Financial Data and Key Metrics Changes - Non-GAAP gross margin was 56.1%, expanding 730 basis points year-over-year and 110 basis points sequentially [8] - Non-GAAP operating expenses were $40.1 million, remaining at the lower end of the targeted guidance range of $40 million to $43 million per quarter [8] - Non-GAAP EPS was $0.21, above the high end of the guidance range, marking the sixth consecutive quarter of exceeding expectations [9] - Adjusted EBITDA was $8.9 million or 10.7% of sales, bringing year-to-date adjusted EBITDA to $22.9 million [9] - GAAP net loss was $300,000 or $0.02 per share, while non-GAAP net income was $4 million or $0.21 per share [41] Business Line Data and Key Metrics Changes - Hardware revenue was $50.3 million, down 10% year-over-year; software revenue was approximately flat at $11.2 million; service revenue increased by 6% to $21.1 million [37] - Recurring revenue was $17.4 million, representing 21% of sales and growing 2% year-over-year [37] Market Data and Key Metrics Changes - Revenue of $82.6 million was down 5% versus the prior year, with the Americas and European regions down 2% and 1%, respectively; Asia Pacific region experienced a $3.4 million decline or 17% due to weakness in China [36] - Demand in the Americas was consistent with the prior quarter, while demand in EMEA increased sequentially, driven by strength in France and Eastern Europe; demand in Asia declined again due to economic challenges [14] Company Strategy and Development Direction - The company is focused on optimizing operations and has exceeded margin targets set earlier in the year [12][31] - Strategic investments are being made in customer experience, regional diversification, and new products and technologies to improve growth profiles [19] - The company is advancing its product roadmap, including refreshing major product lines to meet evolving customer needs [22][23] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the outlook beyond the next quarter due to ongoing macroeconomic uncertainties [14][46] - The macro environment is described as choppy, with expected demand challenges, particularly in China [46] - The company anticipates fourth quarter revenue between $88 million and $96 million, with corresponding non-GAAP gross margin between 56% and 57.5% [47] Other Important Information - The company repurchased $10 million of outstanding shares in the third quarter [17] - A restructuring plan has been announced to improve operating performance, particularly in underperforming countries, with expected cash charges of $6 million to $9 million [44] Q&A Session Summary Question: Guidance for Q4 and assumptions behind it - Management indicated that the guidance is based on a cautious outlook due to macroeconomic uncertainties rather than specific observations from October [51] Question: Long-term financial goals and earnings power - Management acknowledged that current gross margin levels are ahead of plan and indicated a potential reset of targets in the future based on revenue growth [54] Question: Restructuring details and revenue offsets - The restructuring plan focuses on reallocating resources to higher growth countries and optimizing operational efficiency [57] Question: Capital allocation and share buyback status - Management confirmed that $10 million was repurchased in Q3, with approximately $8.3 million remaining in the current share repurchase program [59] Question: Trends in the construction end market - Management noted that construction trends vary by region, with healthcare and infrastructure construction performing better than commercial construction [62]

