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OFFON

FARO TECHNOLOGIES, INC.

(FARO)
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FARO : Announces Second Quarter 2021 Financial Results

07/28/2021 | 04:22pm EDT

LAKE MARY, Fla., July 28, 2021 /PRNewswire/ -- FARO® (Nasdaq: FARO), a global leader of 3D measurement, imaging, and realization solutions for the 3D Metrology, AEC (Architecture, Engineering & Construction), and Public Safety Analytics markets, today announced its financial results for the second quarter ended June 30, 2021.

"Second quarter demand reflected a return to seasonal growth, with broad based improvement across our served markets," stated Michael Burger, President and Chief Executive Officer. "While demand recovers, we remain focused on creating opportunities to drive topline growth such as the expansion of our Digital Twin offering through the addition of Holobuilder's photogrammetry capabilities and our recently announced next generation Quantum Max ScanArm family of products, as well as further streamlining our operational cost structure with the recently announced shift to outsourced manufacturing."

Mr. Burger continued, "Through the combination of strategic initiatives implemented over the last two years and the investments we continue to make in our hardware, software and solution offerings to directly address our customer's workflow needs, we believe we are well positioned to drive strong operating leverage and long-term differentiation as the market grows."

Second Quarter 2021 Financial Summary
Total sales were $82.1 million for second quarter 2021 representing an 8% sequential quarterly increase when compared to $76.3 million in the first quarter 2021, and a 36% increase when compared with total sales of $60.6 million for second quarter 2020.  The sequential sales increase represents typical market seasonality while the year over year growth was primarily a result of pandemic related softness in the prior year period.  Similarly, new order bookings of $88.2 million increased 9% sequentially compared to $80.6 million in the first quarter 2021 and increased 44% when compared to $61.4 million for the second quarter 2020.

Gross margin was 55.4% for the second quarter 2021, as compared to 47.7% for the same prior year period. Non-GAAP gross margin was 55.7% for the second quarter 2021 compared to 48.4% for the second quarter 2020. The annual increase in gross margin was primarily a result of higher volume compared to the prior year period.

Operating expenses were $46.1 million for the second quarter 2021, compared to $40.9 million for the same prior year period. Non-GAAP operating expenses were $41.8 million for the second quarter 2021 compared to $37.7 million for the second quarter 2020.

Net loss was $1.2 million, or $0.06 per share, for the second quarter 2021, as compared to a net loss of $8.9 million, or $0.50 per share, for the second quarter 2020. Non-GAAP net income was $2.2 million, or $0.12 per share, for the second quarter 2021 compared to Non-GAAP net loss of $6.3 million, or $0.36 per share, for the second quarter 2020. 

Adjusted EBITDA was $6.5 million, or 7.9% of Non-GAAP total sales, for the second quarter of 2021 compared to Adjusted EBITDA of negative $5.0 million, or 8.2% of Non-GAAP total sales, for the second quarter of 2020.

The Company's cash and short-term investments decreased $36.6 million to $133.3 million as of the end of the second quarter of 2021, primarily due to the $34 million acquisition of HoloBuilder which closed in the quarter.  The Company remained debt-free. 

* 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".

Conference Call
The Company will host a conference call to discuss these results on Thursday, July 29, 2021 at 8:00 a.m. ET. Interested parties can access the conference call by dialing (877) 876-9176 (U.S.) or +1 (785) 424-1669 (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/about-faro/investor-relations/events

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 quickly and easily 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 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 total sales, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income (loss) from operations, non-GAAP other expense (income), net, non-GAAP net income (loss) and non-GAAP net income (loss) per share, exclude the GSA sales adjustment (as defined in the tables below), the impact of purchase accounting intangible amortization expense, stock-based compensation, imputed interest expense recorded related to the GSA Matter, 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 Adjusted EBITDA, which is calculated as net loss before interest expense, net, income tax benefit and depreciation and amortization, excluding other expense (income), net, stock-based compensation, the GSA sales adjustment, and restructuring charges, as measures of our operating profitability. The most directly comparable GAAP measure to Adjusted EBITDA is net loss. We also present Adjusted EBITDA margin, which is calculated as Adjusted EBITDA as a percent of Non-GAAP 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, the anticipated benefits of FARO's acquisition of Holobuilder, 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:

  • 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 ability to successfully integrate the acquired Holobuilder business, operations, assets and personnel;
  • 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 Company's inability to realize the anticipated benefits of its partnership with Sanmina and to successfully transition its manufacturing operations to Sanmina's production facility;
  • the Company's potential loss of future government sales and potential impacts on customer and supplier relationships and on the Company's reputation that may result from the GSA matter;
  • 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 the COVID-19 pandemic, including on our business operations, as well as its impact on general economic and financial market conditions;
  • the impact of fluctuations in foreign exchange rates; and
  • other risks detailed in Part I, Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 that was filed on February 17, 2021.

