FARO Technologies, Inc.

Stand by, your program is about to begin. Good afternoon, everyone, and welcome to the Faro Technologies fourth quarter 2021 earnings call. For opening remarks and introductions, I will now turn the call over to Michael Finari at Sapphire Investor Relations. Please go ahead.

Thank you. Good afternoon. With me today from Farrow are Michael Berger, Chief Executive Officer, and Alan Muhic, Chief Financial Officer. Today, after market close, the company released its financial results for the fourth quarter and full year of 2021. The related press release and Form 10-K are available on Farrow's website at www.farrow.com. Please note certain statements in this conference call, which are not historical facts, may be considered forward-looking statements that involve risks and uncertainties and include statements regarding future business results, product and technology development, customer demand, inventory levels, economic and industry projections, or subsequent events. Various factors could cause actual results to differ materially. Some of these factors have been set forth in today's press release and are described at length in our annual and quarterly SEC filings. Forward-looking statements reflect our views only as of today, and if accepted as required by law, we undertake no obligation to update or revise them. During today's conference call, management will discuss certain financial measures that are not presented in accordance with U.S. generally accepted accounting principles or non-GAAP financial measures. In the press release, you will find additional disclosures regarding these non-GAAP measures, including reconciliations to comparable GAAP measures. While not recognized under GAAP, management believes these non-GAAP financial measures provide investors with relevant period-to-period comparisons of core operations. However, they should not be considered in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP. Now, I'd like to turn the call over to Michael.

Thank you, Mike. Good afternoon. Welcome to our call. Our fourth quarter demand continued to improve throughout the quarter, which enabled reported revenue to grow 27% sequentially and 8% year-over-year to approximately $100 million, despite a strong dollar exchange rate and supply chain challenges, which muted our overall revenue level for the quarter. We remain encouraged by our demand recovery, the strong market acceptance of our next-generation quantum max scan arm, and the traction we're seeing in our hollow builder software application targeted at construction and facilities management. In addition, in the fourth quarter, we're pleased to have demonstrated the operating leverage that's been built into our business over the last two years. A reported 14% fourth quarter EBITDA margin is nearly twice our historical profitability on similar revenue levels. We expect to see additional profit upside as demand continues to