Le Lézard
Classified in: Science and technology, Business
Subjects: ERN, ERP

FARO Announces Third Quarter Financial Results


LAKE MARY, Fla., Nov. 1, 2023 /PRNewswire/ -- FARO® Technologies, Inc. (Nasdaq: FARO), a global leader in 4D digital reality solutions, today announced its financial results for the third quarter ended September 30, 2023.

"Third quarter financial performance with revenue of $86.8 million and non-GAAP EPS of $0.02, exceeded the high-end of our expectations driven by a combination of moderate improvements in end market demand and operational performance," said Peter Lau, President & Chief Executive Office of FARO. "We are excited about the mid to long-term prospects for our business and remain focused on improved execution of our hardware and software enabled strategy, exemplified by the recent launch of the highly differentiated Orbis Mobile Scanner and release of an enhanced version of FARO Sphere XG."

Third Quarter 2023 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 Fourth Quarter 2023

For the fourth quarter ending December 31, 2023, FARO currently expects:

Conference Call

The Company will host a conference call to discuss these results on Thursday, November 2, 2023, at 8:00 a.m. ET. Interested parties can access the conference call by dialing (800) 343-4849 (U.S.) or +1 (203) 518-9843 (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 margin, non-GAAP operating expenses, non-GAAP net loss and non-GAAP net loss per share, exclude the impact of purchase accounting intangible amortization expense and fair value adjustments, stock-based compensation, inventory reserve charge, 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 loss before interest (income) expense, net, income tax expense and depreciation and amortization, and Adjusted EBITDA, which is calculated as EBITDA, excluding other (income) expense, net, stock-based compensation, inventory reserve charge, and restructuring and other charges, as measures of our operating profitability. The most directly comparable GAAP measure to EBITDA and Adjusted EBITDA is net loss.

Free Cash Flow represents cash from operating activities less capital spending. Adjusted Free Cash Flow represents free cash flow further adjusted to exclude restructuring cash payments.

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 third quarter of 2023, demand for and customer acceptance of FARO's products, FARO's product acquisitions, development and product launches, and FARO's growth, investment, strategic and restructuring plans and initiatives, including but not limited to the timing and amount of cost savings and other benefits expected to be realized from our strategic initiatives. 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," "intend," "continue," "believe," "expect," "may," "could" or "should," 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


Nine Months Ended

(in thousands, except share and per share data)

September 30,
2023


September 30,
2022


September 30,
2023


September 30,
2022

Sales








Product

$            66,911


$            65,581


$          199,754


$          182,015

Service

19,902


19,751


60,237


59,891

Total sales

86,813


85,332


259,991


241,906

Cost of sales








Product

34,640


30,375


112,691


82,879

Service

10,499


11,692


32,587


34,299

Total cost of sales

45,139


42,067


145,278


117,178

Gross profit

41,674


43,265


114,713


124,728

Operating expenses








Selling, general and administrative

37,970


37,226


117,907


108,734

Research and development

8,188


12,586


32,568


36,756

Restructuring costs

2,442


580


15,130


2,512

Total operating expenses

48,600


50,392


165,605


148,002

Loss from operations

(6,926)


(7,127)


(50,892)


(23,274)

Other (income) expense








Interest expense (income)

691


(24)


2,529


(28)

Other income, net

(381)


(1,428)


(125)


(3,077)

Loss before income tax

(7,236)


(5,675)


(53,296)


(20,169)

Income tax expense

1,520


586


4,869


4,352

Net loss

$            (8,756)


$            (6,261)


$          (58,165)


$          (24,521)

Net loss per share - Basic

$              (0.46)


$              (0.34)


$              (3.08)


$              (1.34)

Net loss per share - Diluted

$              (0.46)


$              (0.34)


$              (3.08)


$              (1.34)

Weighted average shares - Basic

18,953,251


18,436,615


18,899,954


18,336,537

Weighted average shares - Diluted

18,953,251


18,436,615


18,899,954


18,336,537

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)


(in thousands, except share and per share data)

