FARO Announces First Quarter 2021 Financial Results

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP (UNAUDITED)

	Three Months Ended March 31,
(dollars in thousands, except per share data)	2021			2020
Gross profit, as reported	$	40,407		$	43,873
Stock-based compensation ⁽²⁾	66			271
Non-GAAP adjustments to gross profit	66			271
Non-GAAP gross profit	$	40,473		$	44,144
Gross margin, as reported	52.9		%	55.2		%
Non-GAAP gross margin	53.0		%	55.5		%

Selling, general and administrative, as reported	$	33,348		$	36,324
Stock-based compensation ⁽²⁾	(1,682)			(1,523)
Purchase accounting intangible amortization	(185)			(124)
Non-GAAP selling, general and administrative	$	31,481		$	34,677

Research and development, as reported	$	11,973		$	10,415
Stock-based compensation ⁽²⁾	(346)			(382)
Purchase accounting intangible amortization	(328)			(401)
Non-GAAP research and development	$	11,299		$	9,632

Operating expenses, as reported	$	46,845		$	60,427
Stock-based compensation ⁽²⁾	(2,028)			(1,905)
Restructuring costs ⁽³⁾	(1,524)			(13,688)
Purchase accounting intangible amortization	(513)			(525)
Non-GAAP adjustments to operating expenses	(4,065)			(16,118)
Non-GAAP operating expenses	$	42,780		$	44,309

Loss from operations, as reported	$	(6,438)		$	(16,554)
Non-GAAP adjustments to gross profit	66			271
Non-GAAP adjustments to operating expenses	4,065			16,118
Non-GAAP loss from operations	$	(2,307)		$	(165)

Other (income) expense, net, as reported	$	(1,605)		$	507
Interest expense increase due to GSA sales adjustment ⁽¹⁾	—			(149)
Non-GAAP adjustments to other (income) expense, net	—			(149)
Non-GAAP other (income) expense, net	$	(1,605)		$	358

Net loss, as reported	$	(3,221)		$	(14,823)
Non-GAAP adjustments to gross profit	66			271
Non-GAAP adjustments to operating expenses	4,065			16,118
Non-GAAP adjustments to other (income) expense, net	—			149
Income tax effect of non-GAAP adjustments	(1,478)			(2,133)
Non-GAAP net loss	$	(568)		$	(418)

Net loss per share - Diluted, as reported	$	(0.18)		$	(0.84)
Stock-based compensation ⁽²⁾	0.12			0.12
Restructuring costs ⁽³⁾	0.08			0.78
Purchase accounting intangible amortization	0.03			0.03
Interest expense increase due to GSA sales adjustment ⁽¹⁾	—			0.01
Income tax effect of non-GAAP adjustments	(0.08)			(0.12)
Non-GAAP net loss per share - Diluted	$	(0.03)		$	(0.02)

⁽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"). In the first quarter 2020 we recorded imputed interest expense of $0.1 million related to the GSA Matter. 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 first quarters 2020 and 2021 we recorded a pre-tax charge of approximately $13.7 million and $1.5 million, respectively, primarily consisting of severance and related benefits.

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