FARO Announces First Quarter Financial Results

Revenue of $82.9 million, at the upper end of guidance rangeGross margin of 57.0%; Non-GAAP gross margin 57.7%, above guidance rangeEarnings per share of $0.05; Non-GAAP earnings per share (“EPS”) of $0.33, above guidance rangeCash flow from operations of $5.0 million LAKE MARY, Fla., April 24, 2025 (GLOBE NEWSWIRE) -- 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, 2025. “We’re very pleased with our strong start to the year, with our first quarter financial results exceeding our expectations and reflecting the successful execution of our strategic growth initiatives,” said Peter Lau, President & Chief Executive Officer. “Q1 was an inflection point for FARO, with increasing traction from refreshed products, coupled with the introduction of new solutions and the signing of two impactful partnerships contributing to 6% year-over-year net orders growth. As a result, we delivered GAAP net income of $0.9 million and $12.5 million of adjusted EBITDA, or 15.0% of revenue, surpassing our forecasts. As we look ahead, we remain focused on executing our growth strategy, even amidst continued macroeconomic uncertainty. Our recent product launches, including the Leap ST in January for metrology workflows and Blink last week for digital reality workflows, expand our addressable opportunity and we believe position us well to drive sustained, long-term organic growth.” First Quarter 2025 Financial Summary Total sales of $82.9 million, down 1.6% year over yearGross margin of 57.0%, compared to 51.4% in the prior year periodNon-GAAP gross margin of 57.7%, compared to 51.8% in the prior year periodOperating expenses of $43.4 million, compared to $48.6 million in the prior year periodNon-GAAP operating expenses of $38.5 million, compared to $40.7 million in the prior year periodNet income of $0.9 million, or $0.05 per share compared to net loss of $7.3 million, or $(0.38) per share in the prior year periodNon-GAAP net income of $6.4 million, or $0.33 per share compared to non-GAAP net income of $1.7 million, or $0.09 per share in the prior year periodAdjusted EBITDA of $12.5 million, or 15.0% of total sales compared to $5.6 million, or 6.6% of total sales in the prior year periodCash, cash equivalents & short-term investments of $102.6 million compared to $98.7 million as of December 31, 2024 * 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 2025 For the second quarter ending June 30, 2025, FARO currently expects: Revenue in the range of $79 to $87 millionGross margin in the range of 56.5% to 58.0%. Non-GAAP gross margin in the range of 57.0% to 58.5%Operating expenses in the range of $45.0 to $47.0 million. Non-GAAP operating expenses in the range of $38.5 to $40.5 millionNet (loss) income per share in the range of ($0.20) to $0.00. Non-GAAP net income per share in the range of $0.20 to $0.40. Conference Call The Company will host a conference call to discuss these results on Thursday, April 24, 2025, at 8:00 a.m. ET. Interested parties can access the conference call by dialing (800) 245-3047 (U.S.) or +1 (203) 518-9765 (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 over 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 profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share, exclude the impact of purchase accounting intangible amortization expense, 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 EBITDA, which is calculated as net income (loss) before interest (income) expense, net, income tax benefit (expense) and depreciation and amortization, and Adjusted EBITDA, which is calculated as EBITDA, 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 EBITDA and Adjusted EBITDA is net income (loss). We also present Adjusted EBITDA margin, which is calculated as Adjusted EBITDA as a percent of total sales. We have included non-GAAP total sales on a constant currency basis. The most directly comparable GAAP measure to total sales on a constant currency basis is total sales. We believe constant currency information is useful in analyzing underlying trends in our business and the commercial performance of our products by eliminating the impact of highly volatile fluctuations in foreign currency markets and allows for period-to-period comparisons of our performance. For simplicity, we may elect to omit this information in future periods if we determine a lack of material impact. To present this information, current period performance for entities reporting in currencies other than U.S. dollars are converted to U.S. dollars at the exchange rate in effect during the last day of the prior comparable period. 