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FARO Announces First Quarter Financial Results

LAKE MARY, Fla., April 27, 2022 — (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, 2022.

"First quarter revenue came in below expectations as the Chinese government's mandated COVID lockdown in Shanghai prevented shipments from our lone Chinese logistics center at the end of March. Additionally, ongoing supply chain shortages and softer than expected demand in the AEC market further impacted our Q1 revenue," stated Michael Burger, President and Chief Executive Officer. "With the launch of our new Focus Premium Laser Scanner in April and the Quantum Max FaroArm in the second half of 2021, we have refreshed three quarters of FARO's hardware revenue which positions us very well competitively."

Mr. Burger continued, "Our focus remains on providing the market increasing levels of analytics, insights and value from 3D models captured by FARO's hardware products and accessed through FARO Sphere, our recently announced cloud-based environment. While the ongoing uncertainties in the market create risks to near-term results, the long-term opportunity for FARO remains as exciting as ever. Our high accuracy expertise and focus on enabling customers to efficiently and easily manage their assets virtually, positions us well to capitalize on the massive potential of the digital reality market."

First Quarter 2022 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 2022

For the second quarter ending June 30, 2022, FARO currently expects:

Conference Call

The Company will host a conference call to discuss these results on Wednesday, April 27, 2022 at 5:00 p.m. ET. Interested parties can access the conference call by dialing (866) 518-6930 (U.S.) or +1 (203) 518-9797 (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

FARO serves the 3D Metrology, AEC (Architecture, Engineering & Construction), O&M (Facilities Operations & Maintenance), and Public Safety Analytics markets. For over 40 years, FARO has provided industry-leading technology solutions that enable customers to digitize 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 accuracy, precision, and immediacy. For more information, visit http://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 loss from operations, non-GAAP net loss and non-GAAP net loss per share, exclude the impact of purchase accounting intangible amortization expense, stock-based compensation, restructuring 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 expense, net, income tax expense (benefit) and depreciation and amortization, and Adjusted EBITDA, which is calculated as EBITDA, excluding other income, net, stock-based compensation, and restructuring charges, as measures of our operating profitability. The most directly comparable GAAP measure to EBITDA and Adjusted EBITDA is net loss. We also present Adjusted EBITDA margin, which is calculated as Adjusted EBITDA as a percent of total sales.

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 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 plan and the timing and amount of cost savings and other benefits expected to be realized from the restructuring plan 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, 2022


March 31, 2021

Sales




     Product

$                             56,730


$                             54,635

     Service

19,926


21,696

     Total sales

76,656


76,331

Cost of Sales




     Product

24,333


24,804

     Service

11,297


11,120

     Total cost of sales

35,630


35,924

Gross Profit

41,026


40,407

Operating Expenses




     Selling, general and administrative

35,490


33,348

     Research and development

12,128


11,973

     Restructuring costs

600


1,524

     Total operating expenses

48,218


46,845

Loss from operations

(7,192)


(6,438)

Other (income) expense




     Interest expense, net

8


10

     Other (income) expense, net

(13)


(1,615)

Loss before income tax benefit

(7,187)


(4,833)

Income tax expense (benefit)

2,500


(1,612)

Net loss

$                              (9,687)


$                              (3,221)

Net loss per share - Basic

$                                (0.53)


$                                (0.18)

Net loss per share - Diluted

$                                (0.53)


$                                (0.18)

Weighted average shares - Basic

18,240,299


18,076,410

Weighted average shares - Diluted

18,240,299


18,076,410

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share data)

March 31, 2022
(unaudited)


December 31,
2021

ASSETS




Current assets:




     Cash and cash equivalents

$        107,192


$        121,989

     Accounts receivable, net

76,745


78,523

     Inventories, net

53,992


53,145

     Prepaid expenses and other current assets

23,063


19,793

          Total current assets

260,992


273,450

Non-current assets:




     Property, plant and equipment, net

22,454


22,194

     Operating lease right-of-use assets

21,141


22,543

     Goodwill

81,507


82,096

     Intangible assets, net

27,223


25,616

     Service and sales demonstration inventory, net

31,894


30,554

     Deferred income tax assets, net

20,713


21,277

     Other long-term assets

1,979


2,010

          Total assets

$        467,903


$        479,740

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




     Accounts payable

$          14,793


$          14,199

     Accrued liabilities

25,650


28,208

     Income taxes payable

5,760


4,499

     Current portion of unearned service revenues

40,286


40,838

     Customer deposits

5,876


5,399

     Lease liabilities

5,653


5,738

          Total current liabilities

98,018


98,881

Unearned service revenues - less current portion

22,486


22,350

Lease liabilities - less current portion

17,288


18,648

Deferred income tax liabilities

1,041


1,058

Income taxes payable - less current portion

11,297


11,297

Other long-term liabilities

1,034


1,047

Total liabilities

151,164


153,281

Shareholders' equity:




     Common stock - par value $.001, 50,000,000 shares authorized; 19,637,028 and
     19,588,003 issued, respectively; 18,260,667 and 18,205,636 outstanding, respectively

20


20

     Additional paid-in capital

302,877


301,061

     Retained earnings

63,857


73,544

     Accumulated other comprehensive loss

(19,358)


(17,374)

     Common stock in treasury, at cost - 1,376,351 and 1,382,367 shares held, respectively

(30,657)


(30,792)

Total shareholders' equity

316,739


326,459

Total liabilities and shareholders' equity

$        467,903


$        479,740

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



Three Months Ended

(in thousands)

March 31, 2022


March 31, 2021

Cash flows from:




Operating activities:




     Net loss

$           (9,687)


$           (3,221)

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




          Depreciation and amortization

3,012


3,190

          Stock-based compensation

2,867


2,094

          Provisions for bad debts, net of recoveries

16


(89)

          Loss on disposal of assets

112


20

          Provision for excess and obsolete inventory

229


1,404

          Deferred income tax expense (benefit)

66


(1,612)

Change in operating assets and liabilities:




     Decrease (Increase) in:




          Accounts receivable

1,449


3,676

          Inventories

(2,065)


(3,999)

          Prepaid expenses and other current assets

(3,313)


(1,346)

     (Decrease) Increase in:




          Accounts payable and accrued liabilities

(1,682)


(9,823)

          Income taxes payable

1,261


(1,153)

          Customer deposits

492


896

          Unearned service revenues

206


(323)

               Net cash used in operating activities

(7,037)


(10,286)

Investing activities:




     Purchases of property and equipment

(2,442)


(1,547)

     Cash paid for technology development, patents and licenses

(2,612)


(890)

               Net cash used in investing activities

(5,054)


(2,437)

Financing activities:




     Payments on finance leases

(58)


(86)

     Payments for taxes related to net share settlement of equity awards

(916)


(3,336)

     Proceeds from issuance of stock related to stock option exercises


5,118

               Net cash (used in) provided by financing activities

(974)


1,696

Effect of exchange rate changes on cash and cash equivalents

(1,732)


(4,649)

Decrease in cash and cash equivalents

(14,797)


(15,676)

Cash and cash equivalents, beginning of period

121,989


185,633

Cash and cash equivalents, end of period

$        107,192


$        169,957

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP

(UNAUDITED)



Three Months Ended March 31,

(dollars in thousands, except per share data)

2022


2021

Gross profit, as reported

$                      41,026


$                      40,407

     Stock-based compensation (1)

199


66

     Non-GAAP adjustments to gross profit

199


66

Non-GAAP gross profit

$                      41,225


$                      40,473

Gross margin, as reported

53.5%


52.9%

Non-GAAP gross margin

53.8%


53.0%





Selling, general and administrative, as reported

$                      35,490


$                      33,348

     Stock-based compensation (1)

(2,221)


(1,682)

     Purchase accounting intangible amortization

(201)


(185)

