FARO
#Yes, the latter.
So you are correct.
As we go through this verticalization and this reorganization, we will be looking to reinvest into the business to be able to support this and to further grow the business.
Well, we view the aerospace market, which isn't defined as a market before, kind of like another ---+ it's a whole world because we can sell ---+ we sell products for BIMCIM for the factories, we sell components for automated metrology.
We even sell crash components for things like automotive and aerospace.
They have automated and manual components.
They have metrology.
So we would speak to almost every level of the aerospace manufacturing market.
It's clear that the people who are involved in the factory setup are not the same people that are doing metrology for the actual parts being assembled or for the automated large components, which would [be] the factory automation.
So if you think about it, aerospace can be touched by almost all the verticals.
So we expect to see activity in all those fronts and benefit from that.
We're really not looking at the cycles.
We're so under penetrated in our mind that it's really about just doing a better job at what we're doing.
There are tremendous numbers of opportunities out there, a lot of demos that we wish were closing that aren't that we need to improve on.
So my personal feeling is that it has less to do with cycles than it does to do with execution.
We had an unusually low tax rate this quarter.
It was attributed for a variety of things, primarily that the higher tax rate jurisdictions had lower profits than the lower tax rate jurisdictions.
I wouldn't anticipate that our go-forward tax rate would be any different than historically what it's at, which is in the low 20s.
Yes.
Well, clearly, the two parts of that equation, the top line and then our operating expenses give you what you're looking for there.
We would like to be at the top of the band of comparables and we'd like to benchmark other companies.
We would like to be the more profitable of them.
So if you took our comparables and then you looked at the variations of those, I would look for us trying to achieve or exceed the best in our comparables.
Well, first, my comment about the 10% was in no reference to Jay's performance, one which I respect deeply.
Jay did a fantastic job for the decade shepherding the Company through various cycles and through significant changes and expansion in the world.
So thanks to Jay for that.
What is in it for shareholders is an interesting question because, from a management point of view, one expects that by increasing the top line, reducing costs, generating more profit, that you have an EPS.
I know I'm going to ---+ it's going to sound patronizing because the question was, in a way, the most generic question you could ask about what a company does in a public market.
So you'll note that I have not stated any unrealistic goals.
I talk about returning to top-line growth that's better than the 10%.
I talked about getting gross margins to historical highs.
I tied that to the fact that if we lose technological leadership, then we lose the ability to charge premium prices, and margins start to drop.
So the importance thereby of good R&D and good responsiveness to the market.
So we are going to improve our efficiencies around the world.
That should reduce SG&A, simply tracking sales, but give us a little bit more leverage.
What do I expect for shareholders from that.
I expect that if we generate a better return on every dollar of volume, that you'll get EPS, you'll get a growth rate, and you'll have the stock going up.
Now, it's true that in the past couple years or more, four or five years, the stock has hit numbers like in the mid-50s and in the 60s.
In general, if you look back over the last 10 years, the stock has significantly beat the NASDAQ growth overall.
And so from that point of view, only this last few quarters has the pricing been kind of anomalous to the NASDAQ, and for reasons which I don't completely understand, because the nature, the basic nature of the Company has not changed that much.
You raised the point, though, of numbers that are ---+ goals that are set.
And while we won't be the first that stated goals that we didn't quite live up to, however, the return to shareholders has been quite extensive for holders of FARO stock, particularly long-term holders of FARO stock.
So I hope I answered your question a little better.
It's a little bit hard to know exactly what you meant by it.
And I wasn't sure if it was a criticism or it was a support for doing the kinds of things that you need.
Okay.
And I'm not sure if the question's fair or unfair, but, I mean, I'm going to make an effort to answer it.
I think our analysis shows that one of the reasons we haven't been able to scale the earnings with the top-line growth is the fact that the business is very, very complex.
We sell into enormous number of markets.
We operate in eight languages.
We do it globally, even though we're a small, relatively small company in the context with a lot of global players.
And as I noted in my preamble, the complexity of the operations has grown commensurately in the different regions.
And when you're in China, you're operating ---+ or in the APAC, you're operating in quite a few different companies ---+ countries, rather.
And in Europe, same situation, irrespective of the common market.
So that's been complicated.
And part of that has resulted in a regionalization of processes, which we analyzed as one of the major contributors to not being able to scale the SG&A down as a percentage of sales.
So you might ask, well, what's the natural thing you can do for that.
And that's what we're trying to do is to harmonize and reduce those expenses, while also pushing the top line.
The best thing that we can do is we can provide you our best intentions.
With respect to the modeling of it, and there's a lot of companies that operate just in the United States that have G&A of 10%, let alone one like us at 10% or 11% having something global like we do.
So we're not doing terribly, but I believe that we can do much better.
And it's going to be these little incremental pieces with every part of our operational lines, and hopefully they'll add up to something significant.
Really a combination of a few things.
The fact that the team, the global finance team working in combination with the sales team, really made an effort to collect, improve collections through various efficiencies and processes.
And it was, I think also the nature that we are seeing some strong financials with many of our customers who have the ability to pay.
Well, thank you everybody for taking our talk and asking the terrific questions.
We look forward to reporting to you on how the reorganization builds in subsequent quarters.
Thank you, and good night.
