QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
☒ | Accelerated filer | ☐ | ||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
Emerging growth company |
PAGE | ||||||||
PART I. | ||||||||
Item 1. | ||||||||
a) | ||||||||
b) | ||||||||
c) | ||||||||
d) | ||||||||
e) | ||||||||
f) | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
PART II. | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | ||||||||
Item 6. | ||||||||
(in thousands, except share and per share data) | September 30, 2019 (unaudited) | December 31, 2018 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Short-term investments | |||||||||||
Accounts receivable, net | |||||||||||
Inventories, net | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment: | |||||||||||
Machinery and equipment | |||||||||||
Furniture and fixtures | |||||||||||
Leasehold improvements | |||||||||||
Property and equipment at cost | |||||||||||
Less: accumulated depreciation and amortization | ( | ( | |||||||||
Property and equipment, net | |||||||||||
Operating lease right-of-use asset | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Service and sales demonstration inventory, net | |||||||||||
Deferred income tax assets, net | |||||||||||
Other long-term assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued liabilities | |||||||||||
Income taxes payable | |||||||||||
Current portion of unearned service revenues | |||||||||||
Customer deposits | |||||||||||
Lease liability | |||||||||||
Total current liabilities | |||||||||||
Unearned service revenues - less current portion | |||||||||||
Lease liability - less current portion | |||||||||||
Deferred income tax liabilities | |||||||||||
Income taxes payable - less current portion | |||||||||||
Other long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies - See Note 15 | |||||||||||
Shareholders’ equity: | |||||||||||
Common stock - par value $.001, 50,000,000 shares authorized; 18,816,598 and 18,676,059 issued, respectively; 17,404,087 and 17,253,011 outstanding, respectively | |||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Common stock in treasury, at cost; 1,412,511 and 1,423,048 shares, respectively | ( | ( | |||||||||
Total shareholders’ equity | |||||||||||
Total liabilities and shareholders’ equity | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
(in thousands, except share and per share data) | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||||||||||||
Sales | |||||||||||||||||||||||
Product | $ | $ | $ | $ | |||||||||||||||||||
Service | |||||||||||||||||||||||
Total sales | |||||||||||||||||||||||
Cost of Sales | |||||||||||||||||||||||
Product | |||||||||||||||||||||||
Service | |||||||||||||||||||||||
Total cost of sales | |||||||||||||||||||||||
Gross Profit | |||||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Selling and marketing | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
Other (income) expense | |||||||||||||||||||||||
Interest (income) expense, net | ( | ( | ( | ||||||||||||||||||||
Other expense, net | |||||||||||||||||||||||
Loss before income tax (benefit) expense | ( | ( | ( | ( | |||||||||||||||||||
Income tax (benefit) expense | ( | ( | ( | ||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Net loss per share - Basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Net loss per share - Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Weighted average shares - Basic | |||||||||||||||||||||||
Weighted average shares - Diluted |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
(in thousands) | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Currency translation adjustments | ( | ( | ( | ( | |||||||||||||||||||
Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( |
Nine Months Ended | |||||||||||
(in thousands) | September 30, 2019 | September 30, 2018 | |||||||||
Cash flows from: | |||||||||||
Operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Stock-based compensation | |||||||||||
Provisions for bad debts, net of recoveries | |||||||||||
Loss on disposal of assets | |||||||||||
Provision for excess and obsolete inventory | |||||||||||
Deferred income tax benefit | ( | ( | |||||||||
Impairment charge on equity method investment | |||||||||||
Change in operating assets and liabilities: | |||||||||||
Decrease (Increase) in: | |||||||||||
Accounts receivable | ( | ||||||||||
Inventories | ( | ( | |||||||||
Prepaid expenses and other current assets | ( | ||||||||||
(Decrease) Increase in: | |||||||||||
Accounts payable and accrued liabilities | ( | ||||||||||
General Services Administration liability | |||||||||||
Income taxes payable | ( | ( | |||||||||
Customer deposits | ( | ( | |||||||||
Unearned service revenues | |||||||||||
Net cash provided by operating activities | |||||||||||
Investing activities: | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Proceeds from sale of investments | |||||||||||
Purchases of investments | ( | ( | |||||||||
Payments for intangible assets | ( | ( | |||||||||
Acquisition of businesses | ( | ||||||||||
Loan originated to affiliate | ( | ||||||||||
Equity investments and advances to affiliates | ( | ||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Financing activities: | |||||||||||
Payments on finance leases | ( | ( | |||||||||
Payments of contingent consideration for acquisitions | ( | ( | |||||||||
Payments for taxes related to net share settlement of equity awards | ( | ||||||||||
Proceeds from issuance of stock related to stock option exercises | |||||||||||
Net cash (used in) provided by financing activities | ( | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
Increase (decrease) in cash and cash equivalents | ( | ||||||||||
Cash and cash equivalents, beginning of period | |||||||||||
Cash and cash equivalents, end of period | $ | $ |
Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Common Stock in Treasury | |||||||||||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except share data) | Shares | Amounts | Total | |||||||||||||||||||||||||||||||||||||||||
BALANCE JANUARY 1, 2019 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
Net income | ||||||||||||||||||||||||||||||||||||||||||||
Currency translation adjustment | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||
Common stock issued, net of shares withheld for employee taxes | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of the adoption of ASU 2016-02 | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
BALANCE MARCH 31, 2019 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
Net loss | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Currency translation adjustment | ||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||
Common stock issued, net of shares withheld for employee taxes | ||||||||||||||||||||||||||||||||||||||||||||
BALANCE JUNE 30, 2019 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
Net loss | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Currency translation adjustment | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||
Common stock issued, net of shares withheld for employee taxes | ||||||||||||||||||||||||||||||||||||||||||||
BALANCE SEPTEMBER 30, 2019 | $ | $ | $ | $ | ( | $ | ( | $ |
Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Common Stock in Treasury | ||||||||||||||||||||||||||||||||||||||||||
Common Stock | Retained Earnings | |||||||||||||||||||||||||||||||||||||||||||
(in thousands, except share data) | Shares | Amounts | Total | |||||||||||||||||||||||||||||||||||||||||
BALANCE JANUARY 1, 2018 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
Net income | ||||||||||||||||||||||||||||||||||||||||||||
Currency translation adjustment | ||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||
Common stock issued, net of shares withheld for employee taxes | ||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of the adoption of ASU 2014-09 | ||||||||||||||||||||||||||||||||||||||||||||
BALANCE MARCH 31, 2018 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
Net income | ||||||||||||||||||||||||||||||||||||||||||||
Currency translation adjustment | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||
Common stock issued, net of shares withheld for employee taxes | ||||||||||||||||||||||||||||||||||||||||||||
BALANCE JUNE 30, 2018 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
Net loss | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Currency translation adjustment | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||
Common stock issued, net of shares withheld for employee taxes | ||||||||||||||||||||||||||||||||||||||||||||
BALANCE SEPTEMBER 30, 2018 | $ | $ | $ | $ | ( | $ | ( | $ |
For the three months ended, September 30, 2018 | |||||||||||||||||
As Reported | Adjustment | As Adjusted | |||||||||||||||
Cost of Sales | |||||||||||||||||
Product | $ | $ | $ | ||||||||||||||
Service | |||||||||||||||||
Total cost of sales | $ | $ | $ | ||||||||||||||
Operating Expenses | |||||||||||||||||
Selling and marketing | $ | $ | $ | ||||||||||||||
General and administrative | |||||||||||||||||
Depreciation and amortization | ( | ||||||||||||||||
Research and development | |||||||||||||||||
Total operating expenses | $ | $ | ( | $ |
For the nine months ended, September 30, 2018 | |||||||||||||||||
As Reported | Adjustment | As Adjusted | |||||||||||||||
Cost of Sales | |||||||||||||||||
Product | $ | $ | $ | ||||||||||||||
Service | $ | ||||||||||||||||
Total cost of sales | $ | $ | $ | ||||||||||||||
Operating Expenses | |||||||||||||||||
Selling and marketing | $ | $ | $ | ||||||||||||||
General and administrative | $ | ||||||||||||||||
Depreciation and amortization | ( | $ | |||||||||||||||
Research and development | $ | ||||||||||||||||
Total operating expenses | $ | $ | ( | $ |
For the Three Months Ended September 30, | ||||||||||||||
2019 | 2018 | |||||||||||||
Product sales | ||||||||||||||
Product transferred to customers at a point in time | $ | $ | ||||||||||||
