- Quarterly sales of $106.4 million, up 16.1% year-over-year
- Construction BIM-CIM segment quarterly sales of $25.8 million, up 47.2% year-over-year
- Strengthened gross margin to 58.3% for the quarter
- Increased operating margin to 8.6% for the quarter
"In 2017, we executed well on our strategic initiatives in completing our vertical reorganization by mid-year, reinvigorating our product portfolio with next generation technology, and investing in expanding our sales force to make meaningful progress towards our long-term financial objectives," stated Dr. Simon Raab, President and Chief Executive Officer. "Our team delivered double-digit new order bookings and sales growth for 2017, and at the same time increased gross margin progressively through the year to reach 58.3% in the fourth quarter. Our second half performance strongly indicates that we are gaining traction from our vertical focus, investments in new products, and additional sales headcount as highlighted by our remarkable 47.2% increase in fourth quarter construction BIM-CIM sales. As we have discussed before, there is a natural, short-term cost to these investments. However, we expect sustained returns from these initiatives and we will continue with our vertical strategies while optimizing our operations through our 2018 global lean initiatives, which are aimed at reinvigorating the FARO culture of continuous improvement and technological superiority in all of our vertical markets."
Fourth Quarter 2017
Total sales increased by $14.7 million, or 16.1%, to $106.4 million for the quarter ended December 31, 2017 from $91.7 million for the quarter ended December 31, 2016. Our sales increase was primarily driven by a strong increase in product unit sales in our construction BIM-CIM and our other segment (which includes the public safety forensics and product design verticals), higher average selling prices, and continued service revenue growth. New order bookings increased by $14.8 million, or 15.5%, to $110.6 million for the quarter ended December 31, 2017 from $95.8 million for the quarter ended December 31, 2016.
Gross margin for the quarter was 58.3%, up 5.2 percentage points compared with 53.1% in the same prior year period reflecting a strong increase in our product gross margin mostly due to higher average selling prices from our technological leadership and improved manufacturing efficiencies.
Operating income was $9.2 million for the fourth quarter of 2017, reflecting an increase from $3.6 million in the same prior year period driven mainly by our double-digit sales growth and strong increase in gross margin offset partly by our strategic growth initiatives to increase sales headcount and accelerate new product development. Operating margin was 8.6% in the fourth quarter of 2017, compared with 3.9% in the fourth quarter of 2016.
Our net loss of $11.1 million, or $0.66 per share, for the fourth quarter of 2017 included a provisional charge of $19.4 million, or $1.16 per share, recorded in income tax expense related to the enactment of the U.S. Tax Cuts and Jobs Act (U.S. Tax Reform)1. This charge was comprised of $2.0 million related to the re-measurement of our deferred tax assets arising from a lower U.S. corporate tax rate and $17.4 million related to the transition tax on the mandatory deemed repatriation of foreign earnings. Excluding the impact of U.S. Tax Reform, net income for the fourth quarter of 2017 would have been $8.3 million, or $0.50 per share.
Fiscal Year 2017
Total sales increased by $35.3 million, or 10.9%, to $360.9 million for the year ended December 31, 2017 from $325.6 million for the year ended December 31, 2016. Our sales increase was primarily driven by a strong increase in our construction BIM-CIM segment, growth in warranty revenue, and increase in average selling prices. New order bookings increased by $46.3 million, or 14.0%, to $377.0 million for the year ended December 31, 2017 from $330.7 million for the year ended December 31, 2016.
Gross margin was 56.7% for fiscal year 2017, up 2.0 percentage points over the prior year, mostly due to higher average selling prices from our technological leadership and improved manufacturing efficiencies.
Operating income was $5.3 million for fiscal year 2017, reflecting a decrease from $13.3 million for fiscal year 2016. This decrease was primarily due to an intentional increase in operating expenses related to our strategic growth initiatives, including a start-up selling expense of $9.5 million driven by a 17.7% increase in our period ending sales headcount from 536 as of December 31, 2016 to 631 as of December 31, 2017 and increases in R&D spending from recent technology acquisitions. Operating margin was 1.5% for fiscal year 2017, compared with 4.1% for fiscal year 2016.
Our net loss of $14.5 million, or $0.87 per share, for fiscal year 2017 included a provisional charge of $19.4 million, or $1.16 per share, recorded in income tax expense related to the enactment of U.S. Tax Reform. Excluding the impact of U.S. Tax Reform, net income for fiscal year 2017 would have been $4.8 million, or $0.29 per share.
As of December 31, 2017, cash and short-term investments totaled $152.0 million, of which $98.8 million was held by foreign subsidiaries.
The financial information included in this press release is preliminary as the Company has not yet issued its audited financial statements and may differ from those results.
1 Preliminary. Represents the estimated fourth quarter 2017 and fiscal year 2017 impact of the enactment of the Tax Cuts and Jobs Act (U.S. Tax Reform), which was signed into law on December 22, 2017. The final impact of U.S. Tax Reform may differ from these estimates due to, among other things, changes in interpretations and assumptions made by FARO, additional guidance that may be issued by the U.S. Department of the Treasury, and actions that FARO may take.