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


Six Months Ended

(in thousands, except share and per share data)

June 30, 2021


June 30, 2020


June 30, 2021


June 30, 2020

Sales








Product

$

60,275



$

42,259



$

114,910



$

98,784


Service

21,835



18,305



43,531



41,295


Total sales

82,110



60,564



158,441



140,079


Cost of Sales








Product

25,455



21,333



50,259



44,399


Service

11,173



10,335



22,293



22,911


Total cost of sales

36,628



31,668



72,552



67,310


Gross Profit

45,482



28,896



85,889



72,769


Operating Expenses








Selling, general and administrative

33,594



30,036



66,942



66,360


Research and development

11,760



10,186



23,733



20,601


Restructuring costs

779



636



2,303



14,324


Total operating expenses

46,133



40,858



92,978



101,285


Loss from operations

(651)



(11,962)



(7,089)



(28,516)


Other (income) expense








Interest expense, net

39



212



49



246


Other expense (income), net

883



117



(732)



590


Loss before income tax benefit

(1,573)



(12,291)



(6,406)



(29,352)


Income tax benefit

(397)



(3,359)



(2,009)



(5,597)


Net loss

$

(1,176)



$

(8,932)



$

(4,397)



$

(23,755)


Net loss per share - Basic

$

(0.06)



$

(0.50)



$

(0.24)



$

(1.34)


Net loss per share - Diluted

$

(0.06)



$

(0.50)



$

(0.24)



$

(1.34)


Weighted average shares - Basic

18,161,110



17,747,739



18,133,368



17,710,014


Weighted average shares - Diluted

18,161,110



17,747,739



18,133,368



17,710,014


 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share data)

June 30, 2021 (unaudited)


December 31,
2020

ASSETS




Current assets:




Cash and cash equivalents

$

133,337



$

185,633


Accounts receivable, net

59,966



64,616


Inventories, net

51,433



47,391


Prepaid expenses and other current assets

26,978



26,295


Total current assets

271,714



323,935


Non-current assets:




Property, plant and equipment, net

21,578



23,091


Operating lease right-of-use assets

23,356



26,107


Goodwill

81,702



57,541


Intangible assets, net

24,252



13,301


Service and sales demonstration inventory, net

31,477



31,831


Deferred income tax assets, net

47,251



47,450


Other long-term assets

2,251



2,336


Total assets

$

503,581



$

525,592


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

14,115



$

14,121


Accrued liabilities

28,255



42,593


Income taxes payable

1,166



3,442


Current portion of unearned service revenues

40,098



39,149


Customer deposits

4,496



2,807


Lease liabilities

5,235



5,835


Total current liabilities

93,365



107,947


Unearned service revenues - less current portion

21,885



21,757


Lease liabilities - less current portion

19,962



22,131


Deferred income tax liabilities

674



787


Income taxes payable - less current portion

9,250



11,583


Other long-term liabilities

1,083



1,084


Total liabilities

146,219



165,289


Shareholders' equity:




Common stock - par value $.001, 50,000,000 shares authorized; 19,557,240 and 19,384,350 issued, respectively; 18,174,873 and 17,990,707 outstanding, respectively

20



19


Additional paid-in capital

294,490



287,979


Retained earnings

109,111



113,508


Accumulated other comprehensive loss

(15,467)



(10,160)


Common stock in treasury, at cost; 1,382,367 and 1,393,643 shares, respectively

(30,792)



(31,043)


Total shareholders' equity

357,362



360,303


Total liabilities and shareholders' equity

$

503,581



$

525,592


 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



Six Months Ended

(in thousands)

June 30, 2021


June 30, 2020

Cash flows from:




Operating activities:




Net loss

$

(4,397)



$

(23,755)


Adjustments to reconcile net loss to net cash (used in) provided by operating activities:




Depreciation and amortization

6,289



7,209


Stock-based compensation

5,377



4,345


Provisions for bad debts, net of recoveries

(43)



680


Loss on disposal of assets

86



299


Provision for excess and obsolete inventory

1,640



479


Deferred income tax benefit

(2,009)