Product transferred to customers over time | ||||||||||||||
$ | $ |
For the Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | |||||||||||||
Product sales | ||||||||||||||
Product transferred to customers at a point in time | $ | $ | ||||||||||||
Product transferred to customers over time | ||||||||||||||
$ | $ |
For the Three Months Ended September 30, | ||||||||||||||
2019 | 2018 | |||||||||||||
Service sales | ||||||||||||||
Service transferred to customers at a point in time | $ | $ | ||||||||||||
Service transferred to customers over time | ||||||||||||||
$ | $ |
For the Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | |||||||||||||
Service sales | ||||||||||||||
Service transferred to customers at a point in time | $ | $ | ||||||||||||
Service transferred to customers over time | ||||||||||||||
$ | $ |
For the Three Months Ended September 30, | ||||||||||||||
2019 | 2018 | |||||||||||||
Total sales to external customers | ||||||||||||||
United States | $ | $ | ||||||||||||
EMEA (1) | ||||||||||||||
Other APAC (1) | ||||||||||||||
China | ||||||||||||||
Other Americas (1) | ||||||||||||||
$ | $ |
For the Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | |||||||||||||
Total sales to external customers | ||||||||||||||
United States | $ | $ | ||||||||||||
EMEA (1) | ||||||||||||||
Other APAC (1) | ||||||||||||||
China | ||||||||||||||
Other Americas (1) | ||||||||||||||
$ | $ |
Nine Months Ended | |||||
September 30, 2019 | |||||
Risk-free interest rate | 1.8% - 2.48% | ||||
Expected dividend yield | % | ||||
Expected volatility | % | ||||
Weighted-average expected volatility | % |
Nine Months Ended | |||||
September 30, 2018 | |||||
Risk-free interest rate | % | ||||
Expected dividend yield | % | ||||
Expected term of option | |||||
Expected volatility | % | ||||
Weighted-average expected volatility | % |
Options | Weighted- Average Exercise Price | Weighted-Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value as of September 30, 2019 | ||||||||||||||||||||
Outstanding at January 1, 2019 | $ | ||||||||||||||||||||||
Granted | |||||||||||||||||||||||
Forfeited or expired | ( | ||||||||||||||||||||||
Exercised | ( | ||||||||||||||||||||||
Outstanding at September 30, 2019 | $ | $ | |||||||||||||||||||||
Options exercisable at September 30, 2019 | $ | $ |
Shares | Weighted-Average Grant Date Fair Value | ||||||||||
Non-vested at January 1, 2019 | $ | ||||||||||
Granted | |||||||||||
Forfeited | ( | ||||||||||
Vested | ( | ||||||||||
Non-vested at September 30, 2019 | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | ||||||||||||||||||||
Cost of Sales | |||||||||||||||||||||||
Product | $ | $ | $ | $ | |||||||||||||||||||
Service | |||||||||||||||||||||||
Total cost of sales | $ | $ | $ | $ | |||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Selling and marketing | $ | $ | $ | $ | |||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Total operating expenses | $ | $ | $ | $ |
As of September 30, 2019 | As of December 31, 2018 | ||||||||||
Accounts receivable | $ | $ | |||||||||
Allowance for doubtful accounts | ( | ( | |||||||||
Total | $ | $ |
As of September 30, 2019 | As of December 31, 2018 | ||||||||||
Raw materials | $ | $ | |||||||||
Finished goods | |||||||||||
Inventories, net | $ | $ | |||||||||
Service and sales demonstration inventory, net | $ | $ |
Three Months Ended | |||||||||||||||||||||||
September 30, 2019 | September 30, 2018 | ||||||||||||||||||||||
Shares | Per-Share Amount | Shares | Per-Share Amount | ||||||||||||||||||||
Basic loss per share | $ | ( | $ | ( | |||||||||||||||||||
Effect of dilutive securities | |||||||||||||||||||||||
Diluted loss per share | $ | ( | $ | ( | |||||||||||||||||||
Nine Months Ended | |||||||||||||||||||||||
September 30, 2019 | September 30, 2018 | ||||||||||||||||||||||
Shares | Per-Share Amount | Shares | Per-Share Amount | ||||||||||||||||||||
Basic loss per share | $ | ( | $ | ( | |||||||||||||||||||
Effect of dilutive securities | |||||||||||||||||||||||
Diluted loss per share | $ | ( | $ | ( | |||||||||||||||||||
As of September 30, 2019 | As of December 31, 2018 | ||||||||||
Accrued compensation and benefits | $ | $ | |||||||||
Accrued warranties | |||||||||||
Professional and legal fees | |||||||||||
Taxes other than income | |||||||||||
General services administration contract contingent liability (see Note 15) | |||||||||||
Other accrued liabilities | |||||||||||
$ | $ |
Nine Months Ended | |||||||||||
September 30, 2019 | September 30, 2018 | ||||||||||
Balance, beginning of period | $ | $ | |||||||||
Provision for warranty expense | |||||||||||
Fulfillment of warranty obligations | ( | ( | |||||||||
Balance, end of period | $ | $ |
As of September 30, 2019 | |||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||
Liabilities: | |||||||||||||||||
Contingent consideration (1) | $ | $ | $ | ||||||||||||||
Total | $ | $ | $ | ||||||||||||||
As of December 31, 2018 | |||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||
Liabilities: | |||||||||||||||||
Contingent consideration (1) | $ | $ | $ | ||||||||||||||
Total | $ | $ | $ |
3D Manufacturing | Construction BIM | Emerging Verticals | Total | |||||||||||||||||||||||
Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||
Total sales | $ | $ | $ | $ | ||||||||||||||||||||||
Segment profit | $ | $ | $ | $ | ||||||||||||||||||||||
General and administrative | ||||||||||||||||||||||||||
Research and development | ||||||||||||||||||||||||||
Loss from operations | $ | ( |
3D Manufacturing | Construction BIM | Emerging Verticals | Total | |||||||||||||||||||||||
Three Months Ended September 30, 2018 | ||||||||||||||||||||||||||
Total sales | $ | $ | $ | $ | ||||||||||||||||||||||
Segment profit | $ | $ | $ | $ | ||||||||||||||||||||||
General and administrative | ||||||||||||||||||||||||||
Research and development | ||||||||||||||||||||||||||
Loss from operations | $ | ( |
3D Manufacturing | Construction BIM | Emerging Verticals | Total | |||||||||||||||||||||||
Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||
Total sales | $ | $ | $ | $ | ||||||||||||||||||||||
Segment profit (loss) | $ | $ | $ | ( | $ | |||||||||||||||||||||
General and administrative | ||||||||||||||||||||||||||
Research and development | ||||||||||||||||||||||||||
Loss from operations | $ | ( |
3D Manufacturing | Construction BIM | Emerging Verticals | Total | |||||||||||||||||||||||
Nine Months Ended September 30, 2018 | ||||||||||||||||||||||||||
Total sales | $ | $ | $ | $ | ||||||||||||||||||||||
Segment profit | $ | $ | $ | $ | ||||||||||||||||||||||
General and administrative | ||||||||||||||||||||||||||
Research and development | ||||||||||||||||||||||||||
Loss from operations | $ | ( |
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | ||||||||||
Operating lease cost | $ | $ | |||||||||
Finance lease cost: | |||||||||||
Amortization of ROU assets | $ | $ | |||||||||
Interest on lease liabilities | $ | $ | |||||||||
Total finance lease cost | $ | $ |
As of | |||||
September 30, 2019 | |||||
Operating leases: | |||||
Operating lease right-of-use asset | $ | ||||
Current operating lease liability | $ | ||||
Operating lease liability - less current portion | |||||
Total operating lease liability | $ | ||||
Finance leases: | |||||
Property and equipment, at cost | $ | ||||
Accumulated depreciation | ( | ||||
Property and equipment, net | $ | ||||
Current finance lease liability | $ | ||||
Finance lease liability - less current portion | |||||
Total finance lease liability | $ | ||||
Weighted Average Remaining Lease Term (in years): | |||||
Operating leases | |||||
Finance leases | |||||
Weighted Average Discount Rate: | |||||
Operating leases | % | ||||
Finance leases | % |
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | ||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
Operating cash flows from operating leases | $ | $ | |||||||||
Operating cash flows from finance leases | $ | $ | |||||||||
Financing cash flows from finance leases | $ | $ | |||||||||
ROU assets obtained in exchange for lease obligations: | |||||||||||
Operating leases | $ | $ | |||||||||
Finance leases | $ | $ | — |
Year Ending December 31, | Operating leases | Finance leases | |||||||||
2019 (excluding the first 9 months) | $ | $ | |||||||||
2020 | |||||||||||
2021 | |||||||||||
2022 | |||||||||||
2023 | |||||||||||
Thereafter | |||||||||||
Total lease payments | $ | $ | |||||||||
Less imputed interest | ( | ( | |||||||||
Total | $ | $ |
Laser Control Systems | Photocore | Lanmark | Open Technologies (2) | ||||||||||||||
Accounts receivable | $ | $ | $ | $ | |||||||||||||
Inventory | |||||||||||||||||
Other assets | |||||||||||||||||
Intangible assets | |||||||||||||||||
Goodwill | |||||||||||||||||
Accounts payable and accrued liabilities | ( | ( | |||||||||||||||
Other liabilities (1) | ( | ( | ( | ||||||||||||||
Deferred income tax liabilities | ( | ( | |||||||||||||||
Total purchase price, net of cash acquired | $ | $ | $ | $ |
Laser Control Systems | Photocore | Lanmark | Open Technologies | ||||||||||||||||||||||||||
Amount | Weighted Average Life (Years) | Amount | Weighted Average Life (Years) | Amount | Weighted Average Life (Years) | Amount | Weighted Average Life (Years) | ||||||||||||||||||||||
Brand | |||||||||||||||||||||||||||||
Non-competition agreement | |||||||||||||||||||||||||||||
Technology | |||||||||||||||||||||||||||||
Customer relationship | |||||||||||||||||||||||||||||
Fair value of intangible assets acquired | $ | $ | $ | $ |
Three months ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | 2019 | % of Sales | 2018 | % of Sales | 2019 | % of Sales | 2018 | % of Sales | |||||||||||||||||||||||||||||||||||||||
Sales | |||||||||||||||||||||||||||||||||||||||||||||||
Product | $ | 63,641 | 70.3 | % | $ | 75,817 | 76.0 | % | $ | 200,434 | 72.2 | % | $ | 222,118 | 76.4 | % | |||||||||||||||||||||||||||||||
Service | 26,875 | 29.7 | % | 23,888 | 24.0 | % | 77,190 | 27.8 | % | 68,665 | 23.6 | % | |||||||||||||||||||||||||||||||||||
