FARO TECHNOLOGIES INC Managements Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) | MarketScreener
Summary
Important factors that could cause actual results to differ materially from those contemplated in such forward-looking statements include, among others, the following: •an economic downturn or other adverse changes in the industries that we serve or the domestic and international economies in the regions of the world where we operate and other general economic, business, and financial conditions; •the effects of the ongoing COVID-19 pandemic, including on our business operations, as well as its impact on general economic and financial market conditions; •the effects of shipping and other supply chain disruptions caused by the ongoing COVID-19 pandemic and its impact on our ability to deliver our products to customers; •our inability to realize the intended benefits of reorganizing our business functions to improve the efficiency of our sales organization and to improve operational effectiveness; •our inability to realize the intended benefits of our undertaking to transition to a subscription-based business model to deliver new and existing software offerings on a cloud-computing-based platform, including but not limited to impairment charges of capitalized expenditures related to the development of Sphere, our cloud-computing-based platform, and our inability to realize the expected benefits; •our inability to successfully execute our strategic plan, Integration Plan (defined below) and Restructuring Plan (defined below), including but not limited to additional impairment charges including existing leasehold improvements and/or higher than expected severance costs and exit costs, and our inability to realize the expected benefits of such plans; •our inability to realize the anticipated benefits of our partnership with Sanmina (defined below); •our inability to reasonably source essential equipment and materials to manufacture our products as a result of global supply shortages; •the effect of inflationary pressures, rising interest rates, and instability in the banking sector, and its impact on our business operations; •our inability to successfully realize changes to the pricing of our products and services; •our inability to achieve and maintain profitability to fully realize the economic benefit of recorded deferred tax assets; •our inability to further penetrate our customer base and target markets; Table of Contents •development by others of new or improved products, processes or technologies that make our products less competitive or obsolete; •our inability to maintain what we believe to be our technological advantage by developing new products and enhancing our existing products; •risks associated with expanding international operations, such as difficulties in staffing and managing foreign operations, increased political and economic instability, compliance with potentially evolving import and export regulations, and the burdens and potential exposure of complying with a wide variety of and foreign laws and labor practices; •changes in trade regulation, which result in rising prices of imported steel, steel byproducts, aluminum and aluminum byproducts and various other raw materials that we use in the production of measurement devices, and our ability to pass those costs on to our customers or require our suppliers to absorb such costs; •changes in foreign regulation which may result in rising prices of our measurement devices sold as exports to our international customers, our customers willingness to absorb incremental import tariffs, and the corresponding impact on our profitability; •our inability to successfully identify and acquire target companies and achieve expected benefits from, and effectively integrate, acquisitions that are consummated, including the operations from , -based and its subsidiaries (collectively, "GeoSLAM") and US-based , and the intellectual property acquired; •our inability to realize the intended benefits of the technology, products, operations, contracts, and personnel of our acquisitions; •the cyclical nature of the industries of our customers and material adverse changes in our customers access to liquidity and capital; •changes in the potential for the computer-aided measurement market and the potential adoption rate for our products, which are difficult to quantify and predict; •our inability to protect our patents and other proprietary rights in and foreign countries; •our inability to defend against a cyberattack, security or other data breach of our systems may compromise the confidentiality, integrity, or availability of our internal data and the availability of our products and websites designed to support our customers or their data; •our inability to adequately maintain effective internal controls over financial reporting; •fluctuations in our annual and quarterly operating results and the inability to achieve our financial operating targets as a result of a number of factors including, without limitation (i) litigation and regulatory action brought against us, (ii) quality issues with our products, (iii) excess or obsolete inventory, shrinkage or other inventory losses due to product obsolescence, change in demand for our products, scrap or material price changes, (iv) raw material price fluctuations and other inflationary pressures, (v) expansion of our manufacturing capability, (vi) the size and timing of customer orders, (vii) the amount of time that it takes to fulfill orders and ship our products, (viii) the length of our sales cycle to new customers and the time and expense incurred in further penetrating our existing customer base, (ix) manufacturing inefficiencies associated with new product introductions, (x) costs associated with new product introductions, such as product development, marketing, assembly line start-up costs and low introductory period production volumes, (xi) the timing and market acceptance of new products and product enhancements, (xii) customer order deferrals in anticipation of new products and product enhancements, (xiii) the inability of our sales and marketing programs to achieve their sales targets, (xiv) start-up costs associated with opening new sales offices outside of , (xv) fluctuations in revenue without proportionate adjustments in fixed costs, (xvi) inefficiencies in the management of our inventories and fixed assets, (xvii) compliance with government regulations including health, safety, and environmental matters, and (xviii) costs associated with the training and ramp-up time for new sales people; •changes in gross margins due to a changing mix of products sold and the different gross margins on different products and sales channels; •changes in applicable laws, rules or regulations, or their interpretation or enforcement, or the enactment of new laws, rules or regulations that apply to our business operations or require us to incur significant expenses for compliance; •our inability to successfully comply with the requirements of the Restriction of Hazardous Substances Directive and the Waste Electrical and Electronic Equipment Directive in the ; •the inability of our products to displace traditional measurement devices and attain broad market acceptance; •the loss or change of any of our executive officers or other key personnel, which may be impacted by factors such as our inability to competitively address inflationary pressures on employee compensation and flexibility in employee work arrangements; •difficulties in recruiting research and development engineers, application engineers, or other key personnel; •the failure to effectively manage the effects of any future growth; •the impact of reductions or projected reductions in government spending, or uncertainty regarding future levels of government expenditures, particularly in the defense sector; •variations in our effective income tax rate, which makes it difficult to predict our effective income tax rate on a quarterly and annual basis, and the impact of the Tax Cuts and Jobs Act of 2017 on the global intangible low-taxed income of foreign subsidiaries; •the loss of key suppliers and the inability to find sufficient alternative suppliers in a reasonable period of time or on commercially reasonable terms; •the impact of fluctuations in exchange rates on non- dollar-denominated revenues and expenses; •the effect of estimates and assumptions with respect to critical accounting policies and the impact of the adoption of recently issued accounting pronouncements; •the effect of changes in political conditions in the and other countries in which we operate, including the effect of changes in trade policies or the withdrawal from the , on general market conditions, global trade policies and currency exchange rates; •the magnitude of increased warranty costs from new product introductions and enhancements to existing products; •the sufficiency of our plants and third-party resources to meet manufacturing requirements; •the sufficiency of our working capital and cash flows from operations to fund our short- and long-term liquidity requirements; •the impact of geographic changes in the manufacturing or sales of our products on our effective income tax rate; •our ability to comply with the requirements for favorable tax rates in foreign jurisdictions; and •other risks and uncertainties discussed in Part I, Item 1A. The Company, in collaboration with third party lessors and architectural resources, intends to conduct studies over the feasibility of abandoning or demising leased floor space against our current needs. Our current needs continue to include access to existing spaces previously constructed to closely monitor temperature and vibration for our service and research and development teams. The FARO Sphere environment could be adopted globally across a wide range of markets, including construction management, facilities, operations and maintenance, robotic simulation and incident preplanning. On , we acquired SiteScape, an innovator in light detecting and ranging ("LiDAR") 3D scanning software solutions for the architecture, engineering and construction ("AEC") and operations and maintenance ("O&M") markets.