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 2025, 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 and integration plans and the timing and amount of cost savings and other benefits expected to be realized from the restructuring and integration plans 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 strategic plan and our 2024 Restructuring Plan, including but not limited to additional impairment charges including existing leasehold improvements and/or higher than expected severance costs and exit costs, and its inability to realize the expected benefits of such plans;the effect of any changes in our executive management team and the loss of any of our executive officers or other key personnel, which may be impacted by factors such as our inability to competitively address inflationary pressures on employee compensation and flexibility in employee work arrangements, including the impact of our 2025 "return to office" policy;the outcome of any litigation to which the Company is or 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; andother 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, 2024, filed with the Securities and Exchange Commission on February 24, 2025, 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. Investor Contacts FARO Technologies, Inc.Matthew Horwath, Chief Financial Officer+1 407-562-5005IR@faro.com Sapphire Investor Relations, LLCMichael Funari or Erica Mannion+1 617-542-6180IR@faro.com FARO TECHNOLOGIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED) Three Months Ended(in thousands, except share and per share data)March 31, 2025 March 31, 2024Sales Product$62,975 $63,536 Service 19,888 20,708 Total sales 82,863 84,244 Cost of sales Product 26,153 30,452 Service 9,473 10,485 Total cost of sales 35,626 40,937 Gross profit 47,237 43,307 Operating expenses Selling, general and administrative 33,818 39,593 Research and development 9,485 9,024 Restructuring costs 120 — Total operating expenses 43,423 48,617 Income (loss) from operations 3,814 (5,310)Other (income) expense Interest expense, net 888 831 Other (income) expense, net 467 25 Income (loss) before income tax 2,459 (6,166)Income tax expense 1,553 1,101 Net income (loss)$906 $(7,267)Net income (loss) per share - Basic$0.05 $(0.38)Net income (loss) per share - Diluted$0.05 $(0.38)Weighted average shares - Basic 19,052,385 19,046,855 Weighted average shares - Diluted 19,732,364 19,046,855 FARO TECHNOLOGIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED) (in thousands, except share and per share data)March 31,2025 December 31,2024ASSETS Current assets: Cash and cash equivalents$92,445 $88,703 Short-term investments 10,189 9,999 Accounts receivable, net 85,669 87,022 Inventories, net 33,272 32,121 Prepaid expenses and other current assets 33,610 30,326 Total current assets 255,185 248,171 Non-current assets: Property, plant and equipment, net 18,777 18,767 Operating lease right-of-use assets 19,196 15,880 Goodwill 108,664 106,555 Intangible assets, net 43,459 44,133 Service and sales demonstration inventory, net 23,265 22,760 Deferred income tax assets, net 23,090 23,005 Other long-term assets 3,393 3,734 Total assets$495,029 $483,005 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable$26,346 $27,336 Accrued liabilities 25,121 27,735 Income taxes payable 7,937 6,736 Current portion of unearned service revenues 41,763 41,590 Customer deposits 4,633 4,989 Lease liabilities 4,784 4,474 Total current liabilities 110,584 112,860 Loan - 5.50% Convertible Senior Notes 70,378 70,267 Unearned service revenues - less current portion 19,962 19,886 Lease liabilities - less current portion 16,902 14,056 Deferred income tax liabilities 15,478 14,809 Income taxes payable - less current portion 1,530 1,485 Other long-term liabilities 28 32 Total liabilities 234,862 233,395 Commitments and contingencies Shareholders’ equity: Common stock - par value $0.001, 50,000,000 shares authorized; 21,187,604 and 20,916,723 issued, respectively; 19,225,837 and 18,954,956 outstanding, respectively 20 20 Additional paid-in capital 361,891 358,133 Retained earnings (17,949) (18,855)Accumulated other comprehensive loss (43,126) (49,019)Common stock in treasury, at cost - 1,961,767 and 1,961,767 shares held, respectively (40,669) (40,669)Total shareholders’ equity 260,167 249,610 Total liabilities and shareholders’ equity$495,029 $483,005 FARO TECHNOLOGIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED) Three Months Ended March 31,(in thousands) 2025 2024 Cash flows from: Operating activities: Net income (loss)$906 $(7,267)Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 4,212 3,621 Stock-based compensation 3,758 4,539 Deferred income tax (benefit) and other non-cash charges 