Total sales | 90,516 | 100.0 | % | 99,705 | 100.0 | % | 277,624 | 100.0 | % | 290,783 | 100.0 | % | |||||||||||||||||||||||||||||||||||
Cost of Sales | |||||||||||||||||||||||||||||||||||||||||||||||
Product | 26,495 | 29.3 | % | 34,864 | 35.0 | % | 83,632 | 30.1 | % | 91,321 | 31.4 | % | |||||||||||||||||||||||||||||||||||
Service | 13,249 | 14.6 | % | 14,229 | 14.3 | % | 39,461 | 14.2 | % | 40,750 | 14.0 | % | |||||||||||||||||||||||||||||||||||
Total cost of sales | 39,744 | 43.9 | % | 49,093 | 49.2 | % | 123,093 | 44.3 | % | 132,071 | 45.4 | % | |||||||||||||||||||||||||||||||||||
Gross Profit | 50,772 | 56.1 | % | 50,612 | 50.8 | % | 154,531 | 55.7 | % | 158,712 | 54.6 | % | |||||||||||||||||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||||||||||||||||||||||
Selling and marketing | 30,218 | 33.4 | % | 28,482 | 28.6 | % | 87,438 | 31.5 | % | 87,877 | 30.2 | % | |||||||||||||||||||||||||||||||||||
General and administrative | 15,662 | 17.3 | % | 13,102 | 13.1 | % | 44,471 | 16.0 | % | 36,789 | 12.7 | % | |||||||||||||||||||||||||||||||||||
Research and development | 10,783 | 11.9 | % | 11,740 | 11.8 | % | 33,048 | 11.9 | % | 34,138 | 11.7 | % | |||||||||||||||||||||||||||||||||||
Total operating expenses | 56,663 | 62.6 | % | 53,324 | 53.5 | % | 164,957 | 59.4 | % | 158,804 | 54.6 | % | |||||||||||||||||||||||||||||||||||
Loss from operations | (5,891) | (6.5) | % | (2,712) | (2.7) | % | (10,426) | (3.8) | % | (92) | — | % | |||||||||||||||||||||||||||||||||||
Other (income) expense | |||||||||||||||||||||||||||||||||||||||||||||||
Interest (income) expense, net | (24) | — | % | (96) | (0.1) | % | 72 | — | % | (205) | (0.1) | % | |||||||||||||||||||||||||||||||||||
Other expense, net | 514 | 0.6 | % | 226 | 0.2 | % | 2,398 | 0.9 | % | 868 | 0.3 | % | |||||||||||||||||||||||||||||||||||
Loss before income tax (benefit) expense | (6,381) | (7.0) | % | (2,842) | (2.9) | % | (12,896) | (4.6) | % | (755) | (0.3) | % | |||||||||||||||||||||||||||||||||||
Income tax (benefit) expense | (182) | (0.2) | % | (354) | (0.4) | % | (444) | (0.2) | % | 73 | — | % | |||||||||||||||||||||||||||||||||||
Net loss | $ | (6,199) | (6.8) | % | $ | (2,488) | (2.5) | % | $ | (12,452) | (4.5) | % | $ | (828) | (0.3) | % |
Three Months Ended | |||||||||||||||||||||||
September 30, 2019 | % of Total | September 30, 2018 | % of Total | ||||||||||||||||||||
3D Manufacturing | $ | 56,017 | 61.9 | % | $ | 64,182 | 64.4 | % | |||||||||||||||
Construction BIM | 23,884 | 26.4 | % | 23,710 | 23.8 | % | |||||||||||||||||
Emerging Verticals | 10,615 | 11.7 | % | 11,813 | 11.8 | % | |||||||||||||||||
Total sales | $ | 90,516 | $ | 99,705 | |||||||||||||||||||
3D Manufacturing | ||||||||||||||
(dollars in thousands) | Three Months Ended | |||||||||||||
September 30, 2019 | September 30, 2018 | |||||||||||||
Total sales | $ | 56,017 | $ | 64,182 | ||||||||||
Segment profit | $ | 13,660 | $ | 15,190 | ||||||||||
Segment profit as a % of 3D Manufacturing segment sales | 24.4 | % | 23.7 | % |
Construction BIM | ||||||||||||||
(dollars in thousands) | Three Months Ended | |||||||||||||
September 30, 2019 | September 30, 2018 | |||||||||||||
Total sales | $ | 23,884 | $ | 23,710 | ||||||||||
Segment profit | $ | 6,720 | $ | 6,106 | ||||||||||
Segment profit as a % of Construction BIM segment sales | 28.1 | % | 25.8 | % |
Emerging Verticals | ||||||||||||||
(dollars in thousands) | Three Months Ended | |||||||||||||
September 30, 2019 | September 30, 2018 | |||||||||||||
Total sales | $ | 10,615 | $ | 11,813 | ||||||||||
Segment profit | $ | 174 | $ | 834 | ||||||||||
Segment profit as a % of Emerging Verticals segment sales | 1.6 | % | 7.1 | % |
Nine Months Ended | |||||||||||||||||||||||
September 30, 2019 | % of Total | September 30, 2018 | % of Total | ||||||||||||||||||||
3D Manufacturing | $ | 171,586 | 61.8 | % | $ | 190,584 | 65.5 | % | |||||||||||||||
Construction BIM | 73,485 | 26.5 | % | 69,994 | 24.1 | % | |||||||||||||||||
Emerging Verticals | 32,553 | 11.7 | % | 30,205 | 10.4 | % | |||||||||||||||||
Total sales | $ | 277,624 | $ | 290,783 | |||||||||||||||||||
3D Manufacturing | ||||||||||||||
(dollars in thousands) | Nine Months Ended | |||||||||||||
September 30, 2019 | September 30, 2018 | |||||||||||||
Total sales | $ | 171,586 | $ | 190,584 | ||||||||||
Segment profit | $ | 48,004 | $ | 52,489 | ||||||||||
Segment profit as a % of 3D Manufacturing segment sales | 28.0 | % | 27.5 | % |
Construction BIM | ||||||||||||||
(dollars in thousands) | Nine Months Ended | |||||||||||||
September 30, 2019 | September 30, 2018 | |||||||||||||
Total sales | $ | 73,485 | $ | 69,994 | ||||||||||
Segment profit | $ | 20,113 | $ | 16,999 | ||||||||||
Segment profit as a % of Construction BIM segment sales | 27.4 | % | 24.3 | % |
Emerging Verticals | ||||||||||||||
(dollars in thousands) | Nine Months Ended | |||||||||||||
September 30, 2019 | September 30, 2018 | |||||||||||||
Total sales | $ | 32,553 | $ | 30,205 | ||||||||||
Segment (loss) profit | $ | (1,024) | $ | 1,347 | ||||||||||
Segment (loss) profit as a % of Emerging Verticals segment sales | (3.1) | % | 4.5 | % |
INDEX TO EXHIBITS | ||||||||
101 | The following information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Loss; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Shareholders' Equity; and (vi) Notes to Condensed Consolidated Financial Statements | |||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
FARO Technologies, Inc. | |||||||||||
(Registrant) | |||||||||||
Date: October 30, 2019 | By: | /s/ Allen Muhich | |||||||||
Name: Allen Muhich | |||||||||||
Title: Chief Financial Officer | |||||||||||
(Duly Authorized Officer and Principal Financial Officer) |
/s/ Michael Burger | ||
Name: Michael Burger Title: President and Chief Executive Officer (Principal Executive Officer) |
/s/ Allen Muhich | ||
Name: Allen Muhich Title: Chief Financial Officer (Principal Financial Officer) |
/s/ Michael Burger | ||
Name: Michael Burger Title: President and Chief Executive Officer (Principal Executive Officer) |
/s/ Allen Muhich | ||
Name: Allen Muhich Title: Chief Financial Officer (Principal Financial Officer) |
Leases - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2019 |
|
Lessee, Lease, Description [Line Items] | ||
Renewal term | 8 years | |
Termination window | 3 months | |
Short term lease cost | $ 0.1 | $ 0.2 |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Term of contract | 1 year | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Term of contract | 7 years |
Accrued Liabilities - Summary (Details) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Payables and Accruals [Abstract] | ||||
Accrued compensation and benefits | $ 13,489 | $ 17,745 | ||
Accrued warranties | 2,111 | 2,571 | $ 2,605 | $ 2,628 |
Professional and legal fees | 2,319 | 2,154 | ||
Taxes other than income | 2,570 | 3,550 | ||
General services administration contract contingent liability (see Note 15) | 11,739 | 5,267 | ||
Other accrued liabilities | 3,027 | 5,040 | ||
Accrued liabilities | $ 35,255 | $ 36,327 |
Variable Interest Entity (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Apr. 27, 2018 |
Sep. 30, 2019 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Variable Interest Entity [Line Items] | ||||||
Impairment charge on equity method investment | $ 1,535 | $ 0 | ||||
Variable Interest Entity, Not Primary Beneficiary | ||||||
Variable Interest Entity [Line Items] | ||||||
Equity investments and advances to affiliates | $ 1,800 | |||||
Convertible note payable | $ 500 | 500 | ||||
Ownership percentage | 16.50% | |||||
VIE loss, our portion | (100) | |||||
Impairment charge on equity method investment | 1,500 | |||||
Investment in VIE | $ 200 | $ 200 | $ 1,700 | $ 1,700 |
Segment Reporting (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information | The following tables present information about our reportable segments, including a reconciliation of segment profit to loss from operations included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018:
|
Inventories (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | Inventories consist of the following:
|
Impact of Recently Issued Accounting Pronouncements - Additional Information (Details) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Accounting Changes and Error Corrections [Abstract] | ||
Operating lease right-of-use asset | $ 18,672 | $ 0 |
Operating lease liability | 19,708 | 19,708 |
Finance lease, Right-of-use asset | 782 | |
Finance lease, liability | $ 829 | $ 829 |
