FARO - Earnings call transcript Q4 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to the FARO Technologies Fourth Quarter and Full Year 2024 Earnings Call. [Operator Instructions] Also today's call is being recorded. [Operator Instructions] Now at this time, I'll turn things over to Mr. Mike Funari at Sapphire Investor Relations. Please go ahead, sir.

Michael Funari

you. Thank afternoon. Good from Executive today Peter President Lau, With and Faro Matt Chief Officer; Officer. Horwath, and you are Chief Financial market released company fourth year close, results XXXX. after of the full quarter its for and Today, financial the is The website on at Form FARO's available related and press release XX-K www.ferro.com.

not technology are include that Please and involve pro and results, statements are results regarding customer uncertainties, and conference demand, projections outlook business beyond be future materially. and may some events. call, actual this certain facts, our levels, considered which our development, risks could financial statements industry inventory to control differ cause note economic guidance, Various which of or in historical forward-looking subsequent statements factors

other today's SEC refer uncertainties, For a risks more and press and quarterly and detailed to our filings. annual and please description release these of

only and to no reflect of revise statements as Forward-looking or undertake update as views we by obligation required our law, today, except them.

will press certain these measures non-GAAP including will accounting During comparable measures, today's U.S. measures. accordance discuss to accepted additional measures. disclosures financial find not GAAP you conference reconciliations the that In presented principles financial generally or non-GAAP with in release, management regarding call, are

GAAP, our not recognized non-GAAP of provide financial measures with believes While in relevant operations. management these investors core comparisons period-to-period

of performance in accordance prepared not However, substitute for they considered be in financial should a with isolation a or measure as GAAP.

to Lau. over Now call I'd like turn to Peter the

Peter Lau

our our year-over-year Revenue were in million quarter, range exceeded basis of our of and the again afternoon, was continued million quarter. over operations expanding lower $XX Good end Mike. the XX.X%, to below targets. to strides $XX guidance operating expenses $XX.X was of call. margin Non-GAAP range. per high XXX our end above and the of the you, million points targeted guidance at everyone, optimizing million, gross Non-GAAP of our $XX.X all range. midpoint we Thank our In to make welcome, fourth and

fourth and quarter, end of expectations. was non-GAAP the representing range operating single which the quarter in result, quarter EBITDA was the million, Adjusted straight with we of our the $X.XX million represented straight EPS, a As guidance in quarter high near seventh our $XX.X operating our generated of sales, over flow decade flow fifth of cash generation. of of XX.X% $XX.X a cash highest or exceeding

corresponding specific for despite It's noting headwinds remaining the In and perspective, have we in margins positive continue our results pretty would saw a to region while cautious also third Germany. quarter. commercial the we and soft. in with exchange we European fourth gross stable top following revenue the key area see again quarter, levels focus From these saw is quarter, faced been in certain others, line demand sectors ongoing the the metrology regions challenges worth impact in million Within while such with including markets, delivered facing of Asia a in served to higher CapEx like increasingly customers. the demand remained discretionary rates EPS. during that here construction both we China becoming line Had in fourth our the and $X is FX XD election, in the Americas, stability as remains a we

quarter. like the the conversations our sentiment ongoing market remain global next outlook well PMI, the beyond as industry on as indicators With we're broader having we with customers cautious

a margins Non-GAAP basis by percentage decreased for basis non-GAAP extremely and the Looking record revenue FARO, optimizing our operating points we're year-over-year and grew of XX.X%, proud was expenses operations. outstanding year gross execution XXXX focus points. XXX to XXX by a towards while of team's back, extremely, as

margins in a for the has the double-digit the XX% EBITDA achieved FARO time EBITDA first that we marks margins XXXX and year. first result, full XXXX time a surpassed As since decade,

As journey, multiyear into event which phases. in can be investor FARO we categorized exciting X last March, an done discussed has our

organization focused first an to to and on base outcomes that EBITDA, a improve building gross consistent throughout gives and this of resulting mindset return margin on first instilling margins gross a investment efficient phase on items The growth. and flow of and significant high in leverage execute us is operating the This financial to operating operational enabled areas XX-XX of generation excellence being phase costs has mindset in us our key ability the invest The all business. cash organization. enhance highly aspects optimize in

allow X XX/XX organic will growth us as tool to term. to growth a The medium to with key this utilize the market second over faster on leverage the ensure the initiatives than continues capitalize and operating near phase to of introduction FARO

