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Faro (FARO)

Participants
Bob Seidel CFO
Simon Raab CEO, Chairman
Patrick Newton Stifel Nicolaus
Greg Palm Craig-Hallum Capital
Jim Ricchiuti Needham & Company
Mark Jordan Noble Capital Markets
Richard Eastman Robert W. Baird & Co.
Call transcript
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Operator

Good morning, and welcome to FARO Technologies’ Conference Call in conjunction with its Third Quarter 2017 Earnings Release.

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

Bob Seidel

Thank you and good morning to everyone. Yesterday after the market closed, we released our financial results for the third quarter and first nine months of 2017. available Web is at release press on site FARO's www.faro.com. The

administrative, call. may These stock know, the understand and the set may actual forward-looking differ plan, the XX, Important materially factors selling projected results ended year those intend, were can will, in course may and to Company make forth XXXX, development reflect certain I XX-K management results financial some you order departmental yesterday’s materially XX, of It statements. words. and December the like from condensed compensation After in and research in the to expenses prepared you in on I and for prior Form call results; ended remarks will general progress, the will our cause the expect, forward-looking and September a possible his Company’s over XXXX. to help release may, results. sales, for actual XX-Q by to As in call of Form company's these potential, identified that for the are Company’s will that turn insights statements to its to differ this with statements return open the afterwards be year our to Simon financial quarter summary the expenses provide as objective, we remind words during our statements consolidated that and similar is and cost continue, reclassified marketing, such goals, anticipate, costs. appropriate and would between you believe, questions. press

Simon Raab

marketing reorganized Harmony quarter Vertical products a XX everyone. the year on of We Thanks, their needs. end their force, the GVH element company by the Virtually this to specific Bob, of every in initiative. of was to the months. company mark tailoring needs our The going sales markets a the of of and ended of the better premise and over meet official morning was focus vertical second going or set and good period

undertook gross we to by achieve growth the and the leadership synergy is all to our realign XXXX. in in The effort processes technical increased sales to three addition, efficiency mid-teens In objective effort slow in a increase the regions G&A. margin our increase harmonization growth to the margin and achieve and through to to G&A slowed our mid-teens the operating essential to growth business

of where is year quarter should this post the these goals. first the see and of quarter of realization Third we GVH some first the

results long-term the In demonstrated fact, reported and important third of a of and third bookings the quarter year-over-year quarter. sales strategic in in order progress in our We execution pursuit growth our our XX.X% new financial initiatives. objectives

which public our segment, the With increase BIM-CIM and includes of performance safety strong continued in product a and verticals. among design other others forensics the XX% construction

increases. use Our growing third we mid-teens our expanding long-term studios, force, sales line the We quarter. margin a XX.X%, percentage are X.X increase points drive reported an X.X and last and to of growth sales in quarter investments our demo top above that compared year top line line margin growth This to products deliver gross with the was new last year growth may of percentage delivering starting of generally and points objective. online in

contributed our new year, with last sales technology sell prices reduce improved steps with margin new our on product demonstration inventory. age took of ASPs model demo margin are average the This selling Also, drumbeat. we active platforms to demo later the to equipment sales. We to realizing higher aged of average conjunction product across increasing gross in our higher and products by verticals

by XX% a We gross to margin target XXXX. objective continue

better supply chain We optimization. including changes design practices, underway several pricing have key and initiatives

the disrupt the than controls, to we our we rather addition sellers. the a hit providing year, can first continuing cost sales full-time strategic quarter quarterly quarter or quarterly greater year, We this growth communicated headcount mature and in competitive and to of sales focus value of this priced at and mindset operating in headcount in short-term with the than pressures. margin hires market sales then With after into income XX% the of decision third returned made We we are a FTE a investing of end will increase experience by At sales and increase confident to losses. we gross startup our that that time two training XXXX. quarters in the growth, FTE new to target aggressive offerings despite rate on operating long-term time, in those

substantially are plan. on We

headcount trailing XX an XXX month quarter for of with XX.X% XXX third sales quarter was the increase FTE XXXX, XXXX. for third average the Our compared

expecting are compared last approximately of end the increase the year, XX%. We XXX at to year at end XXX to of an

The order XX these from trailing geographies average months orders bookings FTE per strategic long-term growth order sales market in verticals per new sales XXXX in to per unaddressed order areas. the new headcount X% take longer emerging achieve headcount ratio sales prior a to directly new approximately of may for $XX,XXX in trailing -- XX third to of This verticals some headcount emerging corporate our quarter. down sale in bookings FTE our hires is for decline in pursuit month for million. $XXX,XXX, FTE. decision the related add Our XX the It bookings and months were of $XXX.X average quarter average the was trailing

into these In addition, verticals. disruptive us may take it introduce longer to products new

more over bookings in few and order quarters additional gain see sales new introduce metrics may these our the into we trailing we until experience products more such, verticals. and FTE average next per XX month declines emerging modest As