114 (805) Provision for excess and obsolete inventory 46 152 Amortization of debt discount and issuance costs 111 112 Loss on disposal of assets 448 96 (Reversal of) provisions for bad debts, net of recoveries (21) 300 Change in operating assets and liabilities: Decrease (Increase) in: Accounts receivable 3,305 1,405 Inventories 153 1,957 Prepaid expenses and other current assets (2,973) 5,587 (Decrease) Increase in: Accounts payable and accrued liabilities (4,541) (5,721) Income taxes payable 1,131 783 Customer deposits (455) 819 Unearned service revenues (1,013) 1,282 Other liabilities (150) (285) Net cash provided by operating activities 5,031 6,575 Investing activities: Purchases of property and equipment (1,342) (1,323)Cash paid for technology development, patents and licenses (1,452) (1,442) Net cash provided by (used in) investing activities (2,794) (2,765)Financing activities: Payments on finance leases (14) (40) Net cash used in financing activities (14) (40)Effect of exchange rate changes on cash and cash equivalents 1,519 (1,039)Increase in cash and cash equivalents 3,742 2,731 Cash and cash equivalents, beginning of period 88,703 76,787 Cash and cash equivalents, end of period$92,445 $79,518 FARO TECHNOLOGIES, INC. AND SUBSIDIARIESRECONCILIATION OF GAAP TO NON-GAAP(UNAUDITED) Three Months Ended March 31,(dollars in thousands, except per share data) 2025 2024 Gross profit, as reported$47,237 $43,307 Stock-based compensation (1) 405 330 Restructuring and other costs (2) 169 8 Non-GAAP adjustments to gross profit 574 338 Non-GAAP gross profit$47,811 $43,645 Gross margin, as reported 57.0% 51.4%Non-GAAP gross margin 57.7% 51.8% Selling, general and administrative, as reported$33,818 $39,593 Stock-based compensation (1) (2,725) (3,942)Restructuring and other costs (2) (393) (2,708)Purchase accounting intangible amortization (385) (543)Non-GAAP selling, general and administrative$30,315 $32,400 Research and development, as reported$9,485 $9,024 Stock-based compensation (1) (628) (267)Purchase accounting intangible amortization (670) (489)Non-GAAP research and development$8,187 $8,268 Operating expenses, as reported$43,423 $48,617 Stock-based compensation (1) (3,353) (4,209)Restructuring and other costs (2) (513) (2,708)Purchase accounting intangible amortization (1,055) (1,032)Non-GAAP adjustments to operating expenses (4,921) (7,949)Non-GAAP operating expenses$38,502 $40,668 Income (loss) from operations, as reported$3,814 $(5,310)Non-GAAP adjustments to gross profit 574 338 Non-GAAP adjustments to operating expenses 4,921 7,949 Non-GAAP income from operations$9,309 $2,977 Net income (loss), as reported$906 $(7,267)Non-GAAP adjustments to gross profit 574 338 Non-GAAP adjustments to operating expenses 4,921 7,949 Income tax effect of non-GAAP adjustments (3) (1,087) (2,072)Other tax adjustments (3) 1,105 2,748 Non-GAAP net income$6,419 $1,696 Net income (loss) per share - Diluted, as reported$0.05 $(0.38)Stock-based compensation (1) 0.19 0.24 Restructuring and other costs (2) 0.03 0.14 Purchase accounting intangible amortization 0.06 0.06 Income tax effect of non-GAAP adjustments (3) (0.06) (0.11)Other tax adjustments (3) 0.06 0.14 Non-GAAP net income per share - Diluted$0.33 $0.09 (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. 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. Substantially all of our planned activities under the Restructuring Plan and the Integration Plan are complete. On November 1, 2024, our Board of Directors approved a restructuring plan (the “2024 Restructuring Plan”), which is intended to support its strategic plan in an effort to improve operating performance and streamline and simplify operations, particularly around our redundant operations and underperforming countries primarily driven by economic and demand challenges in the manufacturing and construction sectors. (3) The Income tax effect of non-GAAP adjustments is calculated by applying a statutory tax rate to Non-GAAP adjustments, including Stock-based compensation, Restructuring and other costs, non-recurring Inventory reserve charges, and Purchase accounting intangible amortization and fair value adjustments. In addition, when estimating our Non-GAAP income tax rate, we exclude the impact of items that impact our reported income tax rate that we do not believe are representative of our ongoing operating results, including the impact of valuation allowances we are currently recording in certain jurisdictions and certain discrete items such as adjustments to uncertain tax position reserves, as these items are difficult to predict and can impact our effective income tax rate. Specifically, Other tax adjustments