September 30,
2023


December 31,
2022

ASSETS




Current assets:




Cash and cash equivalents

$                 79,919


$                 37,812

Accounts receivable, net

88,363


90,326

Inventories, net

40,095


50,026

Prepaid expenses and other current assets

37,325


41,201

Total current assets

245,702


219,365

Non-current assets:




Property, plant and equipment, net

22,207


19,720

Operating lease right-of-use assets

12,521


18,989

Goodwill

106,873


107,155

Intangible assets, net

46,999


48,978

Service and sales demonstration inventory, net

22,662


30,904

Deferred income tax assets, net

24,093


24,192

Other long-term assets

4,047


4,044

Total assets

$               485,104


$               473,347

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$                 23,408


$                 27,286

Accrued liabilities

24,994


23,345

Income taxes payable

12,083


6,767

Current portion of unearned service revenues

34,493


36,407

Customer deposits

5,237


6,725

Lease liabilities

5,258


5,709

Total current liabilities

105,473


106,239

Loan - 5.50% Convertible Senior Notes

72,604


?

Unearned service revenues - less current portion

20,893


20,947

Lease liabilities - less current portion

11,495


14,649

Deferred income tax liabilities

11,497


11,708

Income taxes payable - less current portion

4,020


8,706

Other long-term liabilities

30


49

Total liabilities

226,012


162,298

Commitments and contingencies




Shareholders' equity:




Common stock - par value $0.001, 50,000,000 shares authorized;
20,328,417 and 20,156,233 issued, respectively; 18,953,725 and 18,780,013
outstanding, respectively

20


20

Additional paid-in capital

340,414


328,227

Retained earnings

(11,377)


46,788

Accumulated other comprehensive loss

(39,310)


(33,331)

Common stock in treasury, at cost - 1,374,692 and 1,376,220 shares held,
respectively

(30,655)


(30,655)

Total shareholders' equity

259,092


311,049

Total liabilities and shareholders' equity

$               485,104


$               473,347

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)



Nine Months Ended September 30,

(in thousands)

2023


2022

Cash flows from:




Operating activities:




Net loss

$          (58,165)


$          (24,521)

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




Depreciation and amortization

11,728


10,061

Stock-based compensation

12,276


10,024

Inventory write-downs

8,132


?

Asset impairment charges

5,333


?

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

(82)


568

Provision for excess and obsolete inventory

1,754


209

Amortization of debt discount and issuance costs

294


?

Loss on disposal of assets

(155)


356

Provisions for bad debts, net of recoveries

834


80

Change in operating assets and liabilities:




Decrease (Increase) in:




Accounts receivable

1,282


867

Inventories

(544)


2,129

Prepaid expenses and other current assets

4,047


(14,566)

(Decrease) Increase in:




Accounts payable and accrued liabilities

(2,802)


(2,249)

Income taxes payable

653


1,008

Customer deposits

(1,534)


588

Unearned service revenues

(1,198)


(2,710)

Other liabilities

567


?

Net cash used in operating activities

(17,580)


(18,156)

Investing activities:




Purchases of property and equipment

(5,016)


(4,978)

Cash paid for technology development, patents and licenses

(5,071)


(9,154)

Acquisition of business, net of cash acquired

?


(29,068)

Net cash used in investing activities

(10,087)


(43,200)

Financing activities:




Payments on finance leases

(154)


(172)

Payments for taxes related to net share settlement of equity awards

(89)


(1,584)

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

72,310


?

Payment of contingent consideration for business acquisition

(1,098)


?

Net cash provided by (used in) financing activities

70,969


(1,756)

Effect of exchange rate changes on cash and cash equivalents

(1,195)


(10,343)

Increase (Decrease) in cash and cash equivalents

42,107


(73,455)

Cash and cash equivalents, beginning of period

37,812


121,989

Cash and cash equivalents, end of period

$            79,919


$            48,534

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP
(UNAUDITED)



Three Months Ended September 30,


Nine Months Ended September 30,

(dollars in thousands, except per share data)

2023


2022


2023


2022

Gross profit, as reported

$        41,674


$        43,265


$      114,713


$      124,728

Stock-based compensation (1)

280


273


972


756

Inventory reserve charge (3)

?