XXX quarter XXX, ending gross of at Our an XX% to increase the period sales end compared third headcount XXXX. was of

represents the end startup expenses selling quarter between approximately incremental headcount at million FTE sales was execution the required XXXX for We our incremental quarter XXXX. by estimated organization. an is XXX sales period of costs sales across The XXXX the $X $X.X end almost the startup our headcount headcount of HR sales at expenses. increased our selling quarter third since third force million of end FTE year, sales Through third approximately of the gross XX, headcount Our people of this in great the and XXX. in ending of the cost difference which

for As our this success previously tactical noted, of QX drive of indication XXXX. our the strategy and QX provide the results of year priorities for an and

The sales is in the unaddressed QX penetrate quarter will current force to of the sales XXXX. plan verticals emerging increase XX%, construction and hiring opportunities. determine XX% Our help rate largely of BIM-CIM to modestly fourth headcount our by specifically to within in the our for performance market

sales For the plan to moment, moderate we growth X% in of XXXX. X% FTE

sales exceed FTE in expand sales our expected intend force the goals. sustain we effort the if to QX, a XXXX much at meet our to in per we rate or more However, aggressive

are introduced studios way an to continue demonstration products. online our fast, a new Our gaining to cheaper customers to provide and adoption be for our

can For the qualified leads increased that have the we sales web rapidly significantly studios demo for the force. expanding say moment, our number of

web each We and verticals sellers further of add increased state demonstration early whether studios interaction. the quarter. an geographies is live across number world embrace still as We ratios. online the the closing our have too in to to see increase intend our demonstrations However, customers and to continue it around it both

verticals our are languages in region demonstration completely we our markets, number in redesigned in tradition mid-August sense long-standing our and the Web its and next Web all XX installed infrastructure. operates web-based opportunities. to about reliable vertical knowledge upgraded higher train we and as our encourage customers available experience online to to site base, rates, first more our to product. well the as a released site custom to transition new better customers its Web click our see more all on new not prospective overcome our you Web active learn visit generation a included guides enhances to our to web upgrade verticals. substantial acting FARO We through only become The user the and of various in With increase methods. and focus the we The access more We're was interface. of points We selling starting of effectively and as demonstrations then in realize prospective since of customers and realizing faster Asia-Pacific advantages unifying application software on in the applications in site site

FaroArms. in our continue our Focus SXXX achieve new new to R&D increasing the with Over broad we laser realizing and measurement the on year, October, and Quantum new this superiority products next to -- including third we products and laser released effort exceeded and interest. technical MXX trusted and ever most Last more leadership, our and a disruptive of FaroArms SXX laser January drumbeat, the S unit portable our M in XD we released S, FARO models. essential sales and and leading generation being SXXX, portfolio. of responsive product and our we’ve Vantage verticals maintain technology organization E it’s To commitment the past introduced lead capabilities. sustain well-received completely and for our rugged and we’ve the across with This leading methodologies high-value restructured FaroArms product, in scanner, a this generation most year. we new be in released that this In and releasing is we've The line, new produced. that In tracker completely accurate We productive. product leading quantum new of the range august is ASPs. our is new new quarter January, name scanner of

opportunities. In M&A drumbeat addition, and of technology to channel we generated add activity a

for our our first We seamlessly quality fully portfolio Focus the have made Scanner. the market-leading major works featured is BuildIT construction to with products. industry control of Construction software additions which

Construction verticals. the bringing fast-growing analysis Safety for this and and grown XD that potential BIM-CIM is Forensics. Factory to capability Construction its market and in robotic recently its first to ER first and Robotics in Metrology The the the sign to renowned enormous is reseller verticals. all the inspection evolution. the first the BIM-CIM FARO's various measurement has lead to continue FARO Thus for measurement to vertical first The created principle to bring greater introduce every introduce agreement [indiscernible] reality and and and into guiding to Factory same year mobile advanced than world fully corner KUKA adaptive new system new This Public to to efficiencies later proud We year. market. inspection rate and the Robo-Imager leading with the new the FARO a disruptive to Mobile, R XX% of the in and systems with increased of the enhanced important was highly company measurement is next in importantly this most exciting are committed year Metrology, future. its certification. FARO BIM-CIM, received application factory FARO order its of Construction X.X that build safety at FARO XD and Factory the democratized and particularly virtual capabilities is XD collaborative initiatives technologies

sales technical margins, historically for product growth, categories. value. believe initiatives shareholder higher all in and We mid-teen inherent increased investing the will gross with our risk margin, leadership operating short-term these are be that rewarded sustainable and mid-teen costs in We

to to progress our continue forward We and/or employees work hard world. patience to add technologies around We of the opportunities And the the quarter. create investigate deeply our our our verticals. appreciate and all reporting actively new and existing to of each verticals we acquisition look on shareholders new