Restructuring and Integration - FARO Technologies achieved approximately $40 million in annualized savings through its Restructuring Plan[80]. - The Integration Plan has incurred total restructuring charges of $26.7 million, with cash payments of $10.1 million as of September 30, 2024[80]. - FARO's cloud-based offerings are being consolidated from three platforms into a single customer offering as part of the Integration Plan[80]. - FARO has not incurred any costs associated with the Integration and Restructuring plans in Q3 2024, compared to $1.6 million in the same period in 2023[80]. Financial Performance - Total sales for the three months ended September 30, 2024, were $82.6 million, a decrease of $4.3 million or 5.2% compared to $86.8 million for the same period in 2023[90]. - Product sales decreased by $5.4 million, or 8.1%, to $61.5 million for the three months ended September 30, 2024, primarily impacted by a $3.4 million decline in the APAC region, particularly in China[90]. - Gross profit increased by $4.3 million, or 10.3%, to $46.0 million for the three months ended September 30, 2024, with gross margin rising to 55.7% from 48.0% in the prior year[90]. - Selling, general and administrative expenses decreased by $4.0 million, or 10.3%, to $34.0 million for the three months ended September 30, 2024, resulting in a decrease in expenses as a percentage of sales to 41.2%[90]. - Research and development expenses increased by $1.6 million, or 19.5%, to $9.8 million for the three months ended September 30, 2024, representing 11.8% of sales[90]. - Net loss for the three months ended September 30, 2024, was $0.3 million, a significant improvement compared to a net loss of $8.8 million for the same period in 2023[90]. - Total sales decreased by $11.1 million, or 4.3%, to $248.9 million for the nine months ended September 30, 2024, compared to $260.0 million for the same period in 2023[92]. - Product sales decreased by $13.4 million, or 6.7%, to $186.3 million, while service sales increased by $2.3 million, or 3.9%, to $62.6 million[92]. - Gross profit increased by $19.4 million, or 16.9%, to $134.1 million, with gross margin rising by 9.8 percentage points to 53.9%[92]. - Selling, general and administrative expenses decreased by $11.7 million, or 9.9%, to $106.2 million, with expenses as a percentage of sales decreasing to 42.7%[92]. - Research and development expenses decreased by $3.9 million, or 12.3%, to $28.6 million, with expenses as a percentage of sales decreasing to 11.5%[92]. - Net loss was $8.1 million for the nine months ended September 30, 2024, compared to a net loss of $58.2 million for the prior year period[94]. - Cash and cash equivalents increased by $12.1 million to $88.9 million as of September 30, 2024, driven by cash generated from operating activities[94]. - Cash provided by operating activities was $13.4 million during the nine months ended September 30, 2024, compared to $17.6 million used in the same period of 2023[94]. Revenue Recognition - FARO's revenue is primarily derived from measurement equipment and related software, recognized upon shipment[77]. - The company recognizes revenue from hardware service contracts and software maintenance on a straight-line basis over the contractual term[77]. - Recurring revenue from hardware service contracts, software maintenance contracts, and subscription-based software applications was $17.4 million for the three months ended September 30, 2024, compared to $17.1 million in 2023[82]. - Revenue from software products for the three months ended September 30, 2024, was $11.2 million, consistent with the same period in 2023[82]. - The company capitalized $1.2 million in costs related to internally developed software for both the three months ended September 30, 2024, and 2023[82]. Operational Changes - The company transitioned manufacturing to Sanmina, completing the phased transition by the beginning of Q3 2022[80]. - FARO's partnership with Sanmina is expected to support production capacity necessary for 2024[79]. - The company has abandoned 17,000 square feet of unused manufacturing space in Exton, Pennsylvania, as part of its cost reduction initiative[80]. Foreign Currency Exposure - As of September 30, 2024, 58% of the company's revenue was invoiced in foreign currencies, with 43% of assets denominated in foreign currencies, indicating significant exposure to foreign exchange risks[100]. - The company has not utilized off-balance sheet financial instruments to hedge foreign currency exchange rate exposure, relying instead on natural hedges from revenue and expenses[100]. Internal Controls and Compliance - A material weakness was identified in the company's internal controls related to information technology general controls (ITGCs), specifically in user access management, which could lead to material misstatements in financial reporting[105]. - Remediation actions include hiring new IT leadership with public company experience and revising user access controls to ensure appropriate segregation of duties[106]. - The company expects to complete the remediation of the identified material weakness prior to the end of fiscal 2024[106]. - No changes in internal control over financial reporting occurred during the three months ended September 30, 2024, that materially affected the company's internal controls[108]. Legal and Regulatory Matters - The company believes that ongoing legal proceedings will not have a material adverse effect on its financial condition or results of operations[110]. Economic Factors - General inflation has negatively impacted the company's cost of sales and operating expenses, affecting customer capital for purchasing products and services[102]. Shareholder Actions - The company repurchased a total of 588,856 shares for a total cash payment of $10.0 million as part of its share repurchase program[94]. Taxation - The effective tax rate was 93.9% for the nine months ended September 30, 2024, compared to 9.1% in the prior year period[92].

