FARO Announces Second Quarter Financial Results

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NET (LOSS) INCOME TO EBITDA AND ADJUSTED EBITDA
(UNAUDITED)

 
 

Three Months Ended June 30,

 

Six Months Ended June 30,

(in thousands)

2020

 

2019

 

2020

 

2019

Net loss

$

(8,932)

   

$

(6,405)

   

$

(23,755)

   

$

(6,253)

 

Interest expense, net

212

   

240

   

246

   

96

 

Income tax benefit

(3,359)

   

(417)

   

(5,597)

   

(262)

 

Depreciation and amortization

3,520

   

4,573

   

7,279

   

9,322

 

EBITDA

(8,559)

   

(2,009)

   

(21,827)

   

2,903

 

Loss on foreign currency transactions

117

   

154

   

590

   

349

 

Stock-based compensation

2,169

   

2,752

   

4,345

   

5,316

 

GSA sales adjustment (1)

608

   

5,805

   

608

   

5,840

 

Advisory fees for GSA Matter (2)

   

653

   

   

1,244

 

Executive sign-on bonuses & relocation costs

   

575

   

   

575

 

Present4D impairment (3)

   

1,535

   

   

1,535

 

Restructuring costs (4)

636

   

   

14,324

   

 

Adjusted EBITDA

$

(5,029)

   

$

9,465

   

$

(1,960)

   

$

17,762

 

Adjusted EBITDA margin (5)

(8.2)

%

 

9.5

%

 

(1.4)

%

 

9.2

%

   

(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 fourth quarter 2018, we reduced
our total sales by an estimated cumulative adjustment of $4.8 million. We also retained outside legal counsel and
forensic accountants to conduct a comprehensive review of our pricing and other practices under the Contracts
(the "Review"). During the six months ended June 30, 2020 and June 30, 2019, we reduced our total sales by
$0.6 million and $5.8 million, respectively, (the "GSA sales adjustment") and recorded imputed interest expense
of $0.2 million and $0.5 million, respectively, related to the GSA Matter.

(2)

In connection with the GSA Matter, we retained outside legal counsel and forensic accountants to conduct the Review,
which resulted in $1.2 million in advisory fees incurred during the six months ended June 30, 2019.

(3) 

On April 27, 2018, we invested $1.8 million in present4D GmbH ("present4D"), a software solutions provider for
professional virtual reality presentations and training environments, in the form of an equity capital contribution.
During the second quarter of 2019, we determined it is more likely than not that we will not recover our cost basis
in present4D and recorded an impairment charge of $1.5 million, which is included in Other expense, net.

(4)

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, we recorded a pre-tax charge of approximately $14.3 million
during the first half of 2020 primarily consisting of severance and related benefits.

(5)  

Calculated as Adjusted EBITDA as a percentage of Non-GAAP total sales, which adjusts for the GSA sales adjustment.


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