Bob Seidel

Simon. you, Thank

third New order $XX.X third with of for bookings quarter XX.X% XXXX $XX.X quarter compared XXXX. $XX.X million quarter by for from an third million quarter XX.X% Sales were $XX.X million, increased for increase XXXX to XXXX. million third for

of third continued higher higher period, ratio prices product for to third by our our strong additions segment, million within introductions well Product Forensics, sales primarily product related $XX.X in XX.X% shipping in was XXXX, selling safety XXXX of XX.X% million quarter quarter in verticals. for million of $XX.X with segment, sales leveraging million Metrology third higher driven our recent to compensation a service X.X% million of were due budget an initiatives XXXX. prices. BIM-CIM result was of This revenue. $XX.X $XX.X growth unit of sales primarily of higher were for our increase product sales million increase our continued an were million service for quarter increase service the sales mostly for quarter was increased third product driven reflecting and the XXXX, were growth prior increase million, XXXX marked Product increase new $X.X Service of XXXX. prices $XX.X our backlog, XXXX period. for drive year selling to a for with reflecting $XX.X compared revenue our continued emerging non-payable to as as in XXXX, Factory Gross growth design, reflected compared $XX.X our and in compared and warranty sales sales was quarter and XXXX. increase Construction our customer of Verticals, other expenses a The year driven book-to-bill Verticals, and increase third primarily installed is as as which and were sales quarter sales margin by marketing unit for increase Product This in sales with XX.X% headcount increase growth. includes Construction third initiatives of product as other selling to XXXX an XX.X% in increase year the well increase $XX.X million, expense prior for unit part quarter of conjunction This and of Forensics forensics selling product due third compared verticals Design second sales as in XX.X% increase compared year. product revenue. mostly average for XX.X% revenue service in million higher a our This higher Safety and average third strong increase last by primarily the continued sales our our for in partly our BIM-CIM, were margin on third X.X the Public compared new and In costs. period. prior third In in reflected quarter with with in sales third Our as and as serviceable and primarily improvement of for revenue. service our controls product million, within Design quarter XXXX, third these compared With quarter quarter period. for among an unit increase compared third base. for an Selling with for to growth marketing due million sales higher the by a driven increase selling $X.X prices an quarter departmental our $XX.X In percentage as decrease $XX.X expenses Public well million average XXXX XX.X% were was increase and service for sales compared $XX.X X.X% million $XX.X was with with XXXX. year Selling million, strong XXXX administrative prior quarter bookings third mostly drumbeat. This for BIM-CIM expenses in strategic and a for $XX.X Construction quarter with headcount with XX.X% order segment, for Safety General million, third decrease with headcount public revenue other new average conjunction XX.X% an quarter increase of segment, $XX.X quarter

increase to expenses Research This As headcount a of were for acquisitions. XXXX. of unchanged was XXXX. from general decreased for XXXX third XXXX and XXXX, quarter engineering compared was our sales XXXX percentage additions period. quarter prior third expenses and third third increase for development XX.X% for million administrative development XX.X% $X.X with compared Research XX.X% mostly sales, for third at related million expenses an quarter the and to and of quarter XX.X% with $X.X year quarter

tax estimated mix not in our third historical States, many on increase rate our third early higher do profit -- tax was specific effective jurisdictions rate expectations our our than guidance quarter in an in of jurisdictions, reflecting may geographical distinctly our increase XX% income vary We income reflected rates. XXXX XX.X%, across tax quarterly certain the higher income over With higher rate tax operate rate a outside the the different sales quarter-to-quarter. income XXXX, for we quarter higher United trend. tax as effective profit resulting Our with tax within quarter In tax provide expense.

rate However, at we a from annual significantly not differ expect tax historical our to do time, range. this effective income

Our $X.XX quarter for per net $X.XX or net or income compared $X.X per share share income third $X.X year with the was million million prior XXXX of for period.

performance our of As we as long-term financial our progress. to compared months drive highlight at our key in the business the our several with of we first healthy nine measure towards months like the objectives, XXXX. of financial performance look metrics XXXX for first important an nine year-to-date I’d

$XXX.X of reflecting our percentage X.X%, margin X.X% and X.X mostly driven Construction strong million income compared Public XX.X% continued Safety the related to and sales of by sales Metrology. loss Reported selling increase driven in million by gross and service technology points, increase headcount $X.X in XX.X% acquisitions. up $X.X up and order with were average revenue BIM-CIM bookings associated Forensics year, BIM-CIM in of growth, was were Construction improving net prior service million Net reflected Verticals. cost Gross New of margin. the Factory in with R&D XX.X% our growth growing higher a additional $XXX.X of startup million mostly our expenses prices up

increase foreign increase, third end Days new our quarter an and totaled working equip higher capital. quarter of Total third end as of $XX.X of support $XXX.X the short-term now demonstration as of XXXX at to investments $XX.X our which the days new third inventory million million sales cash of materials raw at quarter driven third XX product well of to hires. of conclude At compared sales quarter at XXXX, the million the end and third were total XXXX, drumbeat the $XX.X outstanding third million, will Accounts X,XXX to headcount. Turning third end our with end XXXX was employees, compared receivable end an the from sales quarter I X of held mostly employees XXXX. X,XXX At of was end by increase compared million at with quarter million of at inventories down subsidiaries. XXXX. at with of in XXXX, quarter by XX.X% XXXX, to the quarter XXXX. total $XX.X headcount third quarter end the days the end was third were $XX.X

both reflects for the open Our permanent I'll total questions. your the employees period. at and contingent of now now headcount the call end

Operator

our Please we Instructions] Newton take ahead. Patrick first question will [Operator And from with Stifel. go