Stock-Based Compensation |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | STOCK-BASED COMPENSATION Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date. For awards with only a service condition, we expense stock-based compensation using the straight-line method over the requisite service period for the entire award. For awards with both performance and service conditions, we expense the stock-based compensation on a straight-line basis over the requisite service period taking into account the probability that we will satisfy the performance condition. We have two compensation plans that provide for the granting of stock options and other share-based awards to key employees and non-employee members of the Board of Directors (the “Board”). The 2009 Equity Incentive Plan (the “2009 Plan”) and the 2014 Equity Incentive Plan (the “2014 Plan”) provide for granting options, restricted stock, restricted stock units or stock appreciation rights to employees and non-employee directors. In May 2018, our shareholders approved an amendment to the 2014 Plan, which increased the number of shares available for issuance under the 2014 Plan by 1,000,000 shares. A maximum of 2,974,543 shares are available for issuance under the 2014 Plan, as amended, plus the number of shares (not to exceed 891,960) that were underlying awards outstanding under the 2004 Equity Incentive Plan (the “2004 Plan”) and the 2009 Plan as of May 29, 2014 that thereafter terminate or expire unexercised or are canceled, forfeited or lapse for any reason. No awards were outstanding under the 2004 Plan as of September 30, 2019, and no further grants will be made under the 2004 Plan or the 2009 Plan. Upon election to the Board, each non-employee director receives an initial equity grant of shares of restricted common stock with a value equal to $100,000, calculated using the closing price of our common stock on the date of the non-employee director’s election to the Board. The initial restricted stock grant vests on the third anniversary of the grant date, subject to the non-employee director’s continued membership on the Board. Annually, the non-employee directors are granted restricted shares with a value equal to $100,000 on the first business day following the annual meeting of shareholders, calculated using the closing price of our common stock on that day. In addition, the independent Chairman of the Board is annually granted restricted shares with a value equal to $50,000, and the Lead Director, if one has been appointed, would be annually granted restricted shares with a value of $40,000, on the first business day following the annual meeting of shareholders, calculated using the closing price of our common stock on that day. The shares of restricted stock granted annually to our non-employee directors, our independent Chairman of the Board and, if applicable, our Lead Director vest on the day prior to the following year’s annual meeting date, subject to the non-employee director’s continued membership on the Board. We record compensation expense associated with our restricted stock grants on a straight-line basis over the vesting term. Also, beginning in October 2018, our non-employee directors may elect to have their annual cash retainers and annual equity retainers paid in the form of deferred stock units pursuant to the 2014 Plan and the 2018 Non-Employee Director Deferred Compensation Plan. Each deferred stock unit represents the right to receive one share of our common stock upon the non-employee director’s separation of service from the Company. We record compensation expense associated with our deferred stock units over the period of service. Annually, upon approval by our Compensation Committee, we grant stock-based awards, which historically have been in the form of stock options and/or restricted stock units, to certain employees. We also grant stock-based awards, which historically have been in the form of stock options and/or restricted stock units, to certain new employees throughout the year. The fair value of these stock-based awards is determined by using (a) the current market price of our common stock on the grant date in the case of restricted stock units without a market condition, (b) the Monte Carlo Simulation valuation model in the case of performance-based restricted stock units with a market condition, or (c) the Black-Scholes option valuation model in the case of stock options. Our annual grants in February 2019 and the stock-based awards granted to Michael D. Burger upon the commencement of his service as our President and Chief Executive Officer in June 2019 and to Allen Muhich upon the commencement of his service as our Chief Financial Officer in July 2019 consisted of performance-based restricted stock units and time-based restricted stock units. Our annual grants in March 2018 consisted of time-based stock options and time-based restricted stock units. The number of stock options and/or restricted stock units granted was based on the employee’s individual objectives, performance against operational metrics assigned to the employee and overall contribution to the Company over the last year. For the stock-based awards granted in 2019, the time-based restricted stock units vest in three equal annual installments beginning one year after the grant date. The performance-based restricted stock unit awards vest at the end of the 3-year performance period if the applicable performance measure is achieved. The related stock-based compensation expense will be recognized over the requisite service period, taking into account the probability that we will satisfy the performance measure. The performance-based restricted stock units granted in 2019 will be earned and will vest based upon our total shareholder return (“TSR”) relative to the TSR attained by companies within our defined benchmark group, the Russell 2000 Growth Index. Due to the TSR presence in these performance-based restricted stock units, the fair value of these awards was determined using the Monte Carlo Simulation valuation model. We expense these market condition awards over the three-year vesting period regardless of the value the award recipients ultimately receive. For 2018 grants, stock options vest in three equal annual installments beginning one year after the grant date and time-based restricted stock unit awards vest in full on the three-year anniversary of the grant date. The fair value of these stock-based awards is determined by using (a) the Black-Scholes option valuation model in the case of stock options or (b) the current market price of our common stock on the grant date in the case of restricted stock units. The Black-Scholes option and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. The weighted-average grant-date fair value of the performance-based restricted stock units that were granted during the nine months ended September 30, 2019 and valued using the Monte Carlo Simulation valuation model was $66.16. No performance-based restricted stock units were granted during the nine months ended September 30, 2018. For performance-based restricted stock units granted during the nine months ended September 30, 2019 valued using the Monte Carlo Simulation valuation model, we used the following assumptions:
The weighted-average grant-date fair value of the stock options that were granted during the nine months ended September 30, 2018 and valued using the Black-Scholes option valuation model was $23.43 per option. No stock options were granted during the nine months ended September 30, 2019. For stock options granted during the nine months ended September 30, 2018 valued using the Black-Scholes option valuation model, we used the following assumptions:
Historical information was the primary basis for the selection of the expected dividend yield, expected volatility and the expected lives of the options. The risk-free interest rate was based on the yields of U.S. zero coupon issues and U.S. Treasury issues, with a term approximating the expected life of the option being valued. A summary of stock option activity and weighted-average exercise prices during the nine months ended September 30, 2019 follows:
The total intrinsic value of stock options exercised during the three months ended September 30, 2019 and September 30, 2018 was $1.0 million and $4.7 million, respectively. The total intrinsic value of stock options exercised during the nine months ended September 30, 2019 and September 30, 2018 was $1.3 million and $7.5 million, respectively. The fair value of stock options vested during the three months ended September 30, 2019 and September 30, 2018 was $0.6 million and $0.1 million, respectively. The fair value of stock options vested during the nine months ended September 30, 2019 and September 30, 2018 was $4.9 million and $3.2 million, respectively. The following table summarizes the restricted stock and restricted stock unit activity and weighted average grant-date fair values for the nine months ended September 30, 2019:
We recorded total stock-based compensation expense of $3.4 million and $2.3 million for the three months ended September 30, 2019 and September 30, 2018, respectively, and $8.7 million and $5.7 million for the nine months ended September 30, 2019 and September 30, 2018, respectively. As of September 30, 2019, there was $12.2 million of total unrecognized stock-based compensation expense related to non-vested stock-based compensation arrangements. The expense is expected to be recognized over a weighted average period of 2.1 years. The following table summarizes total stock-based compensation expense for each of the line items on our condensed consolidated statement of operations:
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Loss Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss Per Share | LOSS PER SHARE Basic earnings (loss) per share is computed by dividing net income by the weighted average number of shares outstanding. Diluted earnings (loss) per share is computed by also considering the impact of potential common stock on both net income and the weighted average number of shares outstanding. Our potential common stock consists of employee stock options, restricted stock units and performance-based awards. Our potential common stock is included in the diluted earnings per share calculation when adding such potential common stock would not be anti-dilutive. Performance-based awards are included in the computation of diluted earnings per share only to the extent that the underlying performance conditions (and any applicable market condition) (i) are satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related contingency period and the result would be dilutive under the treasury stock method. When we report a net loss for the period presented, the calculation of diluted net loss per share excludes our potential common stock, as the effect would be anti-dilutive. For the three and nine months ended September 30, 2019, there were approximately 1,050,039 shares issuable upon the exercise of options and the contingent vesting of performance-based restricted stock units that were excluded from the dilutive calculations, as they were anti-dilutive. For the three and nine months ended September 30, 2018, there were approximately 546,538 and 627,733 shares, respectively, issuable upon the exercise of options that were excluded from the dilutive calculations, as they were anti-dilutive. A reconciliation of the number of common shares used in the calculation of basic and diluted loss per share is presented below:
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sales | $ 90,516 | $ 99,705 | $ 277,624 | $ 290,783 |
Cost of Sales | 39,744 | 49,093 | 123,093 | 132,071 |
Gross Profit | 50,772 | 50,612 | 154,531 | 158,712 |
Operating Expenses | ||||
Selling and marketing | 30,218 | 28,482 | 87,438 | 87,877 |
General and administrative | 15,662 | 13,102 | 44,471 | 36,789 |
Depreciation and amortization | 14,203 | 13,467 | ||
Research and development | 10,783 | 11,740 | 33,048 | 34,138 |
Total operating expenses | 56,663 | 53,324 | 164,957 | 158,804 |
Loss from operations | (5,891) | (2,712) | (10,426) | (92) |
Other (income) expense | ||||
Interest (income) expense, net | (24) | (96) | 72 | (205) |
Other expense, net | 514 | 226 | 2,398 | 868 |
Loss before income tax (benefit) expense | (6,381) | (2,842) | (12,896) | (755) |
Income tax (benefit) expense | (182) | (354) | (444) | 73 |
Net loss | $ (6,199) | $ (2,488) | $ (12,452) | $ (828) |
Net (loss) income per share - Basic (in dollars per share) | $ (0.36) | $ (0.15) | $ (0.72) | $ (0.05) |
Net (loss) income per share - Diluted (in dollars per share) | $ (0.36) | $ (0.15) | $ (0.72) | $ (0.05) |
Weighted average shares - Basic (in shares) | 17,367,228 | 17,122,705 | 17,352,386 | 16,976,459 |
Weighted average shares - Diluted (in shares) | 17,367,228 | 17,122,705 | 17,352,386 | 16,976,459 |
Product | ||||
Sales | $ 63,641 | $ 75,817 | $ 200,434 | $ 222,118 |
Cost of Sales | 26,495 | 34,864 | 83,632 | 91,321 |
Service | ||||
Sales | 26,875 | 23,888 | 77,190 | 68,665 |
Cost of Sales | $ 13,249 | $ 14,229 | $ 39,461 | $ 40,750 |
Accounts Receivable (Tables) |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Receivable | Accounts receivable consist of the following:
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Description of Business |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description of Business | DESCRIPTION OF BUSINESS FARO Technologies, Inc. and its subsidiaries (collectively “FARO,” the “Company,” “us,” “we” or “our”) design, develop, manufacture, market and support software driven, three-dimensional (“3D”) measurement and imaging solutions. This technology permits high-precision 3D measurement, imaging and comparison of parts and complex structures within production and quality assurance processes. Our devices are used for inspection of components and assemblies, rapid prototyping, reverse engineering, documenting large volume or structures in 3D, surveying and construction, as well as for investigation and reconstruction of accident sites or crime scenes. We sell the majority of our products through a direct sales force across a broad number of customers in a range of manufacturing, industrial, architecture, surveying, building information modeling, construction, public safety forensics, cultural heritage, dental, and other applications. Our FaroArm®, FARO ScanArm®, FARO Laser TrackerTM, FARO Laser Projector, and their companion CAM2®, BuildIT, and BuildIT Projector software solutions, provide for Computer-Aided Design (“CAD”) based inspection, factory-level statistical process control, high-density surveying and laser-guided assembly and production. Together, these products integrate the measurement, quality inspection, and reverse engineering functions with CAD and 3D software to improve productivity, enhance product quality, and decrease rework and scrap in the manufacturing process, mainly supporting applications in our 3D Manufacturing vertical. Our FARO Focus, FARO ScanPlan and FARO Scanner Freestyle3D X laser scanners, and their companion FARO SCENE, BuildIT, FARO As-BuiltTM, and FARO Zone public safety forensics software offerings, are utilized for a wide variety of 3D modeling, documentation and high-density surveying applications in our Construction Building Information Modeling (“Construction BIM”) and Public Safety Forensics verticals. Our FARO ScanArm®, FARO Scanner Freestyle3D X laser scanners and their companion SCENE software, and other 3D-structured light scanning solutions specific to the dental industry, also enable a fully digital workflow used to capture real world geometry for the purpose of empowering design, enabling innovation, and speeding up the design cycle, supporting our 3D Design vertical. Our line of galvanometer-based scan heads and laser scan controllers are used in a variety of laser applications and are integrated into larger components and systems, supporting our Photonics vertical. We report our segment information in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting (“FASB ASC Topic 280”). We evaluate business performance based upon several metrics, using revenue growth and segment profit as the primary financial measures. In the fourth quarter of 2018, we renamed our 3D Factory vertical and reporting segment “3D Manufacturing.” There was no change in our total consolidated financial condition or results of operations previously reported as a result of this change. We report our activities in the following three reportable segments: •The 3D Manufacturing reporting segment contains our 3D Manufacturing vertical and provides both standardized and customized solutions for 3D measurement and inspection in an industrial or manufacturing environment. Applications include alignment, part inspection, dimensional analysis, first article inspection, incoming and in-process inspection, machine calibration, non-contact inspection, robot calibration, tool building and set-up, and assembly guidance. •The Construction BIM reporting segment contains our Construction BIM vertical and provides solutions for as-built data capturing and 3D visualization in building information modeling applications, allowing our customers in the architecture, engineering and construction markets to quickly and accurately extract two-dimensional (“2D”) and 3D measurement points. Applications include as-built documentation, construction monitoring, surveying, asset and facility management, and heritage preservation. •The Emerging Verticals reporting segment includes our 3D Design, Public Safety Forensics, and Photonics verticals. Our 3D Design vertical provides advanced 3D solutions to capture and edit 3D shapes of products, people and/or environments for design purposes in product development, computer graphics and dental and medical applications. Our Public Safety Forensics vertical provides solutions to public safety officials and professionals to capture environmental or situational scenes in 2D and 3D for crime, crash and fire scene investigations and environmental safety evaluations. Our Photonics vertical develops and markets galvanometer-based laser measurement products and solutions. All operating segments that do not meet the criteria to be reportable segments are aggregated in the Emerging Verticals reporting segment and have been combined based on the aggregation criteria and quantitative thresholds in accordance with the provisions of FASB ASC Topic 280. Our reporting segments have been determined in accordance with our internal management structure, which is based on operating activities. Each segment is responsible for its own product management, sales, strategy and profitability. Each reporting segment employs consistent accounting policies. See Note 14 – Segment Reporting for further information. Reclassification and Related Changes to Presentation Commencing with the third quarter of 2019, depreciation and amortization expenses are being reported in the accompanying statements of operations to reflect departmental costs. Previously, those expenses were reported as a separate line item under operating expenses. Amounts related to depreciation and amortization expenses for the three and nine months ended September 30, 2018 have been restated throughout this Quarterly Report on Form 10-Q to reflect this reclassification of depreciation and amortization expenses and to conform to the current period presentation, as follows:
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Schedule of Error Corrections and Prior Period Adjustments | epreciation and amortization expenses are being reported in the accompanying statements of operations to reflect departmental costs. Previously, those expenses were reported as a separate line item under operating expenses. Amounts related to depreciation and amortization expenses for the three and nine months ended September 30, 2018 have been restated throughout this Quarterly Report on Form 10-Q to reflect this reclassification of depreciation and amortization expenses and to conform to the current period presentation, as follows:
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Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | SEGMENT REPORTING We have three reportable segments: 3D Manufacturing, Construction BIM, and Emerging Verticals. These segments are based upon the vertical markets that we currently serve. Business activities that do not meet the criteria to be reportable segments are aggregated in the Emerging Verticals segment. Each of our reporting segments employs consistent accounting policies. We develop, manufacture, market, support and sell CAD-based quality assurance products integrated with CAD-based inspection and statistical process control software and 3D documentation systems in each of these reportable segments. These activities represent more than 99% of consolidated sales. Our Chief Operating Decision Maker (CODM), our Chief Executive Officer, evaluates segment performance and allocates resources based upon profitable growth. We use segment profit to evaluate the performance of our reportable segments. Segment profit is calculated as gross profit, net of selling and marketing expenses, for the reporting segment. Our definition of segment profit may not be comparable to similarly titled measures reported by other companies. In the fourth quarter of 2018, we renamed our 3D Factory vertical and reporting segment “3D Manufacturing.” Additionally, commencing with the third quarter of 2019, depreciation and amortization expenses are being reported in the accompanying statements of operations to reflect departmental costs. Previously, those expenses were reported as a separate line item under operating expenses. Amounts related to depreciation and amortization expenses for the three and nine months ended September 30, 2018 have been restated throughout this Quarterly Report on Form 10-Q to reflect this reclassification of depreciation and amortization expenses and to conform to the current period presentation. The following tables present information about our reportable segments, including a reconciliation of segment profit to loss from operations included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018:
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Principles of Consolidation (Policies) |
9 Months Ended |
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Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Consolidation | Our condensed consolidated financial statements include the accounts of FARO Technologies, Inc. and its subsidiaries, all of which are wholly-owned. All intercompany transactions and balances have been eliminated. |
Foreign Currency Translation | The financial statements of our foreign subsidiaries are translated into U.S. dollars using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from financial statement translations are reflected as a separate component of accumulated other comprehensive loss. Foreign currency transaction gains and losses are included in net loss. |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements include all normal recurring accruals and adjustments considered necessary by management for a fair presentation in conformity with U.S. GAAP. |
Use of Estimates | Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. |
Impact of Recently Adopted and Recently Issued Accounting Standards | Impact of Recently Adopted Accounting Standards In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, was issued by the FASB in July 2018 and allows for a cumulative-effect adjustment transition method of adoption. The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those years. We adopted ASU 2016-02 effective as of January 1, 2019 utilizing the cumulative-effect adjustment transition method of adoption, which resulted in the recognition on our condensed consolidated balance sheet as of September 30, 2019 of $18.7 million of right-of-use assets for operating leases, $19.7 million of lease liability for operating leases, $0.8 million of property and equipment, net for finance leases and $0.8 million of lease liability for finance leases under which we function as a lessee. We elected certain practical expedients available under the transition provisions to (i) allow aggregation of non-lease components with the related lease components when evaluating accounting treatment, (ii) apply the modified retrospective adoption method, utilizing the simplified transition option, which allows us to continue to apply the legacy guidance in FASB ASC Topic 840, including its disclosure requirements, in the comparative periods presented in the year of adoption, and (iii) use hindsight in determining the lease term (that is, when considering our options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of our right-of-use assets. The adoption of ASU 2016-02 also required us to include any initial direct costs, which are incremental costs that would not have been incurred had the lease not been obtained, in the right-of-use assets. The recognition of these costs in connection with our adoption of this guidance did not have a material impact on our condensed consolidated financial statements. Impact of Recently Issued Accounting Standards In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which is intended to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the current guidance, performance of Step 2 requires us to calculate the implied fair value of goodwill by following procedures that would be required to determine the fair value of assets acquired and liabilities assumed in a business combination. Under the new guidance, we will perform our goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge will be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value up to the amount of the goodwill allocated to the reporting unit. The new guidance also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test if it fails the qualitative assessment. As a result, all reporting units will be subject to the same impairment assessment. We will still have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 becomes effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted for annual or any interim goodwill impairment tests after January 1, 2017. The amendments in this ASU will be applied on a prospective basis. Disclosure of the nature and reason for the change in accounting principle is required upon transition. This disclosure is required in the first annual period and in the interim period within the first annual period when we initially adopt the amendments in this ASU. We plan to adopt this guidance for our fiscal year ending December 31, 2020. We do not expect that the adoption of this guidance will have a material impact on our condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13, and subsequent related amendments to ASU 2016-13, replace the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. We will adopt ASU 2016-13 effective January 1, 2020. We are currently evaluating the effect of the adoption of ASU 2016-13, but we do not expect that the adoption of this guidance will have a material impact on our condensed consolidated financial statements.
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Inventory | Inventories are stated at the lower of cost or net realizable value using the first-in first-out (FIFO) method. We have three principal categories of inventory: 1) manufactured product to be sold; 2) sales demonstration inventory - completed product used to support our sales force for demonstrations and held for sale; and 3) service inventory - completed product and parts used to support our service department and held for sale. Shipping and handling costs are classified as a component of Cost of Sales in our condensed consolidated statements of operations. Sales demonstration inventory is held by our sales representatives for up to three years, at which time it would be refurbished and transferred to finished goods as used equipment, stated at the lower of cost or net realizable value. We expect these refurbished units to remain in finished goods inventory and sold within 12 months at prices that produce reduced gross margins. Service inventory is used to provide a temporary replacement product to a customer covered by a premium warranty when the customer’s unit requires service or repair and as training equipment. Service inventory is available for sale; however, management does not expect service inventory to be sold within 12 months and, as such, classifies this inventory as a long-term asset. Service inventory that we utilize for training or repairs and which we deem as no longer available for sale is transferred to fixed assets at the lower of cost or net realizable value and depreciated over its remaining life, typically three years. |
Leases - Maturities of lease liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Operating leases | ||
2019 (excluding the first 9 months) | $ 1,778 | |
2020 | 6,454 | |
2021 | 3,562 | |
2022 | 2,892 | |
2023 | 2,711 | |
Thereafter | 4,987 | |
Total lease payments | 22,384 | |
Less imputed interest | (2,676) | |
Total | $ 19,708 | 19,708 |
Financing leases | ||
2019 (excluding the first 9 months) | 94 | |
2020 | 351 | |
2021 | 312 | |
2022 | 86 | |
2023 | 37 | |
Thereafter | 6 | |
Total lease payments | 886 | |
Less imputed interest | (57) | |
Total | $ 829 | $ 829 |
Stock-Based Compensation - Schedule of Restricted Stock Unit Activity and Weighted Average Grant Date Fair Value (Details) - Restricted Stock Units |
9 Months Ended |
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Sep. 30, 2019
$ / shares
shares
| |
Shares | |
Non-vested, beginning balance (in shares) | shares | 311,000 |
Granted (in shares) | shares | 250,359 |
Forfeited (in shares) | shares | (25,738) |
Vested (in shares) | shares | (130,527) |
Non-vested, ending balance (in shares) | shares | 405,094 |
Weighted-Average Grant Date Fair Value | |
Non-vested, beginning balance (in dollars per share) | $ / shares | $ 42.66 |
Granted (in dollars per share) | $ / shares | 49.05 |
Forfeited (in dollars per share) | $ / shares | 47.57 |
Vested (in dollars per share) | $ / shares | 37.94 |
Non-vested, ending balance (in dollars per share) | $ / shares | $ 47.81 |
Revenues - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Disaggregation of Revenue [Line Items] | ||||
Deferred commission | $ 2.8 | $ 2.7 | $ 2.8 | $ 2.7 |
Recognized service revenue | 6.3 | 5.3 | 25.9 | 21.5 |
Refund liability | 0.1 | 0.1 | 0.1 | 0.1 |
Prepaid expenses and other current assets | ||||
Disaggregation of Revenue [Line Items] | ||||
Deferred commission | 1.9 | 1.8 | 1.9 | 1.8 |
Other long-term assets | ||||
Disaggregation of Revenue [Line Items] | ||||
Deferred commission | $ 0.9 | $ 0.9 | $ 0.9 | $ 0.9 |
Inventories - Additional Information (Details) |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Property, Plant and Equipment [Line Items] | |
Demonstration inventory shelf life (in years) | 3 years |
Refurbished demonstration inventory selling period (in months) | 12 months |
Service Inventory | |
Property, Plant and Equipment [Line Items] | |
Inventory, remaining useful life (in years) | 3 years |
