FARO Announces First Quarter 2021 Financial Results

LAKE MARY, Fla., April 28, 2021 /PRNewswire/ — FARO® (Nasdaq: FARO), a global leader of 3D measurement, imaging, and realization solutions…

LAKE MARY, Fla., April 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 first quarter ended March 31, 2021.

«First quarter demand reflected historical seasonality combined with an ongoing but improving pandemic demand impact that we believe will continue to improve throughout 2021,» stated Michael Burger, President and Chief Executive Officer. «Once demand returns to normalized pre-pandemic levels, we believe our new cost structure will enable the sustained achievement of our success model of 20% EBITDA margins.»

Mr. Burger continued, «While demand recovers, we remain focused on executing our strategic initiatives including the alignment of our hardware and software development activities to add value to our customer’s workflows and create long-term product differentiation in our target markets.»

First Quarter 2021 Financial Summary

2021 first quarter sales of $76.3 million compare with $79.5 million for the first quarter of 2020. However, new order bookings in the first quarter at $80.6 million were up 3% over the preceding year. The slight decline in sales for the quarter is the result of the economic effect of Covid pandemic which is still in the recovery stage. Sequentially, sales and bookings compared with the fourth quarter 2020 were lower by 18% and 15%, respectively, reflecting normal seasonality in our business.

Gross margin was 52.9% for the first quarter 2021, as compared to 55.2% for the same prior year period. Non-GAAP gross margin was 53.0% for the first quarter 2021 compared to 55.5% for the first quarter 2020. The annual decrease in gross margin was primarily a result of changes in product mix and lower sales resulting from the COVID-19 pandemic.

Operating expense, was $46.8 million for the first quarter 2021, compared to $60.4 million for the same prior year period. Non-GAAP operating expense was $42.8 million for the first quarter 2021 compared to $44.3 million for the first quarter 2020.

Net loss was $3.2 million, or $0.18 per share, for the first quarter 2021, as compared to a net loss of $14.8 million, or $0.84 per share, for the first quarter 2020. Non-GAAP net loss was $0.6 million, or $0.03 per share, for the first quarter 2021 compared to Non-GAAP net loss of $0.4 million, or $0.02 per share, for the first quarter 2020. 

Adjusted EBITDA was $0.4 million, or 0.5% of total sales, for the first quarter of 2021 compared to Adjusted EBITDA of $3.1 million, or 3.9% of total sales, for the first quarter of 2020.

The Company’s cash and short-term investments decreased $15.7 million to $170.0 million as of the end of the first quarter of 2021, and 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, April 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) 424-1670 (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 gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP loss from operations, non-GAAP other expense, net, non-GAAP net loss and non-GAAP net loss per share, exclude 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 (income) expense, net, stock-based compensation, 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, 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 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 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

(in thousands, except share and per share data)

March 31, 2021


March 31, 2020

Sales




Product

$

54,635



$

56,525


Service

21,696



22,990


Total sales

76,331



79,515


Cost of Sales




Product

24,804



23,066


Service

11,120



12,576


Total cost of sales

35,924



35,642


Gross Profit

40,407



43,873


Operating Expenses




Selling, general and administrative

33,348



36,324


Research and development

11,973



10,415


Restructuring costs

1,524



13,688


Total operating expenses

46,845



60,427


Loss from operations

(6,438)



(16,554)


Other (income) expense




Interest expense, net

10



34


Other (income) expense, net

(1,615)



473


Loss before income tax benefit

(4,833)



(17,061)


Income tax benefit

(1,612)



(2,238)


Net loss

$

(3,221)



$

(14,823)


Net loss per share – Basic

$

(0.18)



$

(0.84)


Net loss per share – Diluted

$

(0.18)



$

(0.84)


Weighted average shares – Basic

18,076,410



17,616,964


Weighted average shares – Diluted

18,076,410



17,616,964


 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share data)

March 31, 2020

(unaudited)


December 31,

2020

ASSETS




Current assets:




Cash and cash equivalents

$

169,957



$

185,633


Accounts receivable, net

59,821



64,616


Inventories, net

47,058



47,391


Prepaid expenses and other current assets

27,231



26,295


Total current assets

304,067



323,935


Non-current assets:




Property, plant and equipment, net

21,921



23,091


Operating lease right-of-use asset

24,616



26,107


Goodwill

56,269



57,541


Intangible assets, net

13,254



13,301


Service and sales demonstration inventory, net

31,323



31,831


Deferred income tax assets, net

46,208



47,450


Other long-term assets

2,300



2,336


Total assets

$

499,958



$

525,592


LIABILITIES AND SHAREHOLDERS’ EQUITY




Current liabilities:




Accounts payable

$

15,969



$

14,121


Accrued liabilities

29,775



42,593


Income taxes payable

567



3,442


Current portion of unearned service revenues

37,842



39,149


Customer deposits

3,650



2,807


Lease liability

5,596



5,835


Total current liabilities

93,399



107,947


Unearned service revenues – less current portion

21,476



21,757


Lease liability – less current portion

20,965



22,131


Deferred income tax liabilities

642



787


Income taxes payable – less current portion

11,583



11,583


Other long-term liabilities

1,110



1,084


Total liabilities

149,175



165,289


Shareholders’ equity:




Common stock – par value $.001, 50,000,000 shares authorized; 19,536,531 and 19,384,350 issued, respectively; 18,154,164 and 17,990,707 outstanding, respectively

19



19


Additional paid-in capital

291,603



287,979


Retained earnings

110,287



113,508


Accumulated other comprehensive loss

(20,334)



(10,160)


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

(30,792)



(31,043)