Patrick Newton

morning, very you trailing good Bob. right Hey, Jumping said your in, and correctly, trailing. that FTE Thank Simon I based XXX And think heard both fourth on questions. back into your commentary. if headcount, for headcount FTE you for is means XQ exiting the and quarter much my quarter for on you XXX that I taking XQ the XX-month

and that then, XXX so hiring one your metric And Your targets your variable? I churn increased -- do correctly. guess, or secondly, XXX, to rates provided other of math of I sales, you due trailing prior if some my us the slower is target is

Simon Raab

Patrick, thank the you good the -- and for Well, morning, question.

and Your sure a of calculation is how an is working we accurate trailing have FTE now, better correct. get average we making view the And working and are indicator. be doing to on seems been XX-month we it this that

correct. so but your And we calculation between there, is is doing what the this the maybe of calculation were difference original

Patrick Newton

just in to have million understand XQ, okay. wanted no you for I XXX you’re of you your count, shippable turn change hiring sorry, I $X To XX -- so that shifting impact believe said it had to bookings end change FLS off explicitly trends, to -- note, your XXX revenue both, the no so looks heads quarter last like I’m plans, was quarter. then last And to about of exiting target the

trends? of something purposes being question overly at XQ should and be looking is potential in for in did we revenue Meaning, look overall XQ? ship take million and when simplistic this segment my revenue million about revenue forward at quarter XQ we for revenue to when the we’re BIM-CIM $X think of So like put quarter your XQ seasonality $XX all that an into would it it out revenue

Bob Seidel

So, on the second job scanner end at products quarter. of the did operations team laser our ship to a we the fantastic backlog our that had

in mentioned, increase partly I as driven fact. the that sales Construction So XX.X% was by BIM-CIM and

serves Forensics. but verticals, BIM-CIM and Scanner serve Laser Focus Public our vertical of -- Safety Construction serves it the However, primarily could any it serves the

So I BIM-CIM, say as to would it, that saw at is XX% if construction XX% with look XX% Construction to you about you that rate volume -- of if in related about -- growth BIM-CIM. public you

I look that’s at So it. how

In bookings. way at Simon has the and seasonality, of refocused best the seasonality look order one of on to the is thing terms new us

new seasonality XX.X. XX I when look first quarter order for XX.X see the and for So in I at bookings, QX

we’ve So there's any that in seasonality. no difference our reason from suggest to

Patrick Newton

then And bit thought for arm new product the especially just on sequentially. Okay. a customer refresh one me norm. would've if environment the Quantum? and I long business comment That’s a ask the looking especially demand given and geography, that discuss little you if last focus America stronger general, Factory been EMEA? is North this in because product any helpful. can Metrology cycle to that curious, pent-up relative very would've arm, I at And the interest demand the And your given you on pertaining to trends, was then, I’m for there demand could And by is

Simon Raab

about highly throughput is very is verticals with. FaroArms and more interesting latest limited with to demonstrate. because product, before what’s the in to ability with We that by an sales -- had the the is marketplace do was So competitive excellent it do in to a -- has all Quantum our to our product less begin introduction headcount, our

the requote late prior had having of We lot in quotations arm to us disruption had a improved who some the and some of clients quarter on have -- a in that arms. ways. calls We it of of introduction received it substantive and Edge terms other

in to it's have increase where too with seen product. demand early will a an already we of increase performance a if in of shipments into little higher the we see there And QX. substantively relating go But was so, backlog the the did the ASPs to improved bit arm

in say would comment better the I to to quarter regards that fourth with So that on demand. it be would

Patrick Newton

Great. Thank Simon. the for the Good in quarter. details, you luck

Simon Raab

Thank you.

Bob Seidel

Patrick. Thanks,

Operator

ahead. from with Capital. Please And our come Palm Greg next Craig-Hallum question will go

Greg Palm

could Good talk a GVH Thanks that or be bit. for my brand-new I penetrating the morning. you about Simon, maybe initiative you little you you taking markets weren't hoping Are questions. may in was winning before. customers penetrate

success of curious benchmarks what Just kind track the to of at there? sort -- looking you're

Simon Raab

in XX% over verticals to wanted and XX% our a segment, result, sales. catch-up clearly increase with that size includes Public as this other metrology XD and and was headcount tied XX% of we Well, growth increased the for headcount between focus -- of somewhere Plus incremental you rate as numbers in the verticals Forensics Construction in and to the in of in -- noted how -- important those other then in you want the on the existing to the approximately FTE our year other other. increase of BIM-CIM Safety vision as our headcount over a change. category, an do to Design, BIM-CIM the XX% XX% those first the and as definitely depending the machine from of and significant have It's well the play the comes harder verticals. lot represents which all, increased Product is not on extensive The the FTE -- because the as its was of vertical, in XX% the the increase

which very GVH. -- in mean, that be efforts line keep we I from say indicator would the to of verticals trying sales It’s I going top simple. are the those So it of each are to best

we control of proud course of newest of we that that are to significant made The that other decrease of And the expect harmonization implementations of the costs. GVH a the system quite sale and of a expenses, G&A as which I and cost element world, all continue. the percentage think we was around

we've regarded top line how our So, we of been. from cost successful as both as the components from well