?


8,132


?

Restructuring and other costs (2)

456


?


1,326


?

Non-GAAP adjustments to gross profit

736


273


10,430


756

Non-GAAP gross profit

$        42,410


$        43,538


$      125,143


$      125,484

Gross margin, as reported

48.0 %


50.7 %


44.1 %


51.6 %

Non-GAAP gross margin

48.9 %


51.0 %


48.1 %


51.9 %









Selling, general and administrative, as reported

$        37,970


$        37,226


$      117,907


$      108,734

Stock-based compensation (1)

(3,588)


(2,742)


(9,710)


(7,475)

Purchase accounting intangible amortization

(663)


(180)


(2,024)


(562)

Non-GAAP selling, general and administrative

$        33,719


$        34,304


$      106,173


$      100,697









Research and development, as reported

$          8,188


$        12,586


$        32,568


$        36,756

Stock-based compensation (1)

176


(651)


(1,594)


(1,793)

Purchase accounting intangible amortization

(501)


(487)


(1,541)


(1,522)

Non-GAAP research and development

$          7,863


$        11,448


$        29,433


$        33,441









Operating expenses, as reported

$        48,600


$        50,392


$      165,605


$      148,002

Stock-based compensation (1)

(3,411)


(3,393)


(11,304)


(9,268)

Restructuring and other costs (2)

(2,495)


(2,028)


(16,337)


(4,944)

Purchase accounting intangible amortization

(1,164)


(667)


(3,565)


(2,084)

Non-GAAP adjustments to operating expenses

(7,070)


(6,088)


(31,206)


(16,296)

Non-GAAP operating expenses

$        41,530


$        44,304


$      134,399


$      131,706









Loss from operations, as reported

$        (6,926)


$        (7,127)


$      (50,892)


$      (23,274)

Non-GAAP adjustments to gross profit

737


273


10,430


756

Non-GAAP adjustments to operating expenses

7,070


6,088


31,206


16,296

Non-GAAP loss from operations

$              881


$            (766)


$        (9,256)


$        (6,222)









Net loss, as reported

$        (8,756)


$        (6,261)


$      (58,165)


$      (24,521)

Non-GAAP adjustments to gross profit

737


273


10,430


756

Non-GAAP adjustments to operating expenses

7,070


6,088


31,206


16,296

Income tax effect of non-GAAP adjustments

(1,952)


(1,272)


(10,409)


(4,014)

Other tax adjustments (4)

3,358


1,720


17,700


8,903

Non-GAAP net gain/(loss)

$              457


$              548


$        (9,238)


$        (2,580)









Net loss per share - Diluted, as reported

$           (0.46)


$           (0.34)


$           (3.08)


$           (1.34)

Stock-based compensation (1)

0.19


0.20


0.65


0.55

Restructuring and other costs (2)

0.16


0.11


0.93


0.27

Inventory reserve charge (3)

?


?


0.43


?

Purchase accounting intangible amortization

0.06


0.04


0.19


0.11

Income tax effect of non-GAAP adjustments

(0.10)


(0.07)


(0.55)


(0.22)

Other tax adjustments (4)

0.18


0.09


0.94


0.49

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

$             0.02


$             0.03


$           (0.49)


$           (0.14)


(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 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.


(3) During the nine months ended September 30, 2023, we recorded a charge of $8.1 million, increasing our reserve for excess and obsolete inventory, based on our analysis of our inventory reserves in connection with our strategy to simplify our product portfolio and cease selling certain products.


(4) The other tax adjustments primarily relate to the impact of certain jurisdictions maintaining a full valuation allowance where benefit is not accrued on U.S. GAAP pre-tax book losses.

