faro-20240930

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, 2024


☐			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.)

125 Technology Park,
Lake Mary									32746
Florida
(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 18,917,323 shares of the registrant’s common stock outstanding as of November 4, 2024.

Table of Contents

FARO TECHNOLOGIES, INC.

Quarterly Report on Form 10-Q

Quarter Ended September 30, 2024

INDEX


		PAGE
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

a)	Condensed Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023	3

b)	Condensed Consolidated Statements of Operations (Unaudited) For the Three and Nine Months Ended September 30, 2024 and September 30, 2023	4

c)	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) For the Three and Nine Months Ended September 30, 2024 and September 30, 2023	5

d)	Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2024 and September 30, 2023	6

e)	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) For the Three and Nine Months Ended September 30, 2024 and September 30, 2023	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	31

Item 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	36

SIGNATURES		37

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, 2024 (unaudited)		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	88,913	$	76,787
Short-term investments	—		19,496
Accounts receivable, net	83,208		92,028
Inventories, net	39,055		34,529
Prepaid expenses and other current assets	34,252		38,768
Total current assets	245,428		261,608
Non-current assets:
Property, plant and equipment, net	19,544		21,181
Operating lease right-of-use assets	17,208		12,231
Goodwill	110,972		109,534
Intangible assets, net	46,325		47,891
Service and sales demonstration inventory, net	21,436		23,147
Deferred income tax assets, net	24,826		25,027
Other long-term assets	3,891		4,073
Total assets	$	489,630	$	504,692
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	30,438	$	27,404
Accrued liabilities	25,208		29,930
Income taxes payable	6,881		5,699
Current portion of unearned service revenues	41,495		40,555
Customer deposits	4,282		4,251
Lease liabilities	4,645		5,434
Total current liabilities	112,949		113,273
Loan - 5.50% Convertible Senior Notes	70,096		72,760
Unearned service revenues - less current portion	20,051		20,256
Lease liabilities - less current portion	15,412		10,837
Deferred income tax liabilities	13,048		13,308
Income taxes payable - less current portion	2,510		5,629
Other long-term liabilities	46		23
Total liabilities	234,112		236,086
Commitments and contingencies - See Note 13
Shareholders’ equity:
Common stock - par value $0.001, 50,000,000 shares authorized; 20,869,974 and 20,343,359 issued, respectively; 18,908,076 and 18,968,798 outstanding, respectively	20		20
Additional paid-in capital	354,765		346,277
Retained earnings	(17,869)		(9,789)
Accumulated other comprehensive loss	(40,729)		(37,247)
Common stock in treasury, at cost - 1,961,898 and 1,374,561 shares held, respectively	(40,669)		(30,655)
Total shareholders’ equity	255,518		268,606
Total liabilities and shareholders’ equity	$	489,630	$	504,692

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

Table of Contents

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)	2024		2023		2024		2023
Sales
Product	$	61,461	$	66,911	$	186,309	$	199,754
Service	21,102		19,902		62,583		60,237
Total sales	82,563		86,813		248,892		259,991
Cost of sales
Product	26,246		34,640		82,817		112,691
Service	10,341		10,499		32,003		32,587
Total cost of sales	36,587		45,139		114,820		145,278
Gross profit	45,976		41,674		134,072		114,713
Operating expenses
Selling, general and administrative	34,041		37,970		106,224		117,907
Research and development	9,771		8,188		28,628		32,568
Restructuring costs	—		2,442		616		15,130
Total operating expenses	43,812		48,600		135,468		165,605
Income (loss) from operations	2,164		(6,926)		(1,396)		(50,892)
Other (income) expense
Interest expense	1,023		691		2,615		2,529
Other (income) expense, net	175		(381)		157		(125)
Income (loss) before income tax	966		(7,236)		(4,168)		(53,296)
Income tax expense	1,255		1,520		3,912		4,869
Net loss	$	(289)	$	(8,756)	$	(8,080)	$	(58,165)
Net loss per share - Basic	$	(0.02)	$	(0.46)	$	(0.42)	$	(3.08)
Net loss per share - Diluted	$	(0.02)	$	(0.46)	$	(0.42)	$	(3.08)
Weighted average shares - Basic	19,266,217		18,953,251		19,218,004		18,899,954
Weighted average shares - Diluted	19,266,217		18,953,251		19,218,004		18,899,954

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

Table of Contents

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2024		2023		2024		2023
Net loss	$	(289)	$	(8,756)	$	(8,080)	$	(58,165)
Currency translation adjustments, net of income taxes	6,309		(7,080)		(3,482)		(5,979)
Net unrealized loss on short-term investments	—		(238)		—		—
Comprehensive loss	$	6,020	$	(16,074)	$	(11,562)	$	(64,144)

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

Table of Contents

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended September 30,
(in thousands)	2024		2023
Cash flows from:
Operating activities:
Net loss	$	(8,080)	$	(58,165)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	11,709		11,728
Stock-based compensation	8,471		12,276
Inventory write-downs	—		8,132
Asset impairment charges	—		5,333
Deferred income tax (benefit) and other non-cash charges	(1,230)		(82)
Provision for excess and obsolete inventory	861		1,754
Amortization of debt discount and issuance costs	336		294
Loss on disposal of assets	974		(155)
Provisions for bad debts, net of recoveries	966		834

Change in operating assets and liabilities:
Decrease (Increase) in:
Accounts receivable	6,864		1,282
Inventories	(8,097)		(544)
Prepaid expenses and other current assets	4,298		4,047
(Decrease) Increase in:
Accounts payable and accrued liabilities	(1,722)		(2,802)
Income taxes payable	(1,884)		653
Customer deposits	144		(1,534)
Unearned service revenues	778		(1,198)
Other liabilities	(1,033)		567
Net cash provided by (used in) operating activities	13,355		(17,580)
Investing activities:
Purchases of property and equipment	(3,559)		(5,016)
Maturity of short-term investments	20,009		—
Cash paid for technology development, patents and licenses	(4,822)		(5,071)

Net cash provided by (used in) investing activities	11,628		(10,087)
Financing activities:
Payments on finance leases	(135)		(154)
Cash settlement of equity awards	—		(89)
Repurchases of common stock	(10,014)		—
Proceeds from issuance of 5.50% Convertible Senior Notes, due 2028, net of discount, issuance cost and accrued interest	—		72,310
Repayment of 5.50% Convertible Senior Notes, due 2028	(2,685)		—
Payment of contingent consideration for business acquisition	—		(1,098)
Net cash (used in) provided by financing activities	(12,834)		70,969
Effect of exchange rate changes on cash and cash equivalents	(23)		(1,195)
Increase in cash and cash equivalents	12,126		42,107
Cash and cash equivalents, beginning of period	76,787

SEC Form 10-Q filed by FARO Technologies Inc.