Greg Palm

it. Got

mean, is off installed do I a Metrology, may idea the Factory Moving average curious base I’m is? previous base any what on install large how have age and your arm piggybacking to the pretty question, And replacement be just that of the you from the opportunity. presumably mix have the it related sales for previous versus QX? curious sales then, mix there's of the got to arm, big be if a specifically or as Quantum you to

Simon Raab

the at out are that life average both or there don't of I these a bit many there's say products, the for very more. have I can't of that great We Unfortunately are products. tips. -- been service durable have decades it my there of and finger that provide

we point. this so unclear at replacement is the -- expectation And

increasing to we and to Metrology. that we're degree have insufficient core the have our We the Factory no it of -- that headcount we What’s It's product. evidence the have speak still of about working of on in products. Quantum still speaks headcount Arm. very one represents is interesting penetration It the with linear of amount

issue overplay I of refresh or storyline it's to versions product or about think the not important product. the this this new

efforts technological business consequence growth We to important continue believe demos, sales, there's and that is primary the getting headcount have lot exposing more competitive to making it's and throughout that while more -- to our around people products of FTE our capabilities, of have new we remained room we -- add believe still go. that to still more a

that have think next should we quarter. I

in will lifetime it would people will marketplace, -- see the and just we we think the long they averages, to the product I you that interesting for are for the effort life products, lifetimes have have to next be think time. how in for make I an different

Greg Palm

from new there you’re of of us result is doing feedback? just the a or it's leads arm whether whatnot, give if I you curious sort any for that you Can demos us give know sense can any or percent of web level -- quantify refresh? the what interest don’t that's -- or or maybe amount but the from

Simon Raab

been, has would demand say I good. The

As I quarter. late mentioned it was

I early to think too a number it's give you on that.

to for interest I substantive that are allow the the speak to level was. we put late a for the why quarter clear It lot the actually what executed core introduction. quite right late delighted in timing quarter quoted requote demand any a get It's late we had the the demonstration of that meet that's more quarter. a just the and just requote revenue new to because quarter very lot that about our in the them a even interesting the interest. I’m purposes was them the fourth and arms just and quarter. that for We of had the to to on too for of begun demos advantageous. for product a indication was there arm, for that demand speaking had previous speaks prior the was production. into think little out hard we fact quality people we new field without new to we product of we was that the sufficient pricing the to arm was backlog product, which It of generation had increase about for because the could in It's note effect of in XXX many XXX a that

arm demand I can report next we think for So more the quarter. the on

Greg Palm

wondering solid But, metric. begin tracking a yet just up because to it. different I’m wanted way and double-digit QX. that's report still from Got bookings, metric, this on you times. a thought it. at a couple of quarter you FTE one, useful I’m down I the a think mean, you spend Fair if know trended -- I pretty you FTE growth you you’ve few Last minutes I revenue put tracked as changed just enough. when maybe Just

think if not sales any it's or that remains of potentially So reason initially metric curious be that if I'm new a believe could or still if whether just the you useful as that than a of thought? XX-month, that higher other why indicators that headcount, you maybe you kind ramp of is maybe

Bob Seidel

Okay.

the dollars my of sales the points, figure per was significant. now So -- rate mind each quickly seeing drop we representation XX -- is each as is The FTE not most do we company verticals right of in primary What me maturity the let that indicator. per drop, and the seeing any are is trying are respective and in -- perception working it I as we of count verticals. different a there is a X% it changing what's that we indicator. X% important FTE different a you which overall saw months average the in is mentioned and change in out only the And each have, XX-month XX-month of different information my there's FTE most trailing, in accurate there the A changes as are of is a to in with verticals. the talking we're

the going by We that for rate competitive going it's are and is about maturation maturity But correlation vary FTE, reasons. to for speak FTE directed per to those to not the by the vary FTE dollars is will the very but clear vertical verticals.

you as this we approximately last started So know only midyear year.

in we the point absolutely but we from to FTE of just factor verticals. is and a relating But start already important BIM-CIM FTE that, So see numbers have Metrology. some the going in a And clear, of the feel of start in the than that better most FTE have our verticals. me with change we're planning to is dollars higher for to will to and of FTE view, that report when Factory we a the date, confident indicator per growth verticals the are general starting around how say and dollars are per so to we very let I future significant can you'll in different significantly early that rate the the example have growing. per dollars we’re hopefully be trends see each

Greg Palm

quarter Thanks. the overall. Got Good it. color. Appreciate

Bob Seidel

Greg. Thanks,

Operator

ahead. question Needham And & is with Company. from Ricchiuti Please go Jim our next

Jim Ricchiuti

Good morning.

specific seen? that -- we've type any sequential from I’m go growth the a new that to looking seasonality impact I'm how QX so, The impact with been strategy, mean, have wanted that to or to shown recessions, FARO it to market to QX. this this the probably verticals you revenue just get back trying expect Just sense not you have seasonality does and of through QX may guidance, apart to the historical verticalization that going better be accustomed having QX. or mid-teens decade on from guys go if a from for as I but even strategy. that we And

