FARO Announces First Quarter Financial Results
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FARO Announces First Quarter Financial Results

LAKE MARY, Fla., May 1, 2024 — (PRNewswire) — FARO® Technologies, Inc. (Nasdaq: FARO), a global leader in 4D digital reality solutions, today announced its financial results for the first quarter ended March 31, 2024.

"We're pleased with our strong start to the year, with our first quarter financial performance providing a solid foundation from which we expect to continue to invest in our strategic initiatives within our core markets," said Peter Lau, President & Chief Executive Officer. "GAAP loss per share of $(0.38) and non-GAAP EPS of $0.09 exceeded the high end of our guidance range. GAAP net loss of $7.3 million and Adjusted EBITDA of $5.6 million, or 6.6% of revenue, demonstrates the progress we continue to make towards our aspirational financial goals. In addition, we again expanded our cash position by generating $6.6 million of operating cash flow in the quarter, driven by profitability and efficiencies in working capital."

First Quarter 2024 Financial Summary

* A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion at the end of this press release. An additional explanation of these measures is included below under the heading "Non-GAAP Financial Measures".

Outlook for the Second Quarter 2024

For the second quarter ending June 30, 2024, FARO currently expects:

Conference Call

The Company will host a conference call to discuss these results on Thursday, May 2, 2024, at 8:00 a.m. ET. Interested parties can access the conference call by dialing (888) 632-3384 (U.S.) or +1 (785) 424-1794 (International) and using the passcode FARO. A live webcast will be available in the Investor Relations section of FARO's website at: https://www.faro.com/en/About-Us/Investor-Relations/Financial-Events-and-Presentations
A replay webcast will be available in the Investor Relations section of the Company's web site approximately two hours after the conclusion of the call and will remain available for approximately 30 calendar days.

About FARO

For 40 years, FARO has provided industry-leading technology solutions that enable customers to measure their world, and then use that data to make smarter decisions faster. FARO continues to be a pioneer in bridging the digital and physical worlds through data-driven reliable accuracy, precision, and immediacy. For more information, visit www.faro.com.

Non-GAAP Financial Measures

This press release contains information about our financial results that are not presented in accordance with U.S. generally accepted accounting principles ("GAAP"). These non-GAAP financial measures, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP net income and non-GAAP net income per share, exclude the impact of purchase accounting intangible amortization expense, stock-based compensation, restructuring and other charges, and other tax adjustments, and are provided to enhance investors' overall understanding of our historical operations and financial performance.

In addition, we present EBITDA, which is calculated as net income (loss) before interest (income) expense, net, income tax benefit (expense) and depreciation and amortization, and Adjusted EBITDA, which is calculated as EBITDA, excluding other (income) expense, net, stock-based compensation, and restructuring and other charges, as measures of our operating profitability. The most directly comparable GAAP measure to EBITDA and Adjusted EBITDA is net income (loss). We also present Adjusted EBITDA margin, which is calculated as Adjusted EBITDA as a percent of total sales.

In our first quarter reporting, we have included non-GAAP total sales on a constant currency basis. The most directly comparable GAAP measure to total sales on a constant currency basis is total sales. We believe constant currency information is useful in analyzing underlying trends in our business and the commercial performance of our products by eliminating the impact of highly volatile fluctuations in foreign currency markets and allows for period-to-period comparisons of our performance. For simplicity, we may elect to omit this information in future periods if we determine a lack of material impact. To present this information, current period performance for entities reporting in currencies other than U.S. dollars are converted to U.S. dollars at the exchange rate in effect during the last day of the prior comparable period.

Management believes that these non-GAAP financial measures provide investors with relevant period-to-period comparisons of our core operations using the same methodology that management employs in its review of the Company's operating results. These financial measures are not recognized terms under GAAP and should not be considered in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP.

These non-GAAP financial measures have limitations that should be considered before using these measures to evaluate a company's financial performance. These non-GAAP financial measures, as presented, may not be comparable to similarly titled measures of other companies due to varying methods of calculation. The financial statement tables that accompany this press release include a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties, such as statements about the outlook for the second quarter of 2024, demand for and customer acceptance of FARO's products, FARO's product development and product launches, FARO's growth, strategic and restructuring plans and initiatives, including but not limited to the additional restructuring charges expected to be incurred in connection with our restructuring and integration plans and the timing and amount of cost savings and other benefits expected to be realized from the restructuring and integration plans and other strategic initiatives, and FARO's growth potential and profitability. Statements that are not historical facts or that describe the Company's plans, objectives, projections, expectations, assumptions, strategies, or goals are forward-looking statements. In addition, words such as "is," "will" and similar expressions or discussions of FARO's plans or other intentions identify forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to various known and unknown risks, uncertainties, and other factors that may cause actual results, performances, or achievements to differ materially from future results, performances, or achievements expressed or implied by such forward-looking statements. Consequently, undue reliance should not be placed on these forward-looking statements.
Factors that could cause actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to:

Forward-looking statements in this release represent the Company's judgment as of the date of this release. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law.