(2,404)


Change in operating assets and liabilities:




Decrease (Increase) in:




Accounts receivable

3,964



26,180


Inventories

(7,495)



892


Prepaid expenses and other current assets

(982)



11,347


(Decrease) Increase in:




Accounts payable and accrued liabilities

(13,525)



(1,395)


Income taxes payable

(2,310)



(5,058)


Customer deposits

1,723



384


Unearned service revenues

(627)



(3,139)


Net cash (used in) provided by operating activities

(12,309)



16,064


Investing activities:




Purchases of property and equipment

(2,072)



(1,533)


Proceeds from asset sales



643


Proceeds from sale of investments



25,000


Payments for intangible assets

(1,780)



(673)


Acquisition of business, net of cash acquired

(33,908)




Net cash (used in) provided by investing activities

(37,760)



23,437


Financing activities:




Payments on finance leases

(167)



(160)


Payments for taxes related to net share settlement of equity awards

(3,779)



(2,409)


Proceeds from issuance of stock related to stock option exercises

5,165



3,854


Net cash provided by financing activities

1,219



1,285


Effect of exchange rate changes on cash and cash equivalents

(3,446)



(720)


(Decrease) Increase in cash and cash equivalents

(52,296)



40,066


Cash and cash equivalents, beginning of period

185,633



133,634


Cash and cash equivalents, end of period

$

133,337



$

173,700



 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP

(UNAUDITED)



Three Months Ended June 30,


Six Months Ended June 30,

(dollars in thousands, except per share data)

2021


2020


2021


2020

Total sales, as reported

$

82,110



$

60,564



$

158,441



$

140,079


GSA sales adjustment (1)



608





608


Non-GAAP total sales

$

82,110



$

61,172



$

158,441



$

140,687










Gross profit, as reported

$

45,482



$

28,896



$

85,889



$

72,769


GSA sales adjustment (1)



608





608


Stock-based compensation (2)

214



93



280



364


Non-GAAP adjustments to gross profit

214



701



280



972


Non-GAAP gross profit

$

45,696



$

29,597



$

86,169



$

73,741


Gross margin, as reported

55.4

%


47.7

%


54.2

%


51.9

%

Non-GAAP gross margin

55.7

%


48.4

%


54.4

%


52.4

%









Selling, general and administrative, as reported

$

33,594



$

30,036



$

66,942



$

66,360


Stock-based compensation (2)

(2,526)



(1,617)



(4,208)



(3,140)


Purchase accounting intangible amortization

(188)



(120)



(373)



(244)


Non-GAAP selling, general and administrative

$

30,880



$

28,299



$

62,361



$

62,976










Research and development, as reported

$

11,760



$

10,186



$

23,733



$

20,601


Stock-based compensation (2)

(543)



(459)



(889)



(841)


Purchase accounting intangible amortization

(313)



(327)



(641)



(728)


Non-GAAP research and development

$

10,904



$

9,400



$

22,203



$

19,032










Operating expenses, as reported

$

46,133



$

40,858



$

92,978



$

101,285


Stock-based compensation (2)

(3,069)



(2,076)



(5,097)



(3,981)


Restructuring costs (3)

(779)



(636)



(2,303)



(14,324)


Purchase accounting intangible amortization

(501)



(447)



(1,014)



(972)


Non-GAAP adjustments to operating expenses

(4,349)



(3,159)



(8,414)



(19,277)


Non-GAAP operating expenses

$

41,784



$

37,699



$

84,564



$

82,008










Loss from operations, as reported

$

(651)



$

(11,962)



$

(7,089)



$

(28,516)


Non-GAAP adjustments to gross profit

214



701



280



972


Non-GAAP adjustments to operating expenses

4,349



3,159



8,414



19,277


Non-GAAP income (loss) from operations

$

3,912



$

(8,102)



$

1,605



$

(8,267)










Other expense (income), net, as reported

$

922



$

329



$

(683)



$

836


Interest expense increase due to GSA sales adjustment (1)



(249)





(398)


Non-GAAP adjustments to other expense (income), net



(249)





(398)


Non-GAAP other expense (income), net

$

922



$

80



$

(683)



$

438










Net loss, as reported

$

(1,176)



$

(8,932)



$

(4,397)



$

(23,755)


Non-GAAP adjustments to gross profit

214



701



280



972


Non-GAAP adjustments to operating expenses

4,349



3,159



8,414



19,277


Non-GAAP adjustments to other (income) expense, net



249





398


Income tax effect of non-GAAP adjustments

(1,144)