Non-GAAP selling, general and administrative

$                      33,068


$                      31,481





Research and development, as reported

$                      12,128


$                      11,973

     Stock-based compensation (1)

(447)


(346)

     Purchase accounting intangible amortization

(545)


(328)

Non-GAAP research and development

$                      11,136


$                      11,299





Operating expenses, as reported

$                      48,218


$                      46,845

     Stock-based compensation (1)

(2,668)


(2,028)

     Restructuring costs (2)

(600)


(1,524)

     Purchase accounting intangible amortization

(746)


(513)

Non-GAAP adjustments to operating expenses

(4,014)


(4,065)

Non-GAAP operating expenses

$                      44,204


$                      42,780





Loss from operations, as reported

$                      (7,192)


$                      (6,438)

     Non-GAAP adjustments to gross profit

199


66

     Non-GAAP adjustments to operating expenses

4,014


4,065

Non-GAAP loss from operations

$                      (2,979)


$                      (2,307)





Net loss, as reported

$                      (9,687)


$                      (3,221)

     Non-GAAP adjustments to gross profit

199


66

     Non-GAAP adjustments to operating expenses

4,014


4,065

     Income tax effect of non-GAAP adjustments

(967)


(1,478)

     Other tax adjustments (3)

3,937


Non-GAAP net loss

$                      (2,504)


$                         (568)





Net loss per share - Diluted, as reported

$                        (0.53)


$                        (0.18)

     Stock-based compensation (1)

0.16


0.12

     Restructuring costs (2)

0.03


0.08

     Purchase accounting intangible amortization

0.04


0.03

     Income tax effect of non-GAAP adjustments

(0.05)


(0.08)

     Other tax adjustments (3)

0.21


Non-GAAP net loss per share - Diluted

$                        (0.14)


$                        (0.03)

(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. In connection with the Restructuring Plan, during the three months ended March 31, 2022 and March 31, 2021 we recorded a pre-tax charge of approximately $0.6 million and $1.5 million, respectively, primarily consisting 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)

2022


2021

Net loss

$                      (9,687)


$                      (3,221)

     Interest expense, net

8


10

     Income tax expense (benefit)

2,500


(1,612)

     Depreciation and amortization

3,012


3,190

EBITDA

(4,167)


(1,633)

     Other income, net

(13)


(1,615)

     Stock-based compensation

2,867


2,094

     Restructuring costs (1)

600


1,524

Adjusted EBITDA

$                         (713)


$                           370

Adjusted EBITDA margin (2)

(0.9)%


0.5%

(1) 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. In connection with the Restructuring Plan, during the three months ended March 31, 2022 and March 31, 2021 we recorded a pre-tax charge of approximately $0.6 million and $1.5 million, respectively, primarily consisting 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)

2022


2021

Total sales to external customers




Americas (1)

$                         36,677


$                         32,549

EMEA (1)

22,136


25,454

APAC (1)

17,843


18,328


$                         76,656


$                         76,331

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

 


For the Three Months Ended March 31,

(in thousands)

2022


2021





Product

$                      46,452


$                      44,416

Software

10,278


10,219

Service

19,926


21,696

Total Sales

$                      76,656


$                      76,331





     Product as a percentage of total sales

60.6%


58.2%

     Software as a percentage of total sales

13.4%


13.4%

     Service as a percentage of total sales

26.0%


28.4%





Total Recurring Revenue (2)

$                      16,473


$                      15,464

     Recurring revenue as a percentage of total sales

21.5%


20.3%

(2) 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, 2022



GAAP diluted loss per share range

($0.56) - ($0.32)

     Stock-based compensation

0.16

     Purchase accounting intangible amortization

0.04

     Restructuring and other costs

0.08

     Non-GAAP tax adjustments

0.11 - 0.08

Non-GAAP diluted (loss) earnings per share

($0.17) - $0.04

 

 

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SOURCE FARO

Contact:
Company Name: FARO
FARO Technologies, Inc., Allen Muhich, 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