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



Three Months Ended

(in thousands, except share and per share data)

March 31, 2024


March 31, 2023

Sales




Product

$            63,536


$            65,240

Service

20,708


19,727

Total sales

84,244


84,967

Cost of sales




Product

30,452


33,957

Service

10,485


11,294

Total cost of sales

40,937


45,251

Gross profit

43,307


39,716

Operating expenses




Selling, general and administrative

39,593


41,376

Research and development

9,024


12,718

Restructuring costs


4,238

Total operating expenses

48,617


58,332

Loss from operations

(5,310)


(18,616)

Other (income) expense




Interest expense

831


835

Other (expense) income, net

25


(220)

Loss before income tax

(6,166)


(19,231)

Income tax expense

1,101


1,933

Net loss

$            (7,267)


$          (21,164)

Net loss per share - Basic

$              (0.38)


$              (1.12)

Net loss per share - Diluted

$              (0.38)


$              (1.12)

Weighted average shares - Basic

19,046,855


18,816,110

Weighted average shares - Diluted

19,046,855


18,816,110

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in thousands, except share and per share data)

March 31,
2024


December 31,
2023

ASSETS




Current assets:




Cash and cash equivalents

$                 79,518


$                 76,787

Short-term investments

19,763


19,496

Accounts receivable, net

88,908


92,028

Inventories, net

35,376


34,529

Prepaid expenses and other current assets

32,854


38,768

Total current assets

256,419


261,608

Non-current assets:




Property, plant and equipment, net

19,855


21,181

Operating lease right-of-use assets

11,075


12,231

Goodwill

108,359


109,534

Intangible assets, net

47,057


47,891

Service and sales demonstration inventory, net

20,655


23,147

Deferred income tax assets, net

24,933


25,027

Other long-term assets

3,951


4,073

Total assets

$               492,304


$               504,692

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$                 25,314


$                 27,404

Accrued liabilities

26,567


29,930

Income taxes payable

5,907


5,699

Current portion of unearned service revenues

41,012


40,555

Customer deposits

5,031


4,251

Lease liabilities

5,106


5,434

Total current liabilities

108,937


113,273

Loan - 5.50% Convertible Senior Notes

72,872


72,760

Unearned service revenues - less current portion

20,142


20,256

Lease liabilities - less current portion

9,690


10,837

Deferred income tax liabilities

12,543


13,308

Income taxes payable - less current portion

6,123


5,629

Other long-term liabilities

17


23

Total liabilities

230,324


236,086

Commitments and contingencies




Shareholders' equity:




Common stock - par value $0.001, 50,000,000 shares authorized;
20,578,403 and 20,343,359 issued, respectively; 19,205,361 and 18,968,798
outstanding, respectively

20


20

Additional paid-in capital

350,816


346,277

Retained earnings

(17,056)


(9,789)

Accumulated other comprehensive loss

(41,145)


(37,247)

Common stock in treasury, at cost - 1,373,042 and 1,374,561 shares held,
respectively

(30,655)


(30,655)

Total shareholders' equity

261,980


268,606

Total liabilities and shareholders' equity

$               492,304


$               504,692

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



Three Months Ended March 31,

(in thousands)

2024


2023

Cash flows from:




Operating activities:




Net loss

$            (7,267)


$          (21,164)

Adjustments to reconcile net loss to net cash used in operating activities:




Depreciation and amortization

3,621


4,413

Stock-based compensation

4,539


3,634

Deferred income tax (benefit) and other non-cash charges

(805)


562

Provision for excess and obsolete inventory

152


344

Amortization of debt discount and issuance costs

112


Loss on disposal of assets

96


69

Provisions for bad debts, net of recoveries

300


33

Change in operating assets and liabilities:




Decrease (Increase) in:




Accounts receivable

1,405


2,378

Inventories

1,957


(1,530)

Prepaid expenses and other current assets

5,587


(4,219)

(Decrease) Increase in:




Accounts payable and accrued liabilities

(5,721)


(2,450)

Income taxes payable

783


(102)

Customer deposits

819


(433)

Unearned service revenues

1,282


121

Other liabilities

(285)


Net cash provided by (used in) operating activities

6,575


(18,344)

Investing activities:




Purchases of property and equipment

(1,323)


(1,688)

Purchases of short-term investments


(20,024)