The as and and our final investments focus third away back to phase from M&A strategic shift further programs organic our core. such

with progress of minutes. to aspirational executed this ensure Matt set higher our associated long-term aspect and to last which risk reward remaining of investments to goals aspirational from our talk results few first The across goals commitments In focused exceed strategy, the we these enabled schedule. Phase foundation made solid has organization on business. just to updated XXXX, the we ahead margin deeply the the well on we commitment of the driving goals excellence want of in Given every and a achieve our about be in though, build. saw significant a will March, we disciplined aspirational operational X us

performance. the now momentum, by reflect our strong we're ongoing both continued to the we this these improvements and optimization of driven anticipate goals Given updating operations financial

we for further to strategy, driving continue next multiyear focus transitioning our we'll of enter organic XXXX, growth. While opportunities optimization, phase the our is as identify to

on initiatives market. several refreshing designed lines: FARO strategic with cornerstone FARO the our last discussed as invested partnerships X, has product Quantum and our delivering past expanding reach. the our regards arm to call, new of beyond available to legacy offerings we strategic the and include in to solutions, opportunity building accuracy we in X quarter, forging market. Over portfolio, fourth our With key first, our X quarters, core our to product the on best core the actions the core addressable enhance refreshed accelerate with growth These our scale

the capabilities and laser XXX powerful new improved collecting in assets, And premium improved range fastest the that of planning. whether in you're scan our a XXX-degree changer mode scanner for expert a Building manage scanner pre-incident a information the momentum, game meters an public premium new safety our including versatile to mobile capture flash with your portfolio, focused new on November, we versatile making with professional its building service provider digital Max launched second, technology. a reality Orbis data it premium utilizing and scanning looking quality, solution highly camera a a or expanding unique

the On our updated front, the for quarter, in CAMX software metrology XD first software applications. we

article we further to customer Our updated measurements tolerancing. the Across dimensional and applications options data to CAD version tailored first and repeat for software It and and part our same to in part traction receptivity devices remains forward inspections and of comparisons, the probing strong, CAMX all scanning metrology controls environment. needs. incoming in seeing industrial geometric now includes customers streamlines from different look XXXX. assemblies, parts for offers board, additions dimensioning unified and CAMX

our marks launched the to for we I'm handheld we to new LEAP our the scanner. presence FARO targeting. making scanning, addressable XD ST such This further is addressable million time LEAP to expands as company for strengthens where a share handheld significant production product our a number category portfolio, expansion customers customer initiatives speed, FARO enter portable to a ST that managers. opportunity quality XX% in Turning complete our opportunities. a FARO pleased sector data of approximately range to expand assured vast of milestone successfully offers XX% the a that we're data January, of high throughput accuracy essential. and across and developers of manufacturing designers, devices managers, with product are product profiles as and metrology quality Fast $XXX

parts. extremely future and tool, ST and share versatile. of tool services a industries compact expansion and toolkit As customer design the represents another existing opportunity force and LEAP sales multiple and for within of a verifying base. wallet applications, adds is our variety metrology-grade a at excels direct The it making of our it and measuring suitable to portable significant

to are our closely which stated the over several plan As and our solutions, opportunity and next core received with addressable requests from is our by of our previously, increase years aligned business the we've the customers. the introduction we've through needs address XX% directly

our off Our our and is core business, an to brand really market. strategy have solutions of to we where extremely loyalty more existing strength deliver the served high here build

successful commercially been opportunity our can that some out As of and this of considering. a is revamped years XX% a with With have plan we of much a in to reach probability quarters coming more products being addressed our higher have to we and the towards to the meaningful road product opportunities believe geared target. the remaining play launch address of we where we map is the XX% roll result, has portion to LEAP, win proven our other than

partnership pleased in agreements X both first relates meaningful signed quarter, that Lastly, it as partnership we are say, initiatives, to nature. our global I'm global to the in

