LAKE
MARY, Fla., May 3, 2023
/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, 2023.
"First quarter revenue remained strong at $85.0 million, growing 11% year-on-year, driven
primarily by shipments of our new Focus Premium Laser Scanner,"
said Michael Burger, President and
Chief Executive Officer. "After experiencing delays in customer
purchase decisions late in the first quarter due to a softening
macroeconomic environment, we are implementing additional
annualized cost saving initiatives in the range of $10 million to $20
million, to offset both the expected revenue impact and
continued near-term inflationary pressures. Looking ahead, we
continue to believe the combination of investments in our latest
product innovations and the integration of recent acquisitions
positions us well to capture the significant market opportunity
inherent in digitalizing the physical world."
First Quarter 2023 Financial Summary
- Total sales of $85.0 million, up
11% compared to the prior year period
- Software sales of $10.3 million
or 12% of revenue, approximately flat with the prior year period
due to the conversion of license revenue to subscription
- Recurring revenue of $16.7
million or 20% of revenue, down from 22% in the prior year
period due to the strength in hardware sales
- Gross margin of 46.7%, compared to 53.5% in the prior year
period with the reduction primarily as a result of material cost
increases
- Non-GAAP gross margin of 47.6%, compared to 53.8% in the prior
year period
- Operating expenses of $58.3
million, compared to $48.2
million in the prior year period which includes
approximately $2.7 million in
one-time expenses associated with a first quarter global sales
conference
- Non-GAAP operating expenses of $48.8
million, compared to $44.2
million in the prior year period
- Net loss of $21.2 million, or
($1.12) per share compared to net
loss of $9.7 million, or ($0.53) per share in the prior year period
- Non-GAAP net loss of $7.1
million, or ($0.38) per share
compared to non-GAAP net loss of $2.5
million, or ($0.14) per share
in the prior year period
- Adjusted EBITDA of ($5.5)
million, or 6.5% of total sales compared to an approximate
($0.7) million, or 0.9% of total
sales in the prior year period
- Cash and short-term investments of $88.6
million, compared to $37.8
million as of December 31,
2022
* 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 2023
For the second quarter ending June 30,
2023, FARO currently expects:
- Revenue in the range of $79 to
$87 million
- Gross margin in the range of 44% to 47%. Non-GAAP gross margin
in the range of 45% to 48%.
- Operating expenses in the range of $58.0 to $67.0
million. Non-GAAP operating expenses in the range of
$45.0 to $46.5
million
- Net income (loss) per share in the range of ($1.80) to ($1.13).
Non-GAAP net income (loss) per share in the range of ($0.47) to ($0.22).
Conference Call
The Company will host a conference call to discuss these results
on Wednesday, May 3, 2023, at
5:00 p.m. ET. Interested parties can
access the conference call by dialing (800) 267-6316 (U.S.)
or +1 (203) 518-9783 (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 income (loss) and non-GAAP net income (loss)
per share, exclude the impact of purchase accounting intangible
amortization expense and fair value adjustments, 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 Adjusted EBITDA, which is calculated as
net income (loss), 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 Adjusted EBITDA is net loss.
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 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:
- the Company's ability to realize the intended benefits of its
undertaking to transition to a company that is reorganized around
functions to improve the efficiency of its sales organization and
to improve operational effectiveness;
- the Company's inability to successfully execute its new
strategic plan and restructuring plan, including but not limited to
additional impairment charges and/or higher than expected severance
costs and exit costs, and its inability to realize the expected
benefits of such plans;
- the outcome of the U.S. Government's review of, or
investigation into, the GSA Matter;
- any resulting penalties, damages, or sanctions imposed on the
Company and the outcome of any resulting litigation to which the
Company may become a party;
- loss of future government sales;
- potential impacts on customer and supplier relationships and
the Company's reputation;
- development by others of new or improved products, processes or
technologies that make the Company's products less competitive or
obsolete;
- the Company's inability to maintain its technological advantage
by developing new products and enhancing its existing
products;
- declines or other adverse changes, or lack of improvement, in
industries that the Company serves or the domestic and
international economies in the regions of the world where the
Company operates and other general economic, business, and
financial conditions;
- the effect of general economic and financial market conditions,
including in response to public health concerns;
- assumptions regarding the Company's financial condition or
future financial performance may be incorrect;
- the impact of fluctuations in foreign exchange rates and
inflation rates; and
- other risks and uncertainties discussed in Part I, Item 1A.
Risk Factors in the Company's Annual Report on Form 10-K for the
year ended December 31, 2022, filed
with the Securities and Exchange Commission on February 15, 2023, as supplemented by the
Company's Quarterly Reports on Form 10-Q, and in other SEC
filings.