Principles of Consolidation |
9 Months Ended |
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Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of Consolidation | PRINCIPLES OF CONSOLIDATIONOur condensed consolidated financial statements include the accounts of FARO Technologies, Inc. and its subsidiaries, all of which are wholly-owned. All intercompany transactions and balances have been eliminated. The financial statements of our foreign subsidiaries are translated into U.S. dollars using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from financial statement translations are reflected as a separate component of accumulated other comprehensive loss. Foreign currency transaction gains and losses are included in net loss. |
Variable Interest Entity |
9 Months Ended |
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Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Variable Interest Entities | VARIABLE INTEREST ENTITY A variable interest entity (“VIE”) is an entity that has one of three characteristics: (1) it is controlled by someone other than its shareowners or partners, (2) its shareowners or partners are not economically exposed to the entity’s earnings (for example, they are protected against losses), or (3) it lacks sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties. On April 27, 2018, we invested $1.8 million in present4D GmbH (“present4D”), a software solutions provider for professional virtual reality presentations and training environments, in the form of an equity capital contribution. This initial contribution represented a minority investment in present4D. This investment’s business purpose is to coordinate the design and development of modules supporting compatibility with virtual reality for our existing software offerings. As of our April 27, 2018 investment date, present4D was thinly capitalized and lacked sufficient equity to finance its activities without additional subordinated financial support and is classified as a VIE. We do not have power over decisions that significantly affect present4D’s economic performance and do not represent its primary beneficiary. After April 27, 2020, present4D may request additional equity financing up to $1.8 million from us in exchange for additional share capital, which additional equity financing would be at our discretion. We did not provide support to present4D during 2018 or the first six months of 2019 outside of our initial investment of $1.8 million. During the three months ended September 30, 2019, we originated a $0.5 million note with present4D, which we may convert into additional equity in present4D at our discretion in the event of a default. Further, the note is collateralized by the perpetual and royalty-free, non-exclusive, transferable and sublicensable license granted to us to use present4D’s software. Our 16.5% portion of present4D’s net loss for each of the three and nine month periods ended September 30, 2019 was less than $0.1 million. Present4D is currently accounted for using the equity method of accounting. Our equity in the net loss from this equity-method investment is recorded as loss with a corresponding decrease in the investment. During the three months ended June 30, 2019, we determined it is more likely than not that we will not recover our cost basis in present4D and recorded an impairment charge of $1.5 million, which is included in Other expense, net on our statement of operations for the nine months ended September 30, 2019. Our investment in this unconsolidated VIE at September 30, 2019 was $0.2 million and at December 31, 2018 was $1.7 million and is included in Other long-term assets in our condensed consolidated balance sheets.
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Label | Element | Value |
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Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 2,365,000 |
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 2,365,000 |
Accounting Standards Update 2016-02 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (327,000) |
Accounting Standards Update 2016-02 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (327,000) |
Business Combinations |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations | BUSINESS COMBINATIONS On March 9, 2018, we acquired all of the outstanding shares of Laser Control Systems Limited (“Laser Control Systems”), a laser component technology business located in Bedfordshire, United Kingdom, which specializes in the design and manufacture of advanced digital scan heads and laser software, for a purchase price of $1.7 million. This acquisition supports our Photonics vertical and our long-term strategy to expand our presence and product portfolio in Photonics applications. The results of Laser Control Systems’ operations as of and after the date of acquisition have been included in our condensed consolidated financial statements as of September 30, 2019 and December 31, 2018, and for the three and nine months ended September 30, 2019 and September 30, 2018. On March 16, 2018, we acquired all of the outstanding shares of Photocore AG (“Photocore”), a vision-based 3D measurement application and software developer in Zurich, Switzerland, for a total purchase price of $2.4 million. This acquisition supports our Construction BIM vertical and our long-term strategy to improve our existing software offerings with innovative technology in photogrammetry. The results of PhotoCore’s operations as of and after the date of acquisition have been included in our condensed consolidated financial statements as of September 30, 2019 and December 31, 2018, and for the three and nine months ended September 30, 2019 and September 30, 2018. On July 6, 2018, we acquired all of the outstanding shares of Lanmark Controls, Inc. (“Lanmark”), a high-speed laser marking control boards and laser marking software provider located in Acton, Massachusetts, for a purchase price of $6.3 million. This acquisition supports the development of components used in new 3D laser inspection product development in order to further expand the product portfolio of our Photonics vertical. The results of Lanmark’s operations as of and after the date of acquisition have been included in our condensed consolidated financial statements as of September 30, 2019 and December 31, 2018, and for the three and nine months ended September 30, 2019 and September 30, 2018. On July 13, 2018, we acquired all of the issued and outstanding corporate capital of Opto-Tech SRL and its subsidiary Open Technologies SRL (collectively, “Open Technologies”), a 3D-structured light scanning solution company located in Brescia, Italy, for an aggregate purchase price of up to €18.5 million ($21.6 million), subject to post-closing adjustments based on actual net working capital, net financial position and transaction expenses. The aggregate purchase price included up to €4.0 million ($4.7 million) in contingent consideration that may be earned by the former owners if certain product development milestones are met. The U.S. Dollar amounts have been converted from Euros based on the foreign exchange rate in effect on the closing date of the acquisition. This acquisition supports our 3D Design vertical and our long-term strategy to establish a presence in 3D measurement technology used in other industries and applications, especially dental and medical. The results of Open Technologies’ operations as of and after the date of acquisition have been included in our condensed consolidated financial statements as of September 30, 2019 and December 31, 2018, and for the three and nine months ended September 30, 2019 and September 30, 2018. The acquisitions of Laser Control Systems, Photocore, Lanmark and Open Technologies constitute business combinations as defined by ASC Topic 805, Business Combinations. Accordingly, the assets acquired and liabilities assumed were recorded at their fair values on the date of acquisition. The purchase price allocations below represent our final determination of the fair value of the assets acquired and liabilities assumed for such acquisitions. In the nine months ended September 30, 2019, certain refinements were booked for the Open Technologies acquisition as part of the finalization process, which included a reduction of $2.6 million to the valuation of the customer relationship intangible and the recognition of a deferred tax liability of $1.9 million. Goodwill increased $4.5 million as result of these changes in the finalization process.Following is a summary of our allocations of the purchase price to the fair values of the assets acquired and liabilities assumed as of the date of each acquisition:
(1) For Laser Control Systems, Lanmark and Open Technologies, this total consists primarily of the fair value of the projected contingent consideration. (2) Amounts converted from Euros to U.S. Dollars based on the foreign exchange rate on the closing date of the acquisition. Following are the details of the purchase price allocated to the intangible assets acquired for the acquisitions noted above:
The goodwill for the Laser Control Systems, Lanmark and Open Technologies acquisitions has been allocated to the Emerging Verticals reporting segment. The goodwill for the Photocore acquisition has been allocated to the Construction BIM reporting segment. Acquisition and integration costs are not included as components of consideration transferred, but are recorded as expense in the period in which such costs are incurred. To date, we have incurred approximately $0.8 million in acquisition and integration costs for the Laser Control Systems, Photocore, Lanmark and Open Technologies acquisitions. Pro forma financial results for Laser Control Systems, Photocore, Lanmark and Open Technologies have not been presented because the effects of these transactions, individually and in the aggregate, were not material to our consolidated financial results.