Cash paid for technology development, patents and licenses

(1,442)


(1,820)

Net cash used in investing activities

(2,765)


(23,532)

Financing activities:




Payments on finance leases

(40)


(44)

Cash settlement of equity awards


14

Proceeds from issuance of 5.50% Convertible Senior Notes, due 2028, net of discount,
issuance cost and accrued interest


72,310

Net cash (used in) provided by financing activities

(40)


72,280

Effect of exchange rate changes on cash and cash equivalents

(1,039)


348

Increase in cash and cash equivalents

2,731


30,752

Cash and cash equivalents, beginning of period

76,787


37,812

Cash and cash equivalents, end of period

$            79,518


$            68,564

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP

(UNAUDITED)



Three Months Ended March 31,

(dollars in thousands, except per share data)

2024


2023

Gross profit, as reported

$        43,307


$        39,716

Stock-based compensation (1)

330


272

Restructuring and other costs (2)

8


435

Non-GAAP adjustments to gross profit

338


707

Non-GAAP gross profit

$        43,645


$        40,423

Gross margin, as reported

51.4 %


46.7 %

Non-GAAP gross margin

51.8 %


47.6 %





Selling, general and administrative, as reported

$        39,593


$        41,376

Stock-based compensation (1)

(3,942)


(2,568)

Purchase accounting intangible amortization

(543)


(673)

Non-GAAP selling, general and administrative

$        35,108


$        38,135





Research and development, as reported

$          9,024


$        12,718

Stock-based compensation (1)

(267)


(794)

Purchase accounting intangible amortization

(489)


(499)

Non-GAAP research and development

$          8,268


$        11,425





Operating expenses, as reported

$        48,617


$        58,332

Stock-based compensation (1)

(4,209)


(3,362)

Restructuring and other costs (2)

(2,708)


(5,033)

Purchase accounting intangible amortization

(1,032)


(1,172)

Non-GAAP adjustments to operating expenses

(7,949)


(9,567)

Non-GAAP operating expenses

$        40,668


$        48,765





Loss from operations, as reported

$        (5,310)


$      (18,616)

Non-GAAP adjustments to gross profit

338


707

Non-GAAP adjustments to operating expenses

7,949


9,567

Non-GAAP loss from operations

$          2,977


$        (8,342)





Net loss, as reported

$        (7,267)


$      (21,164)

Non-GAAP adjustments to gross profit

338


707

Non-GAAP adjustments to operating expenses

7,949


9,567

Income tax effect of non-GAAP adjustments (3)

(2,072)


(2,569)

Other tax adjustments (4)

2,748


6,383

Non-GAAP net gain/(loss)

$          1,696


$        (7,076)





Net loss per share - Diluted, as reported

$           (0.38)


$           (1.12)

Stock-based compensation (1)

0.24


0.19

Restructuring and other costs (2)

0.14


0.29

Purchase accounting intangible amortization

0.06


0.06

Income tax effect of non-GAAP adjustments (3)

(0.11)


(0.14)

Other tax adjustments (4)

0.14


0.34

Non-GAAP net income/(loss) per share - Diluted

$             0.09


$           (0.38)

(1) We exclude stock-based compensation, which is non-cash, from the non-GAAP financial measures because the Company believes that such exclusion provides a better comparison of results of ongoing operations for current and future periods with such results from past periods.


(2) On February 14, 2020, our Board of Directors approved a global restructuring plan (the "Restructuring Plan"), which is intended to support our strategic plan in an effort to improve operating performance and ensure that we are appropriately structured and resourced to deliver increased and sustainable value to our shareholders and customers. On February 7, 2023, our Board of Directors approved an integration plan (the "Integration Plan"), which is intended to streamline and simplify operations, particularly around our recent acquisitions and the resulting redundant operations and offerings. The Restructuring and other costs primarily consist of severance and related benefits associated with the Restructuring Plan, Integration Plan, and executive transitions.


(3) The Income tax effect of non-GAAP adjustments is calculated by applying a statutory tax rate to Non-GAAP adjustments, including Stock-based compensation, Restructuring and other costs, and Purchase accounting intangible amortization.


(4) When estimating our Non-GAAP income tax rate, we exclude the effect of items that impact our reported income tax rate that we do not believe are representative of our ongoing operating results, including the impact of valuation allowances we are currently recording in certain jurisdictions and certain discrete items such as adjustments to uncertain tax position reserves, as these items are difficult to predict and can impact our effective income tax rate.

