FARO Announces Fourth Quarter and Full Year Financial Results

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP

(UNAUDITED)



Three Months Ended December 31,


Twelve Months Ended December 31,

(dollars in thousands, except per share data)

2021


2020


2021


2020

Total sales, as reported

$    100,204


$      92,953


$    337,814


$    303,768

GSA sales adjustment (1)




608

Non-GAAP total sales

$    100,204


$      92,953


$    337,814


$    304,376









Gross profit, as reported

$      55,707


$      50,780


$    183,927


$    159,847

GSA sales adjustment (1)




608

Stock-based compensation (2)

165


211


635


702

Non-GAAP adjustments to gross profit

165


211


635


1,310

Non-GAAP gross profit

$      55,872


$      50,991


$    184,562


$    161,157

Gross margin, as reported

55.6 %


54.6 %


54.4 %


52.6 %

Non-GAAP gross margin

55.8 %


54.9 %


54.6 %


52.9 %









Selling, general and administrative, as reported

$      35,859


$      35,304


$    136,234


$    131,827

Stock-based compensation (2)

(2,196)


(1,661)


(8,985)


(6,327)

Purchase accounting intangible amortization

(259)


(193)


(908)


(564)

Non-GAAP selling, general and administrative

$      33,404


$      33,450


$    126,341


$    124,936









Research and development, as reported

$      12,297


$      11,541


$      48,761


$      42,896

Stock-based compensation (2)

(438)


(14)


(1,836)


(1,285)

Purchase accounting intangible amortization

(1,072)


(411)


(2,133)


(1,505)

Non-GAAP research and development

$      10,787


$      11,116


$      44,792


$      40,106









Operating expenses, as reported

$      51,845


$      48,088


$    192,363


$    190,529

Stock-based compensation (2)

(2,634)


(1,675)


(10,821)


(7,612)

Restructuring costs (3)

(3,689)


(1,243)


(7,368)


(15,806)

Other product charge (4)


(1,644)



(1,644)

Purchase accounting intangible amortization

(1,331)


(604)


(3,041)


(2,069)

Non-GAAP adjustments to operating expenses

(7,654)


(5,166)


(21,230)


(27,131)

Non-GAAP operating expenses

$      44,191


$      42,922


$    171,133


$    163,398









Income (loss) from operations, as reported

$        3,862


$        2,692


$       (8,436)


$     (30,682)

Non-GAAP adjustments to gross profit

165


211


635


1,310

Non-GAAP adjustments to operating expenses

7,654


5,166


21,230


27,131

Non-GAAP income (loss) from operations

$      11,681


$        8,069


$      13,429


$       (2,241)









Other expense (income), net, as reported

$            521


$          (650)


$            142


$              91

Interest adjustment due to GSA sales adjustment (1)


727



168

Non-GAAP adjustments to other expense (income), net


727



168

Non-GAAP other expense, net

$            521


$              77


$            142


$            259









Net (loss) income, as reported

$     (31,712)


$      27,408


$     (39,964)


$            629

Non-GAAP adjustments to gross profit

165


211


635


1,310

Non-GAAP adjustments to operating expenses

7,654


5,166


21,230


27,131

Non-GAAP adjustments to other expense (income), net


(727)



(168)

Income tax effect of non-GAAP adjustments

(1,191)


(2,305)


(5,432)


(7,235)

Other tax adjustments (5)

33,779


(23,501)


33,779


(23,501)

Non-GAAP net income (loss)

$        8,695


$        6,252


$      10,248


$       (1,834)









Net (loss) income per share - Diluted, as reported

$         (1.74)


$           1.52


$         (2.20)


$           0.04

GSA sales adjustment (1)




0.03

Stock-based compensation (2)

0.16


0.11


0.63


0.46

Restructuring costs (3)

0.20


0.07


0.40


0.88

Other product charges (4)


0.09



0.09

Purchase accounting intangible amortization

0.07


0.03


0.17


0.12

Interest expense increase due to GSA sales adjustment (1)


(0.04)



(0.01)

Income tax effect of non-GAAP adjustments

(0.06)


(0.13)


(0.30)


(0.40)

Other tax adjustments (5)

1.85


(1.30)


1.86


(1.31)

Non-GAAP net income (loss) per share - Diluted

$           0.48


$           0.35


$           0.56


$         (0.10)


(1) Late in the fourth quarter of 2018, during an internal review we preliminarily determined that certain of our pricing practices may have resulted in the U.S. Government being overcharged under our General Services Administration ("GSA") Federal Supply Schedule contracts (the "Contracts") (the "GSA Matter"). During the twelve months ended December 31, 2020, we reduced our total sales by $0.6 million (the "GSA sales adjustment"). During the first nine months of 2020 we recorded an incremental $0.6 million of imputed interest related to the estimated cumulative sales adjustment and in the fourth quarter of 2020 we determined that an adjustment to reduce imputed interest by $0.7 million was required. Effective as of February 25, 2021, as a result of the review, we entered into a settlement agreement with the GSA and have paid in full and final satisfaction of any and all claims, causes of actions, appeals and the like, including damages, costs, attorney's fees and interest arising under or related to the GSA Matter.


(2) We exclude stock-based compensation, which is non-cash, from the non-GAAP financial measures because the Company believes that such exclusion provides a better comparison of results of ongoing operations for current and future periods with such results from past periods.


(3) On February 14, 2020, our Board of Directors approved a global restructuring plan (the "Restructuring Plan"), which is intended to support our strategic plan in an effort to improve operating performance and ensure that we are appropriately structured and resourced to deliver increased and sustainable value to our shareholders and customers. In connection with the Restructuring Plan, during the twelve months ended December 31, 2021 and December 31, 2020 we recorded a pre-tax charge of approximately $7.4 million and $15.8 million, respectively, primarily consisting of severance and related benefits.     


(4) During the fourth quarter of 2020, we recognized a charge related to the replacement of a prior generation product that was exhibiting lower than desired reliability as part of our ongoing focus on customer satisfaction.


(5) The 2021 tax adjustments were driven by an increase in our valuation allowance primarily related to domestic and foreign deferred tax assets that, in the judgment of management, were not more likely than not to be realized. The 2020 tax adjustments were driven primarily by the establishment of deferred tax assets in relation to intra-entity transfers of certain intellectual property rights in December 2020.


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