(1,505)



(2,622)



(3,638)


Non-GAAP net income (loss)

$

2,243



$

(6,328)



$

1,675



$

(6,746)










Net loss per share - Diluted, as reported

$

(0.06)



$

(0.50)



$

(0.24)



$

(1.34)


GSA sales adjustment (1)



0.03





0.03


Stock-based compensation (2)

0.18



0.12



0.30



0.24


Restructuring costs (3)

0.04



0.04



0.13



0.82


Purchase accounting intangible amortization

0.02



0.03



0.05



0.06


Interest expense increase due to GSA sales adjustment (1)



0.01





0.02


Income tax effect of non-GAAP adjustments

(0.06)



(0.09)



(0.15)



(0.21)


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

$

0.12



$

(0.36)



$

0.09



$

(0.38)



(1) Late in the fourth quarter of 2018, during an internal review we preliminarily determined that certain of our pricing practices may have resulted in the U.S. Government being overcharged under our General Services Administration ("GSA") Federal Supply Schedule contracts (the "Contracts") (the "GSA Matter"). During the six months ended June 30, 2020, we reduced our total sales by $0.6 million (the "GSA sales adjustment") and recorded imputed interest expense of $0.2 million related to the GSA Matter. Effective as of February 25, 2021, as a result of the review, we entered into a settlement agreement with the GSA and have paid in full and final satisfaction of any and all claims, causes of actions, appeals and the like, including damages, costs, attorney's fees and interest arising under or related to the GSA Matter.

(2) 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.

(3) 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 first half 2020 and 2021 we recorded a pre-tax charge of approximately $14.3 million and $2.3 million, respectively, primarily consisting of severance and related benefits.

 


FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA

(UNAUDITED)






Three Months Ended June 30,


Six Months Ended June 30,

(in thousands)

2021


2020


2021


2020

Net loss

$

(1,176)



$

(8,932)



$

(4,397)



$

(23,755)


Interest expense, net

39



212



49



246


Income tax benefit

(397)



(3,359)



(2,009)



(5,597)


Depreciation and amortization

3,099



3,520



6,289



7,279


EBITDA

1,565



(8,559)



(68)



(21,827)


Other expense (income), net

883



117



(732)



590


Stock-based compensation

3,283



2,169



5,377



4,345


GSA sales adjustment (1)



608





608


Restructuring costs (2)

779



636



2,303



14,324


Adjusted EBITDA

$

6,510



$

(5,029)



$

6,880



$

(1,960)


Adjusted EBITDA margin (3)

7.9

%


(8.2)

%


4.3

%


(1.4)

%


(1) Late in the fourth quarter of 2018, during an internal review we preliminarily determined that certain of our pricing practices may have resulted in the U.S. Government being overcharged under our General Services Administration ("GSA") Federal Supply Schedule contracts (the "Contracts") (the "GSA Matter"). During the six months ended June 30, 2020, we reduced our total sales by $0.6 million (the "GSA sales adjustment") and recorded imputed interest expense of $0.2 million related to the GSA Matter. Effective as of February 25, 2021, as a result of the review, we entered into a settlement agreement with the GSA and have paid in full and final satisfaction of any and all claims, causes of actions, appeals and the like, including damages, costs, attorney's fees and interest arising under or related to the GSA Matter

(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 first half 2020 and 2021 we recorded a pre-tax charge of approximately $14.3 million and $2.3 million, respectively, primarily consisting of severance and related benefits.

(3) Calculated as Adjusted EBITDA as a percentage of Non-GAAP total sales, which adjusts for the GSA sales adjustment.

 

TECHNOLOGIES, INC. AND SUBSIDIARIES

SALES DISAGGREGATED BY GEOGRAPHY

(UNAUDITED)



For the Three Months Ended June 30,


For the Six Months Ended June 30,

(in thousands)

2021


2020


2021


2020

Total sales to external customers








Americas (1)

$

33,702



$

25,777



$

66,251



$

61,367


EMEA (1)

26,474



16,720



51,928



40,410


APAC (1)

21,934



18,067



40,262



38,302



$

82,110



$

60,564



$

158,441



$

140,079



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

 

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SOURCE FARO


© PRNewswire 2021
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07/28FARO TECHNOLOGIES INC : Change in Directors or Principal Officers, Other Events (form 8-K)
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Analyst Recommendations on FARO TECHNOLOGIES, INC.
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