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FARO Technologies (FARO) Q3 Earnings Beat Despite Weak Demand

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FARO Technologies, Inc. (FARO - Free Report) reported third-quarter 2020 adjusted loss of 8 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 20 cents per share. The figure was however wider than loss of a penny per share reported in the year-ago quarter.

Revenues of $70.7 million beat the consensus mark by 4%. The figure declined 21.9% year over year due to sales level fluctuations as a result of the COVID-19 impact on customer demand in served markets.

Moreover, new order bookings of $72.0 million were down 24% from the year-ago period.

FARO Technologies, Inc. Price, Consensus and EPS Surprise

FARO Technologies, Inc. Price, Consensus and EPS Surprise

FARO Technologies, Inc. price-consensus-eps-surprise-chart | FARO Technologies, Inc. Quote

Quarter Details

FARO Technologies’ Product revenues (68% of revenues) declined 28% year over year to $48.1 million mainly due to coronavirus-led global lockdown. Services revenues (32%) decreased 4.5% year over year to $22.7 million.

In the reported quarter, non-GAAP gross margin expanded 490 basis points (bps) to 51.5% on a year-over-year basis primarily as a result of the impact of lower sales, resulting from the COVID-19 pandemic.

Research and development (R&D) and sales and marketing (S&M) expenses declined 0.3%, and 34.3% on a year-over-year basis to $10.8 million and $30.2 million, respectively. Moreover, as a percentage of revenues, R&D expenses expanded 330 bps while S&M expenses contracted 800 bps, respectively.

On a non-GAAP basis, total operating expenses declined 24.8% year over to $38.5 million and contracted 210 bps as a percentage of revenues from the year-ago period.

For the third quarter, the company reported non-GAAP loss from operations of $2.04 million against non-GAAP loss from operations of $93K reported in the year-ago quarter.

Adjusted EBITDA was $0.8 million for the third quarter of 2020 compared with adjusted EBITDA of $3.8 million in the year-ago period. Adjusted EBITDA margin contracted 300 bps to 1.3% on a year-over-year basis.

Balance Sheet & Cash Flow

As of Sep 30, 2020, FARO Technologies had cash and short-term investments of $163.6 million compared with $173.7 million reported in the previous quarter while the company remained debt free.

Moreover, cash provided by operating activities was $10.8 million compared with $16.06 million in the previous quarter.

Key Developments in Q3

On Aug 21, the company announced the acquisition of Advanced Technical Solutions in Scandinavia. It is a Swedish-based leader in 3D digital twin solution technology. This acquisition enables FARO with differentiated accuracy and speed, which will accelerate the adoption of digital twin technology.

During the quarter, the company launched FARO Trek, a fully autonomous 3D mobile scanning integration built in collaboration with the Massachusetts-based robotics firm Boston Dynamics. The innovative solution combines cutting-edge scanning speed and accuracy of the FARO Focus Laser Scanner with Spot, a quadruped robot capable of remote and autonomous data capture in challenging environments.

Moreover, FARO Technologies released its first fully integrated indoor mobile mapping solution called Focus Swift. This lightweight and highly portable extension of FARO's renowned Focus Laser Scanner delivers better data faster, enabling AEC industry professionals to balance between accuracy and efficiency.

Zacks Rank & Stocks to Consider

FARO Technologies currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include Q2 Holdings, Inc. (QTWO - Free Report) , Square, Inc. (SQ - Free Report) and Covetrus, Inc. (CVET - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q2 Holdings, Square and Covetrus are set to report quarterly results on Nov 4, Nov 5 and Nov 10, respectively.

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