during the three months ended March 31, 2025 were comprised of $0.6 million related to the impact of valuation allowance adjustments and $0.5 million related to other items, including equity based compensation book to tax differences, non-GAAP adjustments impact on Global intangible low-taxed income and Prepaid tax on intercompany profit. In 2024, Other tax adjustments during the three months ended March 31, 2024 were comprised of $2.7 million related to the impact of valuation allowance adjustments. FARO TECHNOLOGIES, INC. AND SUBSIDIARIESRECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA(UNAUDITED) Three Months Ended March 31,(in thousands) 2025 2024 Net income (loss)$906 $(7,267)Interest expense, net 888 831 Income tax expense 1,553 1,101 Depreciation and amortization and fair value adjustments 4,212 3,621 EBITDA 7,559 (1,714)Other expense, net 467 25 Stock-based compensation 3,758 4,539 Restructuring and other costs (1) 682 2,716 Adjusted EBITDA$12,466 $5,566 Adjusted EBITDA margin (2) 15.0% 6.6% (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. 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. Substantially all of our planned activities under the Restructuring Plan and the Integration Plan are complete. On November 1, 2024, our Board of Directors approved a restructuring plan (the “2024 Restructuring Plan”), which is intended to support its strategic plan in an effort to improve operating performance and streamline and simplify operations, particularly around our redundant operations and underperforming countries primarily driven by economic and demand challenges in the manufacturing and construction sectors. (2) Calculated as Adjusted EBITDA as a percentage of total sales. FARO TECHNOLOGIES, INC. AND SUBSIDIARIESKEY SALES MEASURES(UNAUDITED) Three Months Ended March 31,(in thousands) 2025 2024Total sales to external customers as reported Americas (1)$36,008 $37,228EMEA (1) 25,108 25,435APAC (1) 21,747 21,581 $82,863 $84,244 Three Months Ended March 31,(in thousands) 2025 2024Total sales to external customers in constant currency (2) Americas (1)$36,797 $37,261EMEA (1) 25,338 25,274APAC (1) 21,921 21,422 $84,056 $83,957 (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 March 31,(in thousands) 2025 2024 Hardware$52,589 $52,616 Software 10,386 10,920 Service 19,888 20,708 Total Sales$82,863 $84,244 Hardware as a percentage of total sales 63.5% 62.5%Software as a percentage of total sales 12.5% 13.0%Service as a percentage of total sales 24.0% 24.6% Total Recurring Revenue (3)$17,299 $16,717 Recurring revenue as a percentage of total sales 20.9% 19.8% (3) Recurring revenue is comprised of hardware service contracts, software maintenance contracts, and subscription based software applications. FARO TECHNOLOGIES, INC. AND SUBSIDIARIESFREE CASH FLOW RECONCILIATION(UNAUDITED) Three Months Ended March 31,(in thousands) 2025 2024 Net cash provided by operating activities$5,031 $6,575 Purchases of property and equipment (1,342) (1,323)Cash paid for technology development, patents and licenses (1,452) (1,442)Free Cash Flow 2,237 3,810 Restructuring and other cash payments (1) 905 403 Adjusted Free Cash Flow$3,142 $4,213 (1) On February 7, 2023, our Board of Directors approved 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 associated with the Restructuring Plan, Integration Plan, and executive transitions. On November 1, 2024, our Board of Directors approved a restructuring plan (the “2024 Restructuring Plan”), which is intended to support its strategic plan in an effort to improve operating performance and streamline and simplify operations, particularly around our redundant operations and underperforming countries primarily driven by economic and demand challenges in the manufacturing and construction sectors. FARO TECHNOLOGIES, INC. AND SUBSIDIARIESRECONCILIATION OF OUTLOOK - GAAP TO NON-GAAP Fiscal quarter ending June 30, 2025 Low HighGAAP gross margin56.5% 58.0%Stock-based compensation0.5% 0.5%Non-GAAP gross margin57.0% 58.5% Fiscal quarter ending June 30, 2025(in thousands)Low HighGAAP operating expenses$45,000 $47,000Stock-based compensation(3,300) (3,300)Purchase accounting intangible amortization(1,200) (1,200)Restructuring and other costs(2,000) (2,000)Non-GAAP operating expenses$38,500 $40,500 Fiscal quarter ending June 30, 2025 Low HighGAAP diluted earnings per share range$(0.20) $0.00Stock-based compensation0.19 0.19Purchase accounting intangible amortization0.06 0.06Restructuring and other costs0.10 0.10Non-GAAP tax adjustments0.05 0.05Non-GAAP diluted earnings per share$0.20 $0.40

FARO Announces First Quarter Financial Results

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