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (6,199) | $ (2,488) | $ (12,452) | $ (828) |
Currency translation adjustments | (5,646) | (4,911) | (5,947) | (9,074) |
Comprehensive loss | $ (11,845) | $ (7,399) | $ (18,399) | $ (9,902) |
Stock-Based Compensation (Tables) |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Valuation Assumptions | For performance-based restricted stock units granted during the nine months ended September 30, 2019 valued using the Monte Carlo Simulation valuation model, we used the following assumptions:
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | For stock options granted during the nine months ended September 30, 2018 valued using the Black-Scholes option valuation model, we used the following assumptions:
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Schedule of Stock Option Activity and Weighted Average Exercise Prices | A summary of stock option activity and weighted-average exercise prices during the nine months ended September 30, 2019 follows:
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Schedule of Restricted Stock and Restricted Stock Units Activity and Weighted-Average Grant Date Fair Value | The following table summarizes the restricted stock and restricted stock unit activity and weighted average grant-date fair values for the nine months ended September 30, 2019:
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Share-based Payment Arrangement, Expensed and Capitalized, Amount | The following table summarizes total stock-based compensation expense for each of the line items on our condensed consolidated statement of operations:
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Leases - Supplemental Cash Flows (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
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Sep. 30, 2019 |
Sep. 30, 2019 |
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Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 2,024 | $ 6,134 |
Operating cash flows from finance leases | 11 | 35 |
Financing cash flows from finance leases | 86 | 273 |
ROU assets obtained in exchange for lease obligations: | ||
Operating leases | 2,254 | $ 8,170 |
Finance leases | $ 0 |
Inventories - Schedule of Inventory (Details) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
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Inventory Disclosure [Abstract] | ||
Raw materials | $ 36,944 | $ 39,859 |
Finished goods | 32,835 | 25,585 |
Inventories, net | 69,779 | 65,444 |
Service and sales demonstration inventory, net | $ 39,509 | $ 39,563 |
Earnings (Loss) Per Share - Reconciliation of Number of Common Shares Used in Calculation of Basic and Diluted Earnings Per Share (EPS) (Details) - $ / shares |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Earnings Per Share [Abstract] | ||||
Antidilutive securities (in shares) | 1,050,039 | 546,538 | 1,050,039 | 627,733 |
Earnings Per Share, Basic and Diluted [Abstract] | ||||
Basic (loss) earnings per share (in shares) | 17,367,228 | 17,122,705 | 17,352,386 | 16,976,459 |
Effect of dilutive securities (in shares) | 0 | 0 | 0 | 0 |
Diluted (loss) earnings (in shares) | 17,367,228 | 17,122,705 | 17,352,386 | 16,976,459 |
Basic (loss) earnings (in dollars per share) | $ (0.36) | $ (0.15) | $ (0.72) | $ (0.05) |
Effect of dilutive securities (in dollars per share) | 0 | 0 | 0 | 0 |
Diluted (loss) earnings (in dollars per share) | $ (0.36) | $ (0.15) | $ (0.72) | $ (0.05) |
Fair Value of Financial Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis - Footnotes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Jun. 30, 2019 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Mar. 31, 2019 |
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Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Payment of contingent consideration for acquisitions | $ 3,101 | $ 638 | ||
Monte Carlo Simulation Valuation Model | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Undiscounted maximum payment under the contingent consideration arrangements | $ 2,200 | |||
Accrued Liabilities [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Contingent consideration | $ 2,000 | $ 3,400 | ||
Other Noncurrent Liabilities [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Contingent consideration | $ 2,100 |
Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost | The components of lease expense were as follows:
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Supplemental Balance Sheet Information Related to Leases | Supplemental balance sheet information related to leases was as follows:
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Lessee, Operating Lease, Liability, Maturity | Maturities of lease liabilities are as follows:
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Finance Lease, Liability, Maturity | Maturities of lease liabilities are as follows:
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Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information related to leases was as follows:
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Earnings (Loss) Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Number of Common Shares Used in Calculation of Basic and Diluted Earnings Per Share (EPS) | A reconciliation of the number of common shares used in the calculation of basic and diluted loss per share is presented below:
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Revenues |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | REVENUES The following tables present our revenues by sales type as presented in our condensed consolidated statements of operations disaggregated by the timing of transfer of goods or services (in thousands, unaudited):
The following table presents our revenues disaggregated by geography, based on the billing addresses of our customers (in thousands, unaudited):
(1) Regions represent Europe, the Middle East, and Africa (EMEA); Asia-Pacific, excluding China (Other APAC); and Canada, Mexico, and Brazil (Other Americas). For revenue related to our measurement and imaging equipment and related software, we allocate the contract price to performance obligations based on our best estimate of the standalone selling price. We make this allocation estimate utilizing data from the sale of our applicable products and services to customers separately in similar circumstances, with the exception of software licenses. With respect to software licenses, we use the residual method for allocating the contract price to performance obligations. Revenue related to our measurement and imaging equipment and related software is generally recognized upon shipment from our facilities or when delivered to the customer location, as determined by the agreed upon shipping terms, at which time we are entitled to payment and title and control has passed to the customer. Software arrangements generally include short-term maintenance that is considered post-contract support (“PCS”), which is considered to be a separate performance obligation. We generally establish a standalone sales price for this PCS component based on our maintenance renewal rate. Maintenance renewals, when sold, are recognized on a straight-line basis over the term of the maintenance agreement. Payments for products and services are collected within a short period of time following transfer of control or commencement of delivery of services, as applicable. Further, customers frequently purchase extended warranties with the purchase of measurement equipment and related software. Warranties are considered a performance obligation when services are transferred to a customer over time, and, as such, we recognize revenue on a straight-line basis over the warranty term. Extended warranty sales primarily include contract periods that extend between one month and three years. We capitalize commission expenses related to deliverables transferred to a customer over time and amortize such costs ratably over the term of the contract. As of September 30, 2019, the deferred cost asset related to deferred commissions was approximately $2.8 million. For classification purposes, $1.9 million and $0.9 million are comprised within the Prepaid expenses and other current assets and Other long-term assets, respectively, on our condensed consolidated balance sheet as of September 30, 2019. As of December 31, 2018, the deferred cost asset related to deferred commissions was approximately $2.7 million. For classification purposes, $1.8 million and $0.9 million were comprised within the Prepaid expenses and other current assets and Other long-term assets, respectively, on our condensed consolidated balance sheet as of December 31, 2018. The unearned service revenue liabilities reported on our condensed consolidated balance sheets reflect the contract liabilities to satisfy the remaining performance obligations for extended warranties and software maintenance. The current portion of unearned service revenues on our condensed consolidated balance sheets is what we expect to recognize to revenue within twelve months after the applicable balance sheet date relating to extended warranty and software maintenance contract liabilities. The Unearned service revenues - less current portion on our condensed consolidated balance sheets is what we expect to recognize to revenue extending beyond twelve months after the applicable balance sheet date relating to extended warranty and software maintenance contract liabilities. During the three and nine months ended September 30, 2019, we recognized $6.3 million and $25.9 million, respectively, of service revenue that was deferred on our condensed consolidated balance sheet as of December 31, 2018. During the three and nine months ended September 30, 2018, we recognized $5.3 million and $21.5 million, respectively, of service revenue that was deferred on our consolidated balance sheet as of December 31, 2017. The nature of certain of our contracts gives rise to variable consideration, which may be constrained, primarily related to an allowance for sales returns and contracts with certain government customers. We are required to estimate the contract asset related to sales returns and record a corresponding adjustment to Cost of Sales. Our allowance for sales returns was approximately $0.1 million as of both September 30, 2019 and September 30, 2018. Shipping and handling fees billed to customers in a sales transaction are recorded in Product Sales and shipping and handling costs incurred are recorded in Cost of Sales. We exclude from Sales any value-added sales and other taxes that we collect concurrently with revenue-producing activities.
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Inventories |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | INVENTORIESInventories are stated at the lower of cost or net realizable value using the first-in first-out (FIFO) method. We have three principal categories of inventory: 1) manufactured product to be sold; 2) sales demonstration inventory - completed product used to support our sales force for demonstrations and held for sale; and 3) service inventory - completed product and parts used to support our service department and held for sale. Shipping and handling costs are classified as a component of Cost of Sales in our condensed consolidated statements of operations. Sales demonstration inventory is held by our sales representatives for up to three years, at which time it would be refurbished and transferred to finished goods as used equipment, stated at the lower of cost or net realizable value. We expect these refurbished units to remain in finished goods inventory and sold within 12 months at prices that produce reduced gross margins. Service inventory is used to provide a temporary replacement product to a customer covered by a premium warranty when the customer’s unit requires service or repair and as training equipment. Service inventory is available for sale; however, management does not expect service inventory to be sold within 12 months and, as such, classifies this inventory as a long-term asset. Service inventory that we utilize for training or repairs and which we deem as no longer available for sale is transferred to fixed assets at the lower of cost or net realizable value and depreciated over its remaining life, typically three years. Inventories consist of the following:
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