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
CONSOLIDATED STATEMENTS
OF OPERATIONS
(UNAUDITED)
|
|
|
Three Months
Ended
|
(in thousands, except
share and per share data)
|
March 31,
2023
|
|
March 31,
2022
|
Sales
|
|
|
|
Product
|
$
65,240
|
|
$
56,730
|
Service
|
19,727
|
|
19,926
|
Total sales
|
84,967
|
|
76,656
|
Cost of
sales
|
|
|
|
Product
|
33,957
|
|
24,333
|
Service
|
11,294
|
|
11,297
|
Total cost of
sales
|
45,251
|
|
35,630
|
Gross profit
|
39,716
|
|
41,026
|
Operating
expenses
|
|
|
|
Selling, general and
administrative
|
41,376
|
|
35,490
|
Research and
development
|
12,718
|
|
12,128
|
Restructuring
costs
|
4,238
|
|
600
|
Total operating
expenses
|
58,332
|
|
48,218
|
Loss from
operations
|
(18,616)
|
|
(7,192)
|
Other (income)
expense
|
|
|
|
Interest
expense
|
835
|
|
8
|
Other income,
net
|
(220)
|
|
(13)
|
Loss before income tax
expense
|
(19,231)
|
|
(7,187)
|
Income tax
expense
|
1,933
|
|
2,500
|
Net loss
|
$
(21,164)
|
|
$
(9,687)
|
Net loss per share -
Basic
|
$
(1.12)
|
|
$
(0.53)
|
Net loss per share -
Diluted
|
$
(1.12)
|
|
$
(0.53)
|
Weighted average shares
- Basic
|
18,816,110
|
|
18,240,299
|
Weighted average shares
- Diluted
|
18,816,110
|
|
18,240,299
|
|
|
|
|
|
|
|
|
FARO TECHNOLOGIES,
INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
|
|
(in thousands, except
share and per share data)
|
March 31,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
68,564
|
|
$
37,812
|
Short-term
investments
|
20,024
|
|
—
|
Accounts receivable,
net
|
90,238
|
|
90,326
|
Inventories,
net
|
50,886
|
|
50,026
|
Prepaid expenses and
other current assets
|
45,830
|
|
41,201
|
Total current
assets
|
275,542
|
|
219,365
|
Non-current
assets:
|
|
|
|
Property, plant and
equipment, net
|
19,505
|
|
19,720
|
Operating lease
right-of-use assets
|
17,605
|
|
18,989
|
Goodwill
|
108,051
|
|
107,155
|
Intangible assets,
net
|
48,793
|
|
48,978
|
Service and sales
demonstration inventory, net
|
30,917
|
|
30,904
|
Deferred income tax
assets, net
|
24,271
|
|
24,192
|
Other long-term
assets
|
4,044
|
|
4,044
|
Total assets
|
$
528,728
|
|
$
473,347
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
22,888
|
|
$
27,286
|
Accrued
liabilities
|
26,180
|
|
23,345
|
Income taxes
payable
|
7,282
|
|
6,767
|
Current portion of
unearned service revenues
|
36,792
|
|
36,407
|
Customer
deposits
|
6,389
|
|
6,725
|
Lease
liabilities
|
5,479
|
|
5,709
|
Total current
liabilities
|
105,010
|
|
106,239
|
Loan - 5.50%
convertible Senior Notes
|
72,379
|
|
—
|
Unearned service
revenues - less current portion
|
21,101
|
|
20,947
|
Lease liabilities -
less current portion
|
13,287
|
|
14,649
|
Deferred income tax
liabilities
|
11,897
|
|
11,708
|
Income taxes payable -
less current portion
|
8,718
|
|
8,706
|
Other long-term
liabilities
|
23
|
|
49
|
Total
liabilities
|
232,415
|
|
162,298
|
Common stock - par
value $0.001, 50,000,000 shares authorized; 20,276,813
and
20,156,233 issued,
respectively; 18,902,121 and 18,780,013 outstanding,
respectively
|
20
|
|
20
|
Additional paid-in
capital
|
331,875
|
|
328,227
|
Retained
earnings
|
25,624
|
|
46,788
|
Accumulated other
comprehensive loss
|
(30,551)
|
|
(33,331)
|
Common stock in
treasury, at cost - 1,376,351 and 1,382,367 shares held,
respectively
|
(30,655)
|
|
(30,655)
|
Total shareholders'
equity
|
296,313
|
|
311,049
|
Total liabilities and
shareholders' equity
|
$
528,728
|
|
$
473,347
|
FARO TECHNOLOGIES,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(UNAUDITED)