The first, space, multiyear reality worldwide in was week. collaboration leader agreement a announced a and with last Topcon, digital distribution which the

plant Topcon state-of-the-art in mapping hardware step information launches to and solutions an the solutions delivering and scanning construction, Topcon in widely applications. architecture key building as exciting first modeling such worldwide in accessible. half software industrial XXXX that channel a verticals has significant distribution has with collaboration of more Our and process FARO is make laser expertise and surveying,

relationship the this in to continue to expand coming expect exciting We years.

with and side business. a and in announced in chain extensive the is partner's that agreement white XXXX. broad our a agreement us partnership was products global XD partner expected our be aligns This to on second the that to in launched The deliver leading enables partnership to FARO OEM the This our market metrology to label first metrology marketing fourth multiyear the manner certain is the we signed and network. market quarter company of and a through of them quarter supply

these provide essence, all share over we growth in to into in of channel which the of to scale FARO's sellers to XXXX. and event. what more organic are heading plan for momentum partnerships from generated today. technology closer launch initiatives street To X have we account, than we X,XXX-plus our will though Taking of We add thrilled these X expect partners sense the on triples these number details new a partnerships the into XXXX, from the about XXX feet

our us that recognize we that it contribute they are long-term confident time these our top we on success. very quarter for Phase While initiatives will meaningfully position rest the initiatives X, to and to execution of for laurels. to we've ramp represent some we on The well announcements progress for meaningful line take growth, made committed the first will but these in we not

Coupled We even move will designed initiatives growth introduce excellence and operational in our our commitment ahead, ongoing to continue clear the to as outpace products testament that we continue to can to a belief enhance operating returns anticipate forward. the amid uncertainty These with significant years to more our market leverage our strategy and FARO ongoing are in as revenue we growth. more broader partnerships explore the to market. profitability, efforts

We ability direction coming to our in are shareholders. value our our drive are enthusiastic about substantial confident and strategic years the for in

With overview turn as quarter. provide fourth outlook an full well an as quarter Matt our to and our results year I'll for financial over first that, to it of

Matthew Horwath

million to over $XX.X software continued fourth everyone. afternoon, versus China. million GAAP the in $XX.X while XX.X% million decline amortization intangible stock acquisition-related $XX.X GAAP XX.X% X% was revenue X%. of included and margin million million non-GAAP to restructuring year. of and the region, of we million good was XX.X% Fourth operating of service in gross million and due European Fourth expenses quarter year-over-year. costs. gross down down and revenue declined other Pacific quarter were weakness XX% for and Asia revenue Peter, X% was regions approximately XX% X% in of and million and were $X.X the decreased $XX.X primarily was quarter year-over-year, sales of down and XXXX. prior Geographically, represented in Recurring expenses X% and while by fourth margin revenue compared a $XX.X of XXXX respectively, and was on quarter X%, by $XX.X was the experienced in you, X% Americas $X.X compensation hardware of revenue versus Thank XXXX and

income quarter down the Non-GAAP of of with expense $X.X $X.X improvements. of operating million was year operating million continue to of compared fourth operating XXXX. operating compared to quarter fourth XXXX the of income of of of XXXX in income of the the as the fourth million QX from $XX.X $XX.X to in EBITDA quarter realize quarter we fourth million million in million Non-GAAP million Adjusted fourth was in sales quarter last was $X.X GAAP income XXXX. XXXX. $X.X productivity in or compared XX% million operating was approximately $XX.X $XX.X

GAAP or income XXXX per per was share Our quarter non-GAAP $X.XX $X.X compared loss net to approximately of or was income a fourth $X.X $X.XX QX or per $X.XX million of our share, in $XXX,XXX net for the million XXXX. share net

end quarter. Our $XX.X million flow cash million, million the of from and consecutive was operations our the up of sequentially $XX.X short-term with investment balance quarter at fifth positive representing $X.X cash

effect help our the impact adverse fourth mentioned, in To had FX U.S. XXXX. of the quarter provide third stayed the this at on the an similar Peter some levels rates dollar As strengthened, had outside business to U.S. rapidly perspective quarter, on which