Financial Performance - Revenue for Q3 2024 was $82.6 million, down 5% year over year, but at the upper end of guidance range[3] - Gross margin was 55.7%, significantly improved from 48.0% in the prior year period[3] - Non-GAAP earnings per share (EPS) was $0.21, compared to $0.03 in the prior year period, indicating strong profitability improvement[3] - Adjusted EBITDA for Q3 2024 was $8.9 million, representing 10.7% of total sales, up from 4.1% in the prior year[3] - The net loss for Q3 2024 was $0.3 million, or $(0.02) per share, a significant improvement from a net loss of $8.8 million, or $(0.46) per share, in the prior year[3] - Gross profit for the three months ended September 30, 2024, was $45,976,000, compared to $41,674,000 for the same period in 2023, representing a 5.5% increase[19] - Non-GAAP gross profit for the nine months ended September 30, 2024, was $135,159,000, up from $117,011,000 in 2023, reflecting a 15.5% increase[19] - The net loss for the three months ended September 30, 2024, was $289,000, significantly improved from a net loss of $8,756,000 in the same period of 2023[19] - Adjusted EBITDA for the three months ended September 30, 2024, was $3,520,000, compared to a loss of $9,225,000 in 2023, indicating a recovery in operational performance[22] - The company reported a non-GAAP net income of $3,995,000 for the three months ended September 30, 2024, compared to $457,000 in 2023, marking a substantial increase[19] Cash Flow and Assets - Cash flow from operations was $2.6 million, with cash and short-term investments totaling $88.9 million[4] - Net cash provided by operating activities was $13,355 thousand for the nine months ended September 30, 2024, compared to a net cash used of $17,580 thousand in the prior year[18] - Cash and cash equivalents increased from $76,787 thousand to $88,913 thousand, representing a growth of about 15.5%[18] - Total current assets decreased from $261,608 thousand as of December 31, 2023, to $245,428 thousand as of September 30, 2024, a decline of approximately 6.1%[17] - Total liabilities decreased from $236,086 thousand as of December 31, 2023, to $234,112 thousand as of September 30, 2024, a reduction of approximately 0.8%[17] - Total shareholders' equity decreased from $268,606 thousand to $255,518 thousand, reflecting a decline of about 4.9%[17] - The company reported a decrease in accounts receivable from $92,028 thousand to $83,208 thousand, a decline of approximately 9.6%[17] - The company reported an increase in inventories from $34,529 thousand to $39,055 thousand, an increase of approximately 13.5%[17] Future Projections - For Q4 2024, the company expects revenue in the range of $88 to $96 million and gross margin between 55.6% to 57.1%[5] - Operating expenses for Q4 2024 are projected to be between $47.4 million and $49.4 million[5] - The company expects a GAAP gross margin between 55.6% and 57.1% for the fiscal quarter ending December 31, 2024[26] - Non-GAAP diluted earnings per share are projected to be between $0.32 and $0.52 for the fiscal quarter ending December 31, 2024[27] Sales and Revenue Composition - Total sales to external customers for Q3 2024 were $82,563,000, a decrease of 4.0% compared to $86,813,000 in Q3 2023[23] - Hardware sales accounted for 60.9% of total sales in Q3 2024, down from 64.2% in Q3 2023[24] - Total recurring revenue for Q3 2024 was $17,431,000, representing 21.1% of total sales, compared to 19.6% in Q3 2023[24] - Total sales in constant currency for the Americas in Q3 2024 were $40,707,000, slightly down from $40,879,000 in Q3 2023[23] - Total sales in constant currency for EMEA in Q3 2024 were $24,278,000, compared to $24,954,000 in Q3 2023[23] - Total sales in constant currency for APAC in Q3 2024 were $16,497,000, down from $19,883,000 in Q3 2023[23] Strategic Initiatives - The company launched new products including the Quantum X Arm and next generation Focus Premium Max Laser Scanner to drive organic revenue growth[2] - The company is implementing a global restructuring plan aimed at improving operating performance and streamlining operations following recent acquisitions[21] - The company is implementing an Integration Plan to streamline operations following recent acquisitions[25] Shareholder Returns - Share repurchases during the quarter amounted to $10 million, reflecting the company's commitment to returning value to shareholders[1] - The company incurred $10,014 thousand in common stock repurchases during the nine months ended September 30, 2024[18]