|
|
|
Three Months
Ended
March 31,
|
(in
thousands)
|
2023
|
|
2022
|
Cash flows
from:
|
|
|
|
Operating
activities:
|
|
|
|
Net loss
|
$
(21,164)
|
|
$
(9,687)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation and
amortization
|
4,413
|
|
3,012
|
Stock-based
compensation
|
3,634
|
|
2,867
|
Provisions for bad
debts, net of recoveries
|
33
|
|
16
|
Loss on disposal of
assets
|
69
|
|
112
|
Provision for excess
and obsolete inventory
|
344
|
|
229
|
Deferred income tax
expense (benefit)
|
562
|
|
66
|
Change in operating
assets and liabilities:
|
|
|
|
Decrease (Increase)
in:
|
|
|
|
Accounts
receivable
|
2,378
|
|
1,449
|
Inventories
|
(1,530)
|
|
(2,065)
|
Prepaid expenses and
other current assets
|
(4,219)
|
|
(3,313)
|
(Decrease) Increase
in:
|
|
|
|
Accounts payable and
accrued liabilities
|
(2,450)
|
|
(1,682)
|
Income taxes
payable
|
(102)
|
|
1,261
|
Customer
deposits
|
(433)
|
|
492
|
Unearned service
revenues
|
121
|
|
206
|
Net cash used in
operating activities
|
(18,344)
|
|
(7,037)
|
Investing
activities:
|
|
|
|
Purchases of
short-term investments
|
(20,024)
|
|
—
|
Purchases of property
and equipment
|
(1,688)
|
|
(2,442)
|
Cash paid for
technology development, patents and licenses
|
(1,820)
|
|
(2,612)
|
Net cash used in
investing activities
|
(23,532)
|
|
(5,054)
|
Financing
activities:
|
|
|
|
Payments on finance
leases
|
(44)
|
|
(58)
|
Proceeds from issuance
of convertible notes, net of discount and issuance cost
|
72,310
|
|
—
|
Payments for taxes
related to net share settlement of equity awards
|
14
|
|
(916)
|
Net cash (used in)
provided by financing activities
|
72,280
|
|
(974)
|
Effect of exchange rate
changes on cash and cash equivalents
|
348
|
|
(1,732)
|
Increase (Decrease) in
cash and cash equivalents
|
30,752
|
|
(14,797)
|
Cash and cash
equivalents, beginning of period
|
37,812
|
|
121,989
|
Cash and cash
equivalents, end of period
|
$
68,564
|
|
$
107,192
|
FARO TECHNOLOGIES,
INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP
TO NON-GAAP
(UNAUDITED)
|
|
|
Three Months Ended
March 31,
|
(dollars in thousands,
except per share data)
|
2023
|
|
2022
|
Gross profit, as
reported
|
$
39,716
|
|
$
41,026
|
Stock-based
compensation (1)
|
272
|
|
199
|
Restructuring and
other costs (2)
|
435
|
|
—
|
Non-GAAP adjustments
to gross profit
|
707
|
|
199
|
Non-GAAP gross
profit
|
$
40,423
|
|
$
41,225
|
Gross margin, as
reported
|
46.7 %
|
|
53.5 %
|
Non-GAAP gross
margin
|
47.6 %
|
|
53.8 %
|
|
|
|
|
Selling, general and
administrative, as reported
|
$
41,376
|
|
$
35,490
|
Stock-based
compensation (1)
|
(2,568)
|
|
(2,221)
|
Purchase accounting
intangible amortization
|
(673)
|
|
(201)
|
Non-GAAP selling,
general and administrative
|
$
38,135
|
|
$
33,068
|
|
|
|
|
Research and
development, as reported
|
$
12,718
|
|
$
12,128
|
Stock-based
compensation (1)
|
(794)
|
|
(447)
|
Purchase accounting
intangible amortization
|
(499)
|
|
(545)
|
Non-GAAP research and
development
|
$
11,425
|
|
$
11,136
|
|
|
|
|
Operating expenses, as
reported
|
$
58,332
|
|
$
48,218
|
Stock-based
compensation (1)
|
(3,362)
|
|
(2,668)
|
Restructuring and
other costs (2)
|
(5,033)
|
|
600
|
Purchase accounting
intangible amortization
|
(1,172)
|
|
(746)
|
Non-GAAP adjustments
to operating expenses
|
(9,567)
|
|
(2,814)
|
Non-GAAP operating
expenses
|
$
48,765
|
|
$
45,404
|
|
|
|
|
Loss from operations,
as reported
|
$
(18,616)
|
|
$
(7,192)
|
