FARO Technologies(US:FARO)2023-08-03 03:25Financial Data and Key Metrics Changes - Second quarter revenue was $88.2 million, up 10% year-over-year, with hardware revenue of $56.8 million increasing by 16% due to higher shipments of Quantum Max ScanArm and Laser Tracker product lines [7][28] - GAAP gross margin was 37.8% and non-GAAP gross margin was 48% for Q2 2023, with an $8.1 million inventory reserve impacting GAAP results [31][40] - GAAP net loss was $28.2 million or $1.49 per share, while non-GAAP net loss was $2.6 million or $0.14 per share, compared to a net loss of approximately $600,000 or $0.3 per share in Q2 2022 [36][43] Business Line Data and Key Metrics Changes - Hardware revenue increased by 14% over the last 12 months, with a 16% year-over-year increase in Q2 2023 [29] - Software revenue was approximately flat year-on-year at $10.8 million, reflecting a shift from perpetual licenses to subscriptions [30] - Service revenue of $20.6 million represented a modest 2% increase year-over-year, marking the first year-on-year growth in service revenue in five consecutive quarters [30] Market Data and Key Metrics Changes - The Americas showed strong growth, while Asia Pacific experienced a decline, leading to an overall 10% revenue growth [80] - EMEA had sporadic performance, with strong results in the 3D metrology space, particularly in automotive and aerospace [80] Company Strategy and Development Direction - The company aims to deepen understanding of customer needs, enhance product offerings, and provide exceptional service [25][26] - A focus on streamlining operations and reducing costs is evident, with a target of $40 million to $43 million in quarterly operating expenses [10][15] - The strategic combination of hardware capture, cloud processing, and software applications is expected to differentiate the company in the marketplace [19] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about second half 2023 revenue levels due to ongoing macroeconomic softness in commercial construction and delayed customer purchasing decisions [9][56] - The company expects to remain free cash flow positive in the second half of 2023, with a projected revenue decline of approximately 10% in Q3 [38][46] Other Important Information - The company completed cost reduction activities, resulting in a 17% reduction in operating expenses when considering inflation and currency effects [15] - The transition to a Southeast Asia supply chain is expected to yield $12 million in annualized savings [33] Q&A Session Summary Question: Insights on revenue performance and demand environment - Management noted that some customers accelerated decision-making, contributing to better-than-expected revenue [54] - The underlying demand remains steady, with a cautious outlook due to customer delays in purchasing decisions [56] Question: Q3 guidance and sequential decline - Management indicated that the expected decline is primarily due to seasonality and cautiousness regarding market conditions [58][59] Question: Strategic changes and commercialization of solutions - The new CEO believes the current strategy is sound, with a focus on execution and leveraging technology for growth [68][69] Question: Geographic sales trends - Strong growth was noted in the Americas, while Asia Pacific showed a decline, necessitating a focus on improvement in that region [79] Question: Impact of product portfolio changes on margins - The company does not expect significant changes in top or bottom line from the removal of peripheral products, allowing for a focus on core offerings [82]