Our higher. revenue million $X have would been

margin gross our approximately EPS. as XXX made in year-over-year have in $X.XX $X.XX been better non-GAAP EPS Our more greater. basis progress fourth clearly comparison points margin been of a a the it XX for non-GAAP basis improvement in including reflects the have to non-GAAP points highlight purposes gross increase would quarter is and we important would This and

to our results. annual Moving

point improvement progress pleased in in basis, million deliver were very balance margin year, our XXX macroeconomic of with we've to a $XXX.X were operating cash the in we increase our able on and able in to shares gross in $X.XX XX% from million $XX With in reduction million on a increase cash convert repurchase non-GAAP and to to a are $X.XX XXXX. a million. of Despite significant expense flow, outstanding to million, and to an $XX.X environment non-GAAP operations We sheet. the throughout short-term from made difficult EPS and year-over-year $XX.X and improvement a principal cash our $X improvement flow we outstanding this investments basis

As a communicated versus less the March updated year, aspirational we in ago. than X goals result event year the goals of our investor throughout progress long-term our during our XXXX, previously

of million basis and now million, of XX%, greater of EBITDA cash gross an XX%, of than points margin XXX goal up from $XX flow million. of we basis $XXX an points margin revenue, $XX increase an representing expect At free XXX prior improvement our annual of

we The macroeconomic and continue, Turning quarter we expect last resulting to remains of experienced similar our headwinds quarter in in to outlook. QX. choppy, contraction the level environment a year-over-year market

offset XXXX. throughout While and help first continued tariff-related we of with measured to industry initiatives expectations believe potential gain government broader of growth we setting as and we softness spending softness, the thoughtful our slowdowns, year, quarter they the mindful want challenges remain for will momentum in uncertainties remain

million As of and those a XX.X% million. per first $XX.X million result, revenue between XX% per $XX.X non-GAAP FX rates, gross $X.XX at earnings expect of non-GAAP from At ranging expenses expect margin share and for first and would $XX present share to we per share revenue and $X.XX quarter given corresponding quarter operating between profitability. non-GAAP and million levels we between $XX

non-GAAP revenue, in prepared we'd by XX per addition, time, increase non-GAAP to quarter pleased more concludes -- $X.XX This help the And year, provide basis of to would gross $X.X remarks million comparison in questions. rapid guidance rate earnings the to first relative the in in in FX margin and your with at exchange quarter our XXXX, third a our last rates, line take in be this apples-to-apples points midpoint assuming of change an given share.

Operator

afternoon We'll Ricchiuti to Needham go Jim of Company. first & this [Operator Instructions]

James Ricchiuti

we bit a agreements. Topcon. And might different with a and be give what has maybe sense FARO go Trimble about to with to agreement Talk agreements start get just laser Topco. could back a it's least the how for this ago, the business. mixed to wanted that to be that at because us sense had Peter, I of the years But OEM on part this Can Obviously, of believe, as trying different you cloud. you different agreement, company. it agreement, scanning number might distribution produced I in going us a the had results. little with OEM distribution think, why does to was I an a

Peter Lau

Yes, Jim, the thanks for question.

really a mean, good able I about of we've they this we we've both to to growth our think how -- a and months. talking partnership and part X partner, are I negotiations really look, we've someone take been been for talk -- about as kind for companies. of deliver discussions

take other where into its things expand And of that deliver talked about us we deal Jim, the would kind the comprehensive we obviously, geographies for registration X and ramp. figures the plan, very like to and it full lead And get expect so X us we've to we at versus expect very, certain of as going.

James Ricchiuti

Is by could occur ramp, end full that the So of that expectation? the your year?

Peter Lau

It's we the make I do all growth. is want first that thing very to about something this mean be sure want we that to cautious. is

And so very the to take as to sure make of both delivering we sort approach a future, look of we'll growth that for pragmatic companies. we're kind

watch continue grows. And just so how see we'll to and it

James Ricchiuti

Got it.

obviously make agreement, I I want second down metrology the just this But learn the On sure guess to road. understand. who I is we'll digital the in

this correct? in So agreement Is other that see XX? words, coming in into late we could play that

Peter Lau

Yes.

partner details what that ultimately, not is that's our the has product all right looking now the sharing we're reason we're think launched mean, for. not I the I because of yet.

quarter of thunder available. steal the it's all point XXXX. that target not indications line time the second fourth don't want any so and we But and the And to half to

James Ricchiuti

metrology any you it can part whether say product this digital geographically? covers line can you assume sense there? of what maybe -- you will just -- Is help relationship I the that something