Simon Raab

to Bob it. you let the a effects. a I give chance shot two me Well, have this and -- rate, take combined growth about at you a talk will high When first have

growth. these to You seasonality relates budgets slope top a over which the that have of you have manner sharp in the and market and for are used, that sales then

have annualized for of and previously in as take deduce that is is for to quarter. quarterly FTE. do we annualize we we the we’ve third is the proportions then in around the on per fourth the used orders What dollars past. which we the to example, in in the orders and XX% And based them year quarter try our our an in So XX% indicated, quarter our that sales order do in we manner

XXX. our reason trailing which we to per fourth we I’ve XX-month how expected perform you use estimate the So that's we XXX sales our quarter. ending FTE then seasonal FTEs, as -- We why will the to XX.X% we noted be give period in and to is try use the

role the still quarter of third fourth a operate where the for are play month so impact Europe of to is factors more do of for field. and half, example, European in it's control, quarter. the the out year-end companies third a play around and off budgets, way in which most large holidays, in the course, the And much with because our is in quarter seasonality very

still seasonality that be that strongly believe should considered. we So,

Jim Ricchiuti

Okay. And Bob. -- Okay,

Bob Seidel

significant versus our just any new a We out. The only only had drumbeat. is our kind a come that say seasonality has we complexity of piece would were thing, that have Quantum of new the is Jim part arm revenue -- product that prior I has the

through our QX. flowing from be will that our and So typical seasonality business, you generally, but QX see

Jim Ricchiuti

maybe even it about think expense commentary. for significant going down one's your we Fairly G&A Simon step you. opening How in think the and should Bob, this to alluded in And, you G&A I Okay. forward?

Bob Seidel

Internally progress, mentioned, we're expense and very $XX improve If really non-payroll manage a focused G&A as at one our make quarterly G&A year-to-date I year-to-date our I as If said expense, of on quarter controlling the our a I trends the as average trend. headcount sales. doesn’t measure a really million. G&A to -- look it's percentage to business, cost we I about on department

We year-to-date is to look controlling activities going it have it's -- as variations here time the kind over internal with focused whether efficiencies, quarter-to-quarter activities, whether average it’s certain about I improve we're on it's those same executing to but $XX That’s really at what decrease our forward that we the audit million. of whether on are spend, but quarterly focused activities. or we’re any time. trying doing

Jim Ricchiuti

standpoint that Okay. And we past very final of might potentially on be you’ve the there from number coming? assume you've Should of the introductions. is in here wave products active just or of pause some product out the the -- over question, another year, rolled been new there light

Bob Seidel

The drumbeat drumbeat. the is just

a of bring hear in you and products and to a will those specific for have So new tremendous introduce created verticals The new next quarter all about them new to through things of year. opportunity verticals. each fashion

as my So development through well acquisition. sustain to as we’ve going accelerate in that opinion both it's organic through and to

Jim Ricchiuti

its gauge, products And, tough they be. how meaningful to Simon, could the new sometimes

talk about modest impact more the of you little new bit scope. a are about Some Can we products? think these in of might some how

Simon Raab

Sure.

a introduced years an was it's is to the later was or internal close called a BIM-CIM acquisition elements construction various rate have so markets introductions FARO. in It they’re in of the and than our return million think product a think $XX in XX% accelerating that now, believe the company doing years and return public million and generated maybe I to against for are the for ago its we important did VR the a XX safety Approximately use scanner higher be actually XX $XXX just that very approximately we're of to to iQvolution. We $XX have ER of It an disruptive. sales going laser I Everyone acquisition and These a that scanner. acquisition. verticals. example. represents equally example could introductions market-leading. of We similar all rate potential.

can which will this and into the mentioned the I in will extremely we of products is of We believe collaborative it before have extremely vector playing be impact. that reintroduced it first using inspection, inspection these be device automated an dramatic robotics. we clever market are Robo-Imager, the mentioned -- quarter, disruptive Everyone new before. dynamic

these one specific each need. having the they the that receiving benefits gone of necessary of One are of now is vertical that market focus

because has specific expect to increase we profound, that of very even to return -- the the So be rate more be focus. of

about be than looking the are will But others. our some of fair significant transform all are we're less for these different we introducing. we It's effort to part them that excited very So of products industry. product introduction impactful say a as to

Jim Ricchiuti

you. Thank Okay.

Operator

next our to Jordan Capital with Markets. Noble Please And goes question Mark go ahead.

Mark Jordan

really expansion stellar than deeper line here new bit top I based business. quarters to the margin and to in levels my to last or sales My saying modest kind should continue upon in Good is forward? little question is I'd here that given dynamic, that little like guess, just It's -- been of this a growth service marketing. really XX% business the that the because quarters. normal performer of morning, is talk a we gentlemen. question the about the of for five bit four a try is assume average, four to in dig the that should and range, kind focused show those moving of sustainability here revenue mid higher on

Simon Raab

XX,XXX an is, bases. serve customers. constitute I’m And world the with relate it's continuous introduced new not within -- so. company around I number we very kind the to believe sites internal that our We’ve installed and communicate opportunity knowledge XX,XXX are enormous to and our apps. customers XX,XXX introducing or but realization the it's -- the the a around sure, what It's important of actual

that We’re increasing interaction amount the we with of have the clients.