Non-GAAP adjustments
to gross profit
|
707
|
|
199
|
Non-GAAP adjustments
to operating expenses
|
9,567
|
|
2,814
|
Non-GAAP loss from
operations
|
$
(8,342)
|
|
$
(4,179)
|
|
|
|
|
Net loss, as
reported
|
$
(21,164)
|
|
$
(9,687)
|
Non-GAAP adjustments
to gross profit
|
707
|
|
199
|
Non-GAAP adjustments
to operating expenses
|
9,567
|
|
2,814
|
Income tax effect of
non-GAAP adjustments
|
(2,569)
|
|
(967)
|
Other tax adjustments
(3)
|
6,383
|
|
3,937
|
Non-GAAP net
loss
|
$
(7,076)
|
|
$
(3,704)
|
|
|
|
|
Net loss per share -
Diluted, as reported
|
$
(1.12)
|
|
$
(0.53)
|
Stock-based
compensation (1)
|
0.19
|
|
0.16
|
Restructuring and
other costs (2)
|
0.29
|
|
0.03
|
Purchase accounting
intangible amortization
|
0.06
|
|
0.04
|
Income tax effect of
non-GAAP adjustments
|
(0.14)
|
|
(0.05)
|
Other tax adjustments
(3)
|
0.34
|
|
0.21
|
Non-GAAP net loss per
share - Diluted
|
$
(0.38)
|
|
$
(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) 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
March 31,
|
|
(in
thousands)
|
2023
|
|
2022
|
|
Net loss
|
$
(21,164)
|
|
$
(9,687)
|
|
Interest (income)
expense, net
|
835
|
|
8
|
|
Income tax
expense
|
1,933
|
|
2,500
|
|
Depreciation and
amortization
|
3,978
|
|
3,012
|
|
EBITDA
|
(14,418)
|
|
(4,167)
|
|
Other (income)
expense, net
|
(220)
|
|
(13)
|
|
Stock-based
compensation
|
3,634
|
|
2,867
|
|
Restructuring and
other costs (1)
|
5,468
|
|
600
|
|
Adjusted
EBITDA
|
$
(5,536)
|
|
$
(713)
|
|
Adjusted EBITDA margin
(2)
|
(6.5) %
|
|
(0.9) %
|
|
|
(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.
|
FARO TECHNOLOGIES,
INC. AND SUBSIDIARIES
KEY SALES
MEASURES
(UNAUDITED)
|
|
|
For the Three Months
Ended March 31,
|
(in
thousands)
|
2023
|
|
2022
|
Total sales to
external customers as reported
|
|
|
|
Americas
(1)
|
$
42,343
|
|
$
36,677
|
EMEA
(1)
|
24,165
|
|
22,136
|
APAC
(1)
|
18,459
|
|
17,843
|
|
$
84,967
|
|
$
76,656
|
|
|
|
|
|
For the Three Months
Ended March 31,
|
(in
thousands)
|
2023
|
|
2022
|
Total sales to
external customers in constant currency
(2)
|
|
|
|
Americas
(1)
|
$
43,059
|
|
$
36,625
|
EMEA
(1)
|
25,055
|
|
21,978
|
APAC
(1)
|
19,818
|
|
17,791
|
|
$
87,932
|
|
$
76,394
|
|
(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.
|
|
For the Three Months
Ended March 31,
|
(in
thousands)
|
2023
|
|
2022
|
|
|
|
|
Hardware
|
$
54,962
|
|
$
46,452
|
Software
|
10,279
|
|
10,278
|
Service
|
19,727
|
|
19,926
|
Total Sales
|
$
84,968
|
|
$
76,656
|
|
|
|
|
Hardware as a
percentage of total sales
|
64.7 %
|
|
60.6 %
|
Software as a
percentage of total sales
|
12.1 %
|
|
13.4 %
|
Service as a percentage
of total sales
|
23.2 %
|
|
26.0 %
|
|
|
|
|
Total Recurring Revenue
(3)
|
$
16,685
|
|
$
16,473
|
Recurring revenue as a
percentage of total sales
|
19.6 %
|
|
21.5 %
|
|
(3)
Recurring revenue is comprised of hardware service contracts,
software maintenance contracts, and subscription based software
applications.
|
FARO TECHNOLOGIES,
INC. AND SUBSIDIARIES
RECONCILIATION OF
OUTLOOK - GAAP TO NON-GAAP
|
|
|
Fiscal quarter ending
June 30, 2023
|
|
Low
|
|
High
|
GAAP diluted loss per
share range
|
$(1.80)
|
|
$(1.13)
|
Stock-based
compensation
|
0.30
|
|
0.30
|
Purchase accounting
intangible amortization
|
0.07
|
|
0.07
|
Restructuring and
other costs
|
0.75
|
|
0.39
|
Non-GAAP tax
adjustments
|
0.21
|
|
0.15
|
Non-GAAP diluted loss
per share
|
$(0.47)
|
|
$(0.22)
|
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SOURCE FARO