Total shareholders’ equity

350,783



360,303


Total liabilities and shareholders’ equity

$

499,958



$

525,592


 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



Three Months Ended

(in thousands)

March 31, 2021


March 31, 2020

Cash flows from:




Operating activities:




Net loss

$

(3,221)



$

(14,823)


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




Depreciation and amortization

3,190



3,759


Stock-based compensation

2,094



2,178


Provisions for bad debts, net of recoveries

(89)



(15)


Loss on disposal of assets

20



10


Provision for excess and obsolete inventory

1,404



204


Deferred income tax benefit

(1,612)



(2,326)


Change in operating assets and liabilities:




Decrease (Increase) in:




Accounts receivable

3,676



16,084


Inventories

(3,999)



1,795


Prepaid expenses and other current assets

(1,346)



7,408


(Decrease) Increase in:




Accounts payable and accrued liabilities

(9,823)



4,756


Income taxes payable

(1,153)



(1,389)


Customer deposits

896



(961)


Unearned service revenues

(323)



(365)


Net cash (used in) provided by operating activities

(10,286)



16,315


Investing activities:




Purchases of property and equipment

(1,547)



(757)


Proceeds from sale of investments



9,000


Payments for intangible assets

(890)



(435)


Net cash (used in) provided by investing activities

(2,437)



7,808


Financing activities:




Payments on finance leases

(86)



(82)


Payments for taxes related to net share settlement of equity awards

(3,336)



(1,581)


Proceeds from issuance of stock related to stock option exercises

5,118



2,802


Net cash provided by financing activities

1,696



1,139


Effect of exchange rate changes on cash and cash equivalents

(4,649)



(1,656)


Increase in cash and cash equivalents

(15,676)



23,606


Cash and cash equivalents, beginning of period

185,633



133,634


Cash and cash equivalents, end of period

$

169,957



$

157,240


 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP

(UNAUDITED)



Three Months Ended March 31,

(dollars in thousands, except per share data)

2021


2020

Gross profit, as reported

$

40,407



$

43,873


Stock-based compensation (2)

66



271


Non-GAAP adjustments to gross profit

66



271


Non-GAAP gross profit

$

40,473



$

44,144


Gross margin, as reported

52.9

%


55.2

%

Non-GAAP gross margin

53.0

%


55.5

%





Selling, general and administrative, as reported

$

33,348



$

36,324


Stock-based compensation (2)

(1,682)



(1,523)


Purchase accounting intangible amortization

(185)



(124)


Non-GAAP selling, general and administrative

$

31,481



$

34,677






Research and development, as reported

$

11,973



$

10,415


Stock-based compensation (2)

(346)



(382)


Purchase accounting intangible amortization

(328)



(401)


Non-GAAP research and development

$

11,299



$

9,632






Operating expenses, as reported

$

46,845



$

60,427


Stock-based compensation (2)

(2,028)



(1,905)


Restructuring costs (3)

(1,524)



(13,688)


Purchase accounting intangible amortization

(513)



(525)


Non-GAAP adjustments to operating expenses

(4,065)



(16,118)


Non-GAAP operating expenses

$

42,780



$

44,309






Loss from operations, as reported

$

(6,438)



$

(16,554)


Non-GAAP adjustments to gross profit

66



271


Non-GAAP adjustments to operating expenses

4,065



16,118


Non-GAAP loss from operations

$

(2,307)



$

(165)






Other (income) expense, net, as reported

$

(1,605)



$

507


Interest expense increase due to GSA sales adjustment (1)



(149)


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



(149)


Non-GAAP other (income) expense, net

$

(1,605)



$

358






Net loss, as reported

$

(3,221)



$

(14,823)


Non-GAAP adjustments to gross profit

66



271


Non-GAAP adjustments to operating expenses

4,065



16,118


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



149


Income tax effect of non-GAAP adjustments

(1,478)



(2,133)


Non-GAAP net loss

$

(568)



$

(418)






Net loss per share – Diluted, as reported

$

(0.18)



$

(0.84)


Stock-based compensation (2)

0.12



0.12


Restructuring costs (3)

0.08



0.78


Purchase accounting intangible amortization

0.03



0.03


Interest expense increase due to GSA sales adjustment (1)



0.01


Income tax effect of non-GAAP adjustments

(0.08)



(0.12)


Non-GAAP net loss per share – Diluted

$

(0.03)



$

(0.02)



(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»). In the first quarter 2020 we recorded imputed interest expense of $0.1 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 quarters 2020 and 2021 we recorded a pre-tax charge of approximately $13.7 million and $1.5 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 March 31,

(in thousands)

2021


2020

Net loss

$

(3,221)



$

(14,823)


Interest expense, net

10



34


Income tax benefit

(1,612)



(2,238)


Depreciation and amortization

3,190



3,759


EBITDA

(1,633)



(13,268)


Other (income) expense, net

(1,615)



473


Stock-based compensation

2,094



2,176


Restructuring costs (1)

1,524



13,688


Adjusted EBITDA

$

370



$

3,069


Adjusted EBITDA margin (2)

0.5

%


3.9

%


(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 first quarters 2020 and 2021 we recorded a pre-tax charge of approximately $13.7 million and $1.5 million, respectively, primarily consisting of severance and related benefits.

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

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

SALES DISAGGREGATED BY GEOGRAPHY

(UNAUDITED)



For the Three Months Ended March 31,

(in thousands)

2021


2020

Total sales to external customers




Americas (1)

$

32,549



$

35,590


EMEA (1)

25,454



23,690


APAC (1)

18,328



20,235



$

76,331



$

79,515



(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