Core Insights - FARO Technologies, Inc. reported third-quarter revenue of $82.6 million, which is at the upper end of its guidance range, despite a 5% decline year-over-year [1][3] - The company achieved a gross margin of 55.7%, significantly improved from 48.0% in the prior year, and a non-GAAP gross margin of 56.1% [3][20] - Non-GAAP earnings per share (EPS) reached $0.21, exceeding guidance, while the net loss per share was $(0.02), a substantial improvement from $(0.46) in the same period last year [1][3][21] - Adjusted EBITDA was reported at $8.9 million, representing 10.7% of total sales, compared to $3.5 million or 4.1% of total sales in the prior year [2][3][24] Financial Performance - Total sales for the third quarter were $82.6 million, down from $86.8 million in the prior year [3][25] - Operating expenses decreased to $43.8 million from $48.6 million year-over-year, with non-GAAP operating expenses also declining [3][20] - The company reported a net loss of $0.3 million, a significant improvement from a net loss of $8.8 million in the prior year [3][20] Cash Flow and Shareholder Actions - Cash flow from operations was $2.6 million, and the company executed share repurchases totaling $10 million during the quarter [1][3] - As of September 30, 2024, cash, cash equivalents, and short-term investments amounted to $88.9 million, down from $96.3 million at the end of 2023 [3][20] Future Outlook - For the fourth quarter of 2024, FARO expects revenue in the range of $88 to $96 million, with gross margins projected between 55.6% and 57.1% [4] - The company anticipates operating expenses to be between $47.4 million and $49.4 million, with non-GAAP operating expenses expected to range from $40.5 million to $42.5 million [4]

LAKE MARY, Fla., Oct. 23, 2024 /PRNewswire/ -- FARO® Technologies, Inc. (Nasdaq: FARO), a global leader in 4D digital reality solutions, today announced that after market close on Wednesday, November 6, 2024, it will release its financial results for the third quarter ended September 30, 2024. In conjunction with the release, Peter Lau, President and Chief Executive Officer, and Matthew Horwath, Senior Vice President and Chief Financial Officer, will host a conference call on Wednesday, November 6, 2024, at ...

LAKE MARY, Fla., Oct. 18, 2024 /PRNewswire/ -- FARO® (Nasdaq: FARO), a global leader in 4D digital reality solutions, today announced the appointment of Phillip Delnick to lead FARO's global sales organization as its SVP, Global Sales, effective October 21, 2024. "Phillip brings a wealth of expertise in sales leadership to FARO, with a proven track record of driving revenue growth, profit growth, and customer satisfaction across multiple product sectors over nearly two decades at Ingersoll Rand," said Peter ...

New FARO Focus Premium Max leads refreshed lineup LAKE MARY, Fla., Oct. 15, 2024 /PRNewswire/ -- FARO Technologies, Inc. (Nasdaq: FARO) has launched the next generation in the FARO Focus 3D Laser Scanner portfolio. The Focus product line offers a complete 3D laser scanning solution, delivering a more efficient experience from data capture to insights. The Focus Laser Scanner Solution offers up to 400 meters in range.The Focus Laser Scanner Solution offers up to 400 meters in range. The latest addition to th ...

New arm series increases accuracy and boosts user confidence LAKE MARY, Fla., Oct. 8, 2024 /PRNewswire/ -- FARO Technologies, Inc. (Nasdaq: FARO) has announced the release of the Quantum X FaroArm Series of portable coordinate measurement machines. The Quantum X Series offers an up to 15% increase in accuracy compared to previous Quantum Max FaroArms, with probing and scanning designed to improve manufacturing efficiency in a configurable and scalable solution. The Quantum X Series offers an up to 15% incre ...

FARO Technologies, Inc. (NASDAQ:FARO) Q2 2024 Results Conference Call August 8, 2024 4:30 PM ET Company Participants Michael Funari - Investor Relations Greg Palm - Craig-Hallum Capital Group Peter Lau - President and Chief Executive Officer Matt Horwath - Chief Financial Officer Conference Call Participants Jonathan Bass - Stephens Jim Ricchiuti - Needham Capital Operator Good day, everyone, and welcome to the FARO Technologies Second Quarter 2024 Earnings Call. For opening remarks and introductions, I wou ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-23081 FARO TECHNOLOGIES, INC. (Exact Name of Registrant as Specified in Its Charter) Florida 59-3157093 (State or o ...