Release Date: February 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Faro Technologies Inc (FARO, Financial) exceeded all targets for the fourth quarter, with revenue of $93.5 million above the midpoint of their guidance range.
- Non-GAAP gross margin expanded over 600 basis points year over year to 57.4%, reaching the high end of their guidance range.
- The company achieved $0.50 of non-GAAP EPS, marking the seventh consecutive quarter of exceeding expectations.
- FARO generated $17.3 million in operating cash flow, representing the fifth straight quarter of positive cash flow generation.
- The company launched several new products, including the FaroArm Quantum X and the Focus Premium laser scanner, enhancing their product portfolio and market reach.
Negative Points
- Fourth-quarter revenue was down 5% compared to the previous year, with significant declines in the Asia-Pacific region due to continued weakness in China.
- Hardware revenue decreased by 7% year over year, while software and service revenues also saw declines.
- The company faced FX headwinds, which negatively impacted revenue by $2 million and affected gross margins and EPS.
- FARO's GAAP net loss was $986,000 or $0.05 per share for the fourth quarter.
- The macroeconomic environment remains challenging, with ongoing softness in certain markets and regions, leading to cautious market outlooks for the near term.
Q & A Highlights
Q: Can you provide details on the OEM distribution agreement with Topcon and how it differs from past agreements like the one with Trimble?
A: Peter Lau, President and CEO, explained that the partnership with Topcon is comprehensive and expected to deliver growth for both companies. They have discussed deal registration in certain geographies and expect the agreement to generate eight-figure revenue at full ramp. However, they are cautious and will monitor the growth closely.
Q: When can we expect the digital metrology agreement to come into play, and what impact will it have?
A: Peter Lau stated that the agreement is expected to launch in the fourth quarter of 2025. It is a global partnership that will help FARO scale to a larger customer base. Initially, it will start with one metrology product, with plans to expand over time.
Q: How are the various growth initiatives, such as new products and partnerships, expected to contribute to growth in 2025?
A: Peter Lau mentioned that it's too early to specify the full impact, but they are confident in the commercial viability of new products and partnerships. The strategy is considered evergreen, with plans to launch more products and explore additional partnerships in 2025.
Q: What feedback have you received on the recently launched Leap ST handheld scanner?
A: Peter Lau reported that all key performance indicators, such as pipeline, discussions, demos, and orders, are ahead of initial expectations, indicating strong market reception.
Q: How are tariffs impacting FARO, and what is the company's strategy to mitigate these effects?
A: Peter Lau explained that most products are manufactured in Thailand, minimizing tariff impacts. They may cover potential costs with price adjustments and have the flexibility to move production globally if needed. The company is focused on delivering high-quality products to its customer base.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