Peter Lau

Yes.

mean, that it's I with lot addition -- believe think world. a the us of a the larger scale base, much customer helps to parts the than one different a ultimately, today. we of obviously, I have we that partnership of company and this

global to or time, X the that, but goes be mind one. confidences start betray with don't X expand look to serves the and of part we it's than we'll any in it It portion every to that and that in again, then we've got But want over more here, metrology of So over X we how world. relationship see expand into want And nature. we'll with products look our likely, start to don't coming years. and

Operator

We'll [Operator to Craig-Hallum. Greg of Instructions] go now Palm next

Greg Palm

the Congrats that on FX quarter. the emerged light headwind that results, especially in of in

Peter Lau

Greg. Thanks, you. Good to hear

Greg Palm

seeing Maybe just of kind cadence starting QX, surprises market a mix? just in in end Maybe whether back more with in the and seeing if -- that market. year-to-date, the quarter even detail some what the was quarter, you're what look maybe that anything the out on of little sort there geographically you're you you bit throughout

Peter Lau

Yes.

think market QX. seeing and I what good what we've got the LEAP launched is hopes we partnerships. in largely, obviously, for ST, we're Greg, about in we these saw our

it to or initiatives about we And these change. help the saw than no what us QX, market. meaningful kind for faster grow we're so ramps, what of as material is obviously, expect, we QX, seeing in But

Greg Palm

rank that the do the year? unnamed being contribution of of like you it how And run think we expect up? to too of expansion would that white time this Topcon, And opportunity. a kind a Or various line say? What next the you from it initiatives of early rate year order share standpoint, more impact as type new do wallet as sort ramps is of products, growth highlighted label announcement, you've from the full

Peter Lau

things Yes. of Look, here. couple I think it's a

since having strategy for obviously, it's So look, think products true of side too the expansion, we customers opportunity we're about the buy worked last to an that. It's are over Look, a updated products introduced since a on addressable new from to is And house, refreshed the right, a early us versus a us, decades, for that. that's asking we've and product little huge long excited new these X product the But tried I right? us. say. opportunity this are since is been that right? our a product XXXX, done probably time

believe reasonably us feel of culturally. for in good. the of or been They've that viability commercial The we really, us. fit been very, partnerships So discussions about really companies nature. projects. all confident opportunities these the very the well very X-way are then, these are have great Look, again, And negotiations we

going other we're we're of to Greg, products to and the look going kind to we're when of run going rate to So to partnerships. in products, at because say, Hard to to more we terms on not we're In right? launch stop get new full the going on going not and stop we're XXXX, partnerships,

make of partnerships, Matt So everything look, products this I we've talked thoughtful new, sure our are this to -- We disciplined. our to what is we evergreen. that new that as about excited to about are want measured we initiatives and we to we're strategy me, to very in out said, not we skis, these want that future. with bullish is and II over want Phase be getting really deliver as X about and think been And very, but be able new

Greg Palm

LEAP but not but kind at necessarily of to about on talked we maybe about able order the for As market marketplace a the knowing month, rates, all? feedback are it's only you the specifically, been from think

Peter Lau

what tracking say, KPIs expectations all our think that orders, Look, think all I think of those the pipeline, and initial are of so Yes. ahead discussions, think were. I of think would demos we're KPIs,

Greg Palm

Okay. figure thinking and Great. the or trying impacted competition. are better maybe worse either about just you some And lastly, to of how then versus tariffs out

maybe be maybe year? happens what in emerges us competitive of landscape months on maybe footprint competitive here if any So color depending there over the remind and and that a coming advantage terms manufacturing on could the or

Peter Lau

be all we're of It's the of And question. end a products think partner manufactured most will obviously reminder, the lot. first and good Thailand. then now, thinking right No, as by that our about quarter of I in Yes. most a -- the something of

been North huge that obviously, and some Asia And country the retain it beginning, you do has a They think tariffs, They're do we with in dollars. the over the sizable But cover very They impact We price. a reciprocal But to ability we the far. this impact Look, have it's about products. today. I potentially America, around absolute in ability with nonetheless, do of locations parts calibrate it if in in the move across not would likely production is an a so the put to not to not with we think obviously that but have there service we the here target look XX so in the probably, the contract test world. potentially products. centers partner, around world. our manufacturer the world that still think service

so number. could to news think we really there. again, comes say, in talk at tariff least and cover it's position of for And a standpoint, go out local of low out from we'll have ability price And it think We is local. be to figure more returns early really, better kind the how absolute able from goes we it a a hey, to do strategy our probably I that, relatively be what about with kind

base. being high a whole would just products deliver from able high-quality to know Greg, broadly, now, our the puts don't is ourselves to say, maybe competitors. and the we of customer existing know, what just paybacks right terms competitive we some In the we're have but and just worried that lot about And environment, reality about I takes