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA
(UNAUDITED)



Three Months Ended September 30,


Nine Months Ended September 30,

(in thousands)

2023


2022


2023


2022

Net loss

$        (8,756)


$        (6,261)


$      (58,165)


$      (24,521)

Interest (income) expense, net

691


(24)


2,529


(28)

Income tax expense

1,520


586


4,869


4,352

Depreciation and amortization

3,803


3,406


11,728


10,061

EBITDA

(2,742)


(2,293)


(39,039)


(10,136)

Other (income) expense, net

(381)


(1,428)


(125)


(3,077)

Stock-based compensation

3,692


3,666


12,276


10,024

Inventory reserve charge (3)

?


?


8,132


?

Restructuring and other costs (1)

2,951


2,028


17,663


4,944

Adjusted EBITDA

$          3,520


$          1,973


$        (1,093)


$          1,755

Adjusted EBITDA margin (2)

4.1 %


2.3 %


(0.4) %


0.7 %


(1) 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.


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


(3) During nine months ended September 30, 2023, we recorded a charge of $8.1 million, increasing our reserve for excess and obsolete inventory, based on our analysis of our inventory reserves in connection with our strategy to simplify our product portfolio and cease selling certain products.

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
KEY SALES MEASURES
(UNAUDITED)



Three Months Ended September 30,


Nine Months Ended September 30,

(in thousands)

2023


2022


2023


2022

Total sales to external customers as reported








Americas (1)

$          41,033


$          38,732


$        124,734


$        110,077

EMEA (1)

25,621


22,802


74,641


66,494

APAC (1)

20,159


23,798


60,616


65,335


$          86,813


$          85,332


$        259,991


$        241,906










Three Months Ended September 30,


Nine Months Ended September 30,

(in thousands)

2023


2022


2023


2022

Total sales to external customers in constant currency (2)








Americas (1)

$          40,220


$          38,675


$        123,148


$        109,825

EMEA (1)

23,074


22,232


67,557


61,320

APAC (1)

20,121


23,112


59,109


60,862


$          83,415


$          84,019


$        249,814


$        232,007


(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 September 30,


Nine Months Ended September 30,

(in thousands)

2023


2022


2023


2022









Hardware

$        55,706


$        54,971


$      167,484


$      150,597

Software

11,205


10,610


32,270


31,418

Service

19,902


19,751


60,237


59,891

Total Sales

$        86,813


$        85,332


$      259,991


$      241,906









Hardware as a percentage of total sales

64.2 %


64.4 %


64.4 %


62.3 %

Software as a percentage of total sales

12.9 %


12.4 %


12.4 %


13.0 %

Service as a percentage of total sales

22.9 %


23.1 %


23.2 %


24.8 %









Total Recurring Revenue (3)

$        17,056


$        16,591


$        50,137


$        50,184

Recurring revenue as a percentage of total sales

19.6 %


19.4 %


19.3 %


20.7 %


(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 September 30,


Nine Months Ended September 30,

(in thousands)

2023


2022


2023


2022

Net cash used in operating activities

$            (4,373)


$          (14,896)


$          (17,580)


$          (18,156)

Purchases of property and equipment

(704)


(1,497)


(5,016)


(4,978)

Cash paid for technology development, patents and
licenses

(1,455)


(3,606)


(5,071)


(9,154)

Free Cash Flow

(6,532)


(19,999)


(27,667)


(32,288)

Restructuring and other cash payments (1)

6,279


3,075


11,014


5,910

Adjusted Free Cash Flow

$               (253)


$          (16,924)


$          (16,653)


$          (26,378)


(1) 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 cash payments primarily consist of severance and related benefits.

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION OF OUTLOOK - GAAP TO NON-GAAP



Fiscal Quarter Ending 12/31/2023


Low


High

GAAP diluted loss per share range

$(0.30)


$(0.15)

Stock-based compensation

0.19


0.19

Purchase accounting intangible amortization

0.06


0.06

Restructuring and other costs

0.13


0.13

Non-GAAP tax adjustments

0.10


0.11

Non-GAAP diluted loss per share

$0.18


$0.34

 

SOURCE FARO


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