faro-20230331

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 March 31, 2023


☐			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 other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

250 Technology Park,	Lake Mary,	Florida	32746
(Address of Principal Executive Offices)			(Zip Code)

(407) 333-9911

(Registrant’s Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.001	FARO	Nasdaq Global Select Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No x

There were 18,902,121 shares of the registrant’s common stock outstanding as of May 4, 2023.

Table of Contents

FARO TECHNOLOGIES, INC.

Quarterly Report on Form 10-Q

Quarter Ended March 31, 2023

INDEX


		PAGE
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

a)	Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	3

b)	Condensed Consolidated Statements of Operations (Unaudited) For the Three Months Ended March 31, 2023 and March 31, 2022	4

c)	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) For the Three Months Ended March 31, 2023 and March 31, 2022	5

d)	Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2023 and March 31, 2022	6

e)	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) For the Three Months Ended March 31, 2023 and March 31, 2022	7

f)	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	31

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 5.	Other Information	33

Item 6.	Exhibits	34

SIGNATURES		35

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share data)	March 31, 2023 (unaudited)		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	68,564	$	37,812
Short-term investments	20,024		—
Accounts receivable, net	90,238		90,326
Inventories, net	50,886		50,026
Prepaid expenses and other current assets	45,830		41,201
Total current assets	275,542		219,365
Non-current assets:
Property, plant and equipment, net	19,505		19,720
Operating lease right-of-use assets	17,605		18,989
Goodwill	108,051		107,155
Intangible assets, net	48,793		48,978
Service and sales demonstration inventory, net	30,917		30,904
Deferred income tax assets, net	24,271		24,192
Other long-term assets	4,044		4,044
Total assets	$	528,728	$	473,347
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	22,888	$	27,286
Accrued liabilities	26,180		23,345
Income taxes payable	7,282		6,767
Current portion of unearned service revenues	36,792		36,407
Customer deposits	6,389		6,725
Lease liabilities	5,479		5,709
Total current liabilities	105,010		106,239
Loan - 5.50% convertible Senior Notes	72,379		—
Unearned service revenues - less current portion	21,101		20,947
Lease liabilities - less current portion	13,287		14,649
Deferred income tax liabilities	11,897		11,708
Income taxes payable - less current portion	8,718		8,706
Other long-term liabilities	23		49
Total liabilities	232,415		162,298
Commitments and contingencies - See Note 12
Shareholders’ equity:
Common stock - par value $0.001, 50,000,000 shares authorized; 20,276,813 and 20,156,233 issued, respectively; 18,902,121 and 18,780,013 outstanding, respectively	20		20
Additional paid-in capital	331,875		328,227
Retained earnings	25,624		46,788
Accumulated other comprehensive loss	(30,551)		(33,331)
Common stock in treasury, at cost - 1,374,692 and 1,376,220 shares held, respectively	(30,655)		(30,655)
Total shareholders’ equity	296,313		311,049
Total liabilities and shareholders’ equity	$	528,728	$	473,347

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended
(in thousands, except share and per share data)	March 31, 2023		March 31, 2022
Sales
Product	$	65,240	$	56,730
Service	19,727		19,926
Total sales	84,967		76,656
Cost of sales
Product	33,957		24,333
Service	11,294		11,297
Total cost of sales	45,251		35,630
Gross profit	39,716		41,026
Operating expenses
Selling, general and administrative	41,376		35,490
Research and development	12,718		12,128
Restructuring costs	4,238		600
Total operating expenses	58,332		48,218
Loss from operations	(18,616)		(7,192)
Other (income) expense
Interest expense	835		8
Other income, net	(220)		(13)
Loss before income tax expense	(19,231)		(7,187)
Income tax expense	1,933		2,500
Net loss	$	(21,164)	$	(9,687)
Net loss per share - Basic	$	(1.12)	$	(0.53)
Net loss per share - Diluted	$	(1.12)	$	(0.53)
Weighted average shares - Basic	18,816,110		18,240,299
Weighted average shares - Diluted	18,816,110		18,240,299

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)


	Three Months Ended
(in thousands)	March 31, 2023		March 31, 2022
Net loss	$	(21,164)	$	(9,687)
Currency translation adjustments, net of income taxes	2,780		(1,984)
Comprehensive loss	$	(18,384)	$	(11,671)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Three Months Ended
(in thousands)	March 31, 2023		March 31, 2022
Cash flows from:
Operating activities:
Net loss	$	(21,164)	$	(9,687)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	4,413		3,012
Stock-based compensation	3,634		2,867
Deferred income tax expense (benefit)	562		66
Provision for excess and obsolete inventory	344		229
Loss on disposal of assets	69		112
Provisions for bad debts, net of recoveries	33		16

Change in operating assets and liabilities:
Decrease (Increase) in:
Accounts receivable	2,378		1,449
Inventories	(1,530)		(2,065)
Prepaid expenses and other current assets	(4,219)		(3,313)
(Decrease) Increase in:
Accounts payable and accrued liabilities	(2,450)		(1,682)
Income taxes payable	(102)		1,261
Customer deposits	(433)		492
Unearned service revenues	121		206
Net cash used in operating activities	(18,344)		(7,037)
Investing activities:
Purchases of property and equipment	(1,688)		(2,442)
Purchases of short-term investments	(20,024)		—
Cash paid for technology development, patents and licenses	(1,820)		(2,612)

Net cash used in investing activities	(23,532)		(5,054)
Financing activities:
Payments on finance leases	(44)		(58)
Payments for taxes related to net share settlement of equity awards	14		(916)
Proceeds from issuance of 5.50% Convertible Senior Notes, due 2028, net of discount, issuance cost and accrued interest	72,310		—
Net cash provided by (used in) financing activities	72,280		(974)
Effect of exchange rate changes on cash and cash equivalents	348		(1,732)
Increase (Decrease) in cash and cash equivalents	30,752		(14,797)
Cash and cash equivalents, beginning of period	37,812		121,989
Cash and cash equivalents, end of period	$	68,564	$	107,192

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)


				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Common Stock in Treasury
	Common Stock
(in thousands, except share data)	Shares	Amounts										Total
BALANCE JANUARY 1, 2023	18,780,013	$	20	$	328,227	$	46,788	$	(33,331)	$	(30,655)	$	311,049
Net loss	—	—		—		(21,164)		—		—		(21,164)
Currency translation adjustment	—	—		—		—		2,780		—		2,780
Stock-based compensation	—	—		3,634		—		—		—		3,634
Common stock issued, net of shares withheld for employee taxes	122,108	—		14		—		—		—		14
BALANCE MARCH 31, 2023	18,902,121	$	20	$	331,875	$	25,624	$	(30,551)	$	(30,655)	$	296,313

SEC Form 10-Q filed by FARO Technologies Inc.