Operator

follow-up We'll now from at question take Jim Needham. a

James Ricchiuti

question you're the evaluate the what wanted a just Just their on businesses. caution little as you're if trade curious as customer tariff maybe differently. seeing any impacts they to on own I'm policy your -- hearing you're base, tariffs, from whether address

Peter Lau

a it is great Yes, question. Jim,

I we've briefly unknown touched outlook talking And for was think Matt not first really our quarter. when of he is productive our obviously about view it anybody. for on look, the -- or kind

provided forward, conversations. you when we look, to their see there's types who that having kind continue some moving Obviously, guidance took are customers of to a I that. And unknowns, those when we've got we'll little been little QX. measured going some And we more of customers customers of bit. And pennies pinch we be cautious. But kind to so generally, account are into and thoughtful monitor a think a who

James Ricchiuti

Pete or that and sell pronounced Is other, it's whether seen broad just range. the to versus reaction you you've know a the -- it more automotive yes, X aerospace in vertical or I

Peter Lau

good right obviously, that regionally. in question. areas second the here those to what do like I are first to continue again, and thoughts do Canada monitor sit to And world. we'll that now. probably, a Actually, probably it's and and prevalent deliver speak It's But a to can we obviously, as more help places we America, solid more those of what customers to do we the Latin in need quarter.

James Ricchiuti

Last on question for me is just pricing.

you sense your that how line product metrology from of I'm how and You received covers guys actions seeing the put January. a us as pricing just broadly you're through early they've some whether give some been price similar can any increases, in and I believe, whether curious to competitors?

Matthew Horwath

We prices Matt. XXXX. as did Yes, Jim, this our is of January X, increase list

deal. since we back initial XXXX January with days would in our early XXXX increase competitive don't have a I January had to prices COVID, have then So competitive We ability X.X first we're we did I in and a to deal well. we as months time think that's of discount And under months, X XX, great belt, increase prices. that getting list significant And do thing a in increased that would say that nice we is we our think 'XX. when price give we there allow we our in an pushback the so. realization in But was kind of see did team discount opportunity some if some are needed I list there. in almost

that's their different early of our that's anything to increasing our seen it, And we've organization products products they're And so feel value we significantly prices. how kind what we of and that our the competitors. think like increasing XXXX. kind days in for We're sales I our ours and seen in we've deserve. from don't -- need go get treats

James Ricchiuti

And announcements. and on the the congrats results

Peter Lau

Thank you, Jim.

Operator

afternoon. comments. appears things sir, further any to like it closing gentlemen, we have And turn this questions I'd for back no to Mr. you, Lau,

Peter Lau

Thank outstanding our and executed we do. team environment, just within In exceeded our their growth challenging our Good. thank we for like XXXX. of a of several targets sincerely well all every to I'd we key everything operator. in our significant delivering strategic hard you, market in progress really an also we to on to Despite facing moment made take initiatives. a dedication area going employees work on And our control. were short, said and

remain opportunities these additional gives forward. enhance the on strong results, focused we success so confidence us moving far we've achieved to While further identifying

growth we much, As you both we long confident the the execution execute unlock ahead. quarters, market outgrow significant in forward initiatives to and our on that Thank the in we'll term. We everyone. call shareholders, our for our to look value organic and be are and positioned our sharing very today. progress coming quarters well the concludes This in short

Operator

a Earnings joining great we us, day. Ladies and all conclude Mr. will that so Quarter Technologies gentlemen, today's Call. Again, and thanks Faro you, Thank Lau. Fourth wish for Goodbye. you much

FARO (FARO) 24 Feb 252024 Q4 Earnings call transcript