faro-20230930

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 September 30, 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.)

150 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 18,954,257 shares of the registrant’s common stock outstanding as of October 30, 2023.

Table of Contents

FARO TECHNOLOGIES, INC.

Quarterly Report on Form 10-Q

Quarter Ended September 30, 2023

INDEX


		PAGE
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

a)	Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022	3

b)	Condensed Consolidated Statements of Operations (Unaudited) For the Three and Nine Months Ended September 30, 2023 and September 30, 2022	4

c)	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) For the Three and Nine Months Ended September 30, 2023 and September 30, 2022	5

d)	Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2023 and September 30, 2022	6

e)	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) For the Three and Nine Months Ended September 30, 2023 and September 30, 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	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	33

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

SIGNATURES		38

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)	September 30, 2023 (unaudited)		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	79,919	$	37,812

Accounts receivable, net	88,363		90,326
Inventories, net	40,095		50,026
Prepaid expenses and other current assets	37,325		41,201
Total current assets	245,702		219,365
Non-current assets:
Property, plant and equipment, net	22,207		19,720
Operating lease right-of-use assets	12,521		18,989
Goodwill	106,873		107,155
Intangible assets, net	46,999		48,978
Service and sales demonstration inventory, net	22,662		30,904
Deferred income tax assets, net	24,093		24,192
Other long-term assets	4,047		4,044
Total assets	$	485,104	$	473,347
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	23,408	$	27,286
Accrued liabilities	24,994		23,345
Income taxes payable	12,083		6,767
Current portion of unearned service revenues	34,493		36,407
Customer deposits	5,237		6,725
Lease liabilities	5,258		5,709
Total current liabilities	105,473		106,239
Loan - 5.50% Convertible Senior Notes	72,604		—
Unearned service revenues - less current portion	20,893		20,947
Lease liabilities - less current portion	11,495		14,649
Deferred income tax liabilities	11,497		11,708
Income taxes payable - less current portion	4,020		8,706
Other long-term liabilities	30		49
Total liabilities	226,012		162,298
Commitments and contingencies - See Note 13
Shareholders’ equity:
Common stock - par value $0.001, 50,000,000 shares authorized; 20,328,417 and 20,156,233 issued, respectively; 18,953,725 and 18,780,013 outstanding, respectively	20		20
Additional paid-in capital	340,414		328,227
Retained earnings	(11,377)		46,788
Accumulated other comprehensive loss	(39,310)		(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	259,092		311,049
Total liabilities and shareholders’ equity	$	485,104	$	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 September 30,				Nine Months Ended September 30,
(in thousands, except share and per share data)	2023		2022		2023		2022
Sales
Product	$	66,911	$	65,581	$	199,754	$	182,015
Service	19,902		19,751		60,237		59,891
Total sales	86,813		85,332		259,991		241,906
Cost of sales
Product	34,640		30,375		112,691		82,879
Service	10,499		11,692		32,587		34,299
Total cost of sales	45,139		42,067		145,278		117,178
Gross profit	41,674		43,265		114,713		124,728
Operating expenses
Selling, general and administrative	37,970		37,226		117,907		108,734
Research and development	8,188		12,586		32,568		36,756
Restructuring costs	2,442		580		15,130		2,512
Total operating expenses	48,600		50,392		165,605		148,002
Loss from operations	(6,926)		(7,127)		(50,892)		(23,274)
Other (income) expense
Interest expense (income)	691		(24)		2,529		(28)
Other income, net	(381)		(1,428)		(125)		(3,077)
Loss before income tax	(7,236)		(5,675)		(53,296)		(20,169)
Income tax expense	1,520		586		4,869		4,352
Net loss	$	(8,756)	$	(6,261)	$	(58,165)	$	(24,521)
Net loss per share - Basic	$	(0.46)	$	(0.34)	$	(3.08)	$	(1.34)
Net loss per share - Diluted	$	(0.46)	$	(0.34)	$	(3.08)	$	(1.34)
Weighted average shares - Basic	18,953,251		18,436,615		18,899,954		18,336,537
Weighted average shares - Diluted	18,953,251		18,436,615		18,899,954		18,336,537

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 September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Net loss	$	(8,756)	$	(6,261)	$	(58,165)	$	(24,521)
Currency translation adjustments, net of income taxes	(7,080)		(11,796)		(5,979)		(26,791)
Net unrealized loss on short-term investments	(238)		—		—		—
Comprehensive loss	$	(16,074)	$	(18,057)	$	(64,144)	$	(51,312)

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)


	Nine Months Ended September 30,
(in thousands)	2023		2022
Cash flows from:
Operating activities:
Net loss	$	(58,165)	$	(24,521)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	11,728		10,061
Stock-based compensation	12,276		10,024
Inventory write-downs	8,132		—
Asset impairment charges	5,333		—
Deferred income tax (benefit) expense and other non-cash charges	(82)		568
Provision for excess and obsolete inventory	1,754		209
Amortization of debt discount and issuance costs	294		—
Loss on disposal of assets	(155)		356
Provisions for bad debts, net of recoveries	834		80

Change in operating assets and liabilities:
Decrease (Increase) in:
Accounts receivable	1,282		867
Inventories	(544)		2,129
Prepaid expenses and other current assets	4,047		(14,566)
(Decrease) Increase in:
Accounts payable and accrued liabilities	(2,802)		(2,249)
Income taxes payable	653		1,008
Customer deposits	(1,534)		588
Unearned service revenues	(1,198)		(2,710)
Other liabilities	567		—

SEC Form 10-Q filed by FARO Technologies Inc.