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA

(UNAUDITED)



Three Months Ended March 31,

(in thousands)

2024


2023

Net loss

$        (7,267)


$      (21,164)

Interest expense, net

831


835

Income tax expense

1,101


1,933

Depreciation and amortization

3,621


3,978

EBITDA

(1,714)


(14,418)

Other expense (income), net

25


(220)

Stock-based compensation

4,539


3,634

Restructuring and other costs (1)

2,716


5,468

Adjusted EBITDA

$          5,566


$        (5,536)

Adjusted EBITDA margin (2)

6.6 %


(6.5) %

(1) On February 14, 2020, our Board of Directors approved the Restructuring Plan, which is intended to support our strategic plan in an effort to improve operating performance and ensure that we are appropriately structured and resourced to deliver increased and sustainable value to our shareholders and customers. On February 7, 2023, our Board of Directors approved the Integration Plan, which is intended to streamline and simplify operations, particularly around our recent acquisitions and the resulting redundant operations and offerings. The Restructuring and other costs primarily consist of severance and related benefits associated with the Restructuring Plan, Integration Plan, and executive transitions.


(2) Calculated as Adjusted EBITDA as a percentage of total sales.

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

KEY SALES MEASURES

(UNAUDITED)



Three Months Ended March 31,

(in thousands)

2024


2023

Total sales to external customers as reported




Americas (1)

$          37,228


$          42,343

EMEA (1)

25,435


24,165

APAC (1)

21,581


18,459


$          84,244


$          84,967






Three Months Ended March 31,

(in thousands)

2024


2023

Total sales to external customers in constant currency (2)




Americas (1)

$          37,037


$          42,434

EMEA (1)

25,218


24,486

APAC (1)

22,826


18,460


$          85,081


$          85,380

(1) Regions represent North America and South America ("Americas"); Europe, the Middle East, and Africa ("EMEA"); and the Asia-Pacific ("APAC").


(2) We compare the change in the sales from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rate in effect during the last day of the prior comparable period, rather than the actual exchange rates in effect during the respective periods.

 


Three Months Ended March 31,

(in thousands)

2024


2023





Hardware

$        52,616


$        54,961

Software

10,920


10,279

Service

20,708


19,727

Total Sales

$        84,244


$        84,967





Hardware as a percentage of total sales

62.5 %


64.7 %

Software as a percentage of total sales

13.0 %


12.1 %

Service as a percentage of total sales

24.6 %


23.2 %





Total Recurring Revenue (3)

$        16,717


$        16,685

Recurring revenue as a percentage of total sales

19.8 %


19.6 %

(3) Recurring revenue is comprised of hardware service contracts, software maintenance contracts, and subscription based software applications.

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

FREE CASH FLOW RECONCILIATION

(UNAUDITED)



Three Months Ended March 31,

(in thousands)

2024


2023

Net cash provided by (used in) operating activities

$              6,575


$          (18,344)

Purchases of property and equipment

(1,323)


(1,688)

Cash paid for technology development, patents and licenses

(1,442)


(1,820)

Free Cash Flow

3,810


(21,852)

Restructuring and other cash payments (1)

403


796

Adjusted Free Cash Flow

$              4,213


$          (21,056)

(1) On February 7, 2023, our Board of Directors approved the Integration Plan, which is intended to streamline and simplify operations, particularly around our recent acquisitions and the resulting redundant operations and offerings. The Restructuring and other costs primarily consist of severance and related benefits associated with the Restructuring Plan, Integration Plan, and executive transitions.

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF OUTLOOK - GAAP TO NON-GAAP



Fiscal quarter ending June 30, 2024


Low


High

GAAP gross margin

50.5 %


52.0 %

Stock-based compensation

0.5 %


0.5 %

Non-GAAP gross margin

51.0 %


52.5 %




Fiscal quarter ending June 30, 2024

(in thousands)

Low


High

GAAP operating expenses

$46,000


$48,000

Stock-based compensation

(3,300)


(3,300)

Purchase accounting intangible amortization

(1,200)


(1,200)

Restructuring and other costs

(500)


(500)

Non-GAAP operating expenses

$41,000


$43,000




Fiscal quarter ending June 30, 2024


Low


High

GAAP diluted loss per share range

$(0.43)


$(0.23)

Stock-based compensation

0.19


0.19

Purchase accounting intangible amortization

0.06


0.06

Restructuring and other costs

0.02


0.02

Non-GAAP tax adjustments

0.08


0.08

Non-GAAP diluted loss per share

$(0.08)


$0.12

   

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SOURCE FARO Technologies

Contact:
Company Name: FARO Technologies
Investor Contacts, FARO Technologies, Inc., Matthew Horwath, Chief Financial Officer
Phone: +1 407-562-5005
Email Contact | Sapphire Investor Relations, LLC, Michael Funari or Erica Mannion
Phone: +1 617-542-6180
Email Contact
Financial data for FARO Technologies