We detect monitoring to products online our capabilities of field in our through are the doing possible. where active the now performance software

software, even installed -- we the of additional much base overall very engagement our our behalf the so, And Whether with clientele. and/or selling warranties, means training part performing on services focus. is that accessories, of additional

possibilities. All are these of

cost effort products the increasing. sure through of increases, improve expect and made of service every bump. continue our margins get margins we products serviceability being design The improving. decreases, is make the to the to of get reliability the that are some reliability is we our As unless those But

And this to mean, that's we growth, mid-teens have I count. so -- think should if unit usually related you regard I

There count So the shouldn’t unit rate. the the why going is in teens fall. service up is no reason

into XX,XXX that the user service of that because of penetration full base. lack exceed fact, could In the

that provide recurring continue So sales we’re the source view base because we customer increase the improvement new of of and important that to we the engagement. are to very, engagement, revenue products a to for as actually going in services And the installed and an increase very going increase penetration, clients.

Mark Jordan

be that million to cash position XX% I if Question put I question, work? you paying XX% you to a on your while, large repatriate a international overseas. a position, related active mentioned that is cash strategy which cash have you mean, $XX.X for that to you to and tax guess, roughly were Do quite an it's you would had penalty? a

Bob Seidel

currently those that So regions policies where cash resides. will the cash we are our that into reinvest premise not

the our in invest half of Most transaction, of is do it accessible in business. to M&A at is is cash Asia. in Europe, our you cash look that, of our to If to business call half grow

we that -- So we acquisitions, in will can external look at region. do it

we’ve you For year, out European did deal of done, came [indiscernible] if purchased the timeframe was look the MWF-Technology XXXX, we at of in that XXXX We the out XX which that last the that deals came kind of region. instance, Germany.

If be. we're But we would point, at is reform, of when cash at not some time and clear within tax region. at ways what this is looking the to So look will that will we a invest say -- that. we sort actively that there

been has until, that focus change. will be our continue legislative and environment -- we the to really will that's So so will

Mark Jordan

Thank much. you very

Bob Seidel

Sure.

Operator

from ahead. go Please Baird. W. Richard will Robert question come Eastman And with our next

Your line is open.

Richard Eastman

good Yes, morning.

Simon Raab

Good morning, Rick.

Richard Eastman

bit you X.X% relative could factory a sales growth still Bob, that growth? to there the business, and Simon maybe little kind of just what were order speak through automation

Simon Raab

at point versus disclosed year the growth prior time vertical. this not we’ve So, by orders in

through that growth the a do will XXXX. not the sales orders of the But of time I just order did until say process we transitioning in start at so will our see we orders We in financial. went within XXXX. would this our we point basis. in -- It's starting our this we at year growth disclose vertical in of start -- year-to-date last on

Richard Eastman

in quarter me third think curious series were let are Quantum I up the speak get arm? kind units would better down fact market that the Well question to share automation to is just sales give to maybe in there. the higher we’ve a X.X% be, to Clearly, market of the comment of that, There was willing much than heart price I'm you a but for growth. the

Bob Seidel

As business, I look go at Factory Metrology I -- ahead.

Simon Raab

Rick in and is metrology? automation we factory automation. Are factory factory asking confusing about

Bob Seidel

talking about I vertical, factory metrology Rick correct? you’re No, think

Richard Eastman

Yes.

focused that, of say in Quantum just did and metrology I the it's arm a was timing on … of kind the I release the yes, obviously So, business of but

Bob Seidel

Okay.

Richard Eastman

ahead. go I’m sorry. Yes,

Bob Seidel

quarter. lead of are when year-to-date we been X% from our the of And factory the sales in the benefits at we the third our it largely metrology look growth in metrology business has at is So, products business. that

early August to within months. our had which quarter in the arm, just timing our Quantum a cycle limited really released and we X So benefits sales X being from general perspective

limited would other have I at look other some the product on and I the impacts products say that on it that drumbeat if new we vertical, had pricing improved there. than So of the that positive its

were say where would back high looked growth unaddressed and rates I headcount verticals a considerable going year, that and at first emerging the our into potential were construction we and market. perspective, -- piece this we which it foremost, add to to high throughout places we is, they put when had other the BIM-CIM headcount which had we The

ahead, you so to So will the Go related a headcount proportionately was slightly growth of as headcount less, there see Simon. well. less

Simon Raab

And a additional And have for to its I in answer. -- pro, addressable FTE. the The quite increased our we the the is have catch want say, as we second try verticals $XXX,XXX, primarily let's core of the is per is right corporate the got tied remained competitive. remember, we answer, FTE in to market-leading I numbers to of his those. We contradict so in but market software. new you accessories vertical. Bob FTE It laser up the previous XX% that each terms with close too without think very Bob, it's Yes, likely we of and noted about we to developments product dollars for it a around entirely annually to refresher. our do part I of fantastic line that our is product before business, as of which on per believe was It's had in the said, in what which product, ongoing don't -- even had FTE, our

