FARO Technologies(US:FARO)2022-08-04 03:17Summary of FARO Technologies, Inc. Q2 Earnings Conference Call Company Overview - Company: FARO Technologies, Inc. (NASDAQ:FARO) - Date of Call: August 3, 2022 - Participants: - Michael Burger - CEO - Allen Muhich - CFO - Michael Funari - Sapphire IR Key Industry and Company Insights Industry Context - The company operates in the 3D measurement and laser scanning technology industry, which is experiencing healthy demand across service markets. Financial Performance - Q2 Revenue: $79.9 million, down approximately 3% year-over-year [14] - Constant Currency Revenue: $83.9 million, representing a 3% year-over-year increase [7][15] - Hardware Revenue: $49.2 million, down 2% year-over-year [16] - Software Revenue: $10.5 million, up 4% year-over-year [16] - Service Revenue: $20.2 million, down 7% year-over-year [16] - Recurring Revenue: $17.1 million, up 8% year-over-year [16] Product Demand and Backlog - Strong demand for Quantum Max scan arm and Focus Premium laser scanner, with overall orders in the Americas growing 14% year-over-year [16] - Backlog increased due to strong demand, particularly in the last month of the quarter [30][32] Currency Impact - Approximately 60% of revenue was impacted by a stronger U.S. dollar, which appreciated about 10% against major currencies [7][15] - The strengthening dollar adversely affected gross margins and revenue recognition [17][18] Gross Margin and Operating Expenses - GAAP Gross Margin: 50.6%, lower than historical levels due to currency effects and lower-margin configurations [17] - Non-GAAP Gross Margin: 51% [17] - GAAP Operating Loss: $9 million, compared to a loss of $650,000 in Q2 2021 [19] - Non-GAAP Operating Loss: $2.5 million, compared to a profit of $3.9 million in Q2 2021 [19] Strategic Initiatives - Transition of manufacturing to Sanmina in Thailand is largely complete, expected to yield $12 million in annualized savings, although timing is delayed due to supply chain disruptions [9] - Launch of FARO Sphere, a cloud-based platform for 3D model creation and collaboration, is progressing well with positive adoption rates [10][13] - HoloBuilder's construction progress management application is set to be integrated into the Sphere platform by year-end [11] Market Outlook - Guidance for Q3 revenue is projected between $79 million and $87 million, contingent on currency stability [22] - The company remains cautiously optimistic about the second half of the year, driven by new product traction and a growing opportunity pipeline [38][40] Risks and Challenges - Ongoing supply chain disruptions and potential recessionary impacts are being monitored closely [13][40] - The company has not yet seen direct effects from recessionary rhetoric but remains cautious [13][50] Long-term Vision - The goal is to achieve 25% of total revenue from recurring sources, with a current CAGR of 8% in recurring revenue since 2019 [43] - The company is focused on leveraging its technology to capitalize on the growing market for digitizing physical objects [25] Additional Important Points - The company has maintained a strong capital structure with a cash balance of $102 million and no debt [21] - Significant progress has been made in reducing aged receivables and short-term inventory [21] - The highest non-Q4 quarter of laser scanner units booked in the company's history was recorded [23] This summary encapsulates the key points discussed during the FARO Technologies Q2 earnings call, highlighting the company's performance, strategic initiatives, and market outlook.