I as a it because product. ability above competitive expectation street new and of that I've was their to of one we feed the see the is, generation is of their on a noted our products of So believe by to the This before, almost entirely demo. introduction unrealistic, number core throughput sales related provide of

the all to but need increase FTE of focus -- in our count verticals increase, ASPs. not So some of metrology increase with representation be that's would the two over hiring We new on an where do higher of we than felt factory we three was in sales more the metrology and we to expect improvement that factory slightly we metrology in because before. marketplace. to expect terms the perhaps commensurate factory in the there in But an did or metrology, FTE the play will factory the so remember, our see in substantively hiring is and quarters, higher and in the increase catch-up FTE. next in But late per I an not

Richard Eastman

looking that, unit I but mean, volumes. I’m I guess, at I again, understand

reduction -- wouldn't metrology. wouldn't at presume. metrology, fewer you unit -- that explain in X% have necessarily I minus don't I look yes. don't difficulty], have just That's But in You if volume unit FTE volumes, a [technical in

Bob Seidel

the Yes, we’ve not stated volumes publicly. any unit change in

Richard Eastman

are down, and up, asking prices business that factory I’m Q, that in Well, okay. disclosure But referencing services just you metrology … volumes the number there's up, and unit the in says

Bob Seidel

Correct.

Richard Eastman

arms Quantum introduction into the put … have in of the normally that if basically backlog product would shipped quarter. the

Bob Seidel

Yes.

Richard Eastman

Okay.

thank So you.

Bob Seidel

correct. not We that. We was state that a did all percentage, did comment. my state That’s

Simon Raab

had that -- late the about XXX quarter And and because for the but pushed in were misunderstanding third of the exactly or Rick apologies fourth quarter arms for the requoting. need was identified in your in it the question, introduction we that

Richard Eastman

the I volume? grow did see. vantage in -- Is products, unit they the did quarter, new

Bob Seidel

Substantively. Yes.

Richard Eastman

BIM-CIM Yes, category, addressed category is growth perhaps the or okay. And other? FTE then the dollars all the margins to around either new particular there Is and that just a question quick profit and there due the in the decline profitability -- this, in profit profitability obviously you investment other in Construction product?

Simon Raab

consist dedicated the of that year force. We’ve past is, other that and Product the we hiring a in really over our Public primarily is Design have verticals Forensic. the done which sales Safety It's

hires. in you that the decline is profitability the of So those see addition

marketing. dedicated were their own now have of they and leveraging selling kind verticals. on they And the so Previously off

So those that that was is grow vertical. to and impacted, was that intentional

Richard Eastman

I Okay. understand.

Okay. marketing hold the I’m just on question. sales and the And holding third work but just a all the -- with did nice selling new hires and quarter-to-quarter, then higher curious Does that flat, we quarter-to-quarter flat? expense that how

Simon Raab

quarter-by-quarter, So so in is $XX million Part activity the quarter-to-quarter. marketing terms of activities we are of quarter-to-quarter. change about that marketing just varying that had --

of that piece types is other along of have hiring that we're is people we with on to expenses in the that adding The terms come those additional when boarding.

added well. those so certainly in as etcetera. recruiting We have a people less We the third quarter,

it, So, of process as really on at marketing a this are as look you [indiscernible]. transition expenses when boarding little costly bit just less well

Richard Eastman

would of expenses cadence of the it marketing through to selling cadence quarter have the marketing elevate. and again continues higher than to the and second on side, selling QX. in as think I that QX in But additions the just the be expected

Bob Seidel

I I think question. understand Yes, the

a of loaded. hiring was lot frontend So the

a of So force. of just body when existing our an talk about increase sales FTEs, we maturation in

headcount was so of So the the 'XX, sales no QX in X.X. raw QX almost At XXX, change. for was it end ending example headcount

only commission increase you or that sales approximately is X% the on get so the increase. X% of And

flat. it So that's why relatively remains

Richard Eastman

see. I

that the When look product Okay. might I that's gross sustainable the question. that maybe at we’ve are? the the question, XX% to sustainable -- how -- XX.X%, last that And products trying is got just I’m mean, I then how on be? at margin

Simon Raab

Yes, it's very sustainable.

will increase. I fact, think In it

or all We through are XXXX for initiative significant efficiency improvement. chain we and supply -- have an sales the manufacturing

are in superiority going also have cases does all well. past have evident the We able ASPs, technical which increase that we to already it noted to is our in that be as been

and of is to remain countervailing trend as hope still is that desperate competitive the pressure. And around is in through our the improvements believe there the time, entering new significantly I all increases it's -- well So so you that the there field that’s be But countervailing course to competitors as was only ASP. to achievable, that have price. new battling internal

Richard Eastman

Right.

much. Okay. Well, thank very you

Simon Raab

Thanks the started today. going of point much your [indiscernible] at crossed of we’ve has this the Time, because Rick. across Eastern in market. participation We in the your questions time over Thank to again. AM we're trading and And just now thank you, coverage call US you for very X:XX close

Operator

participation. This call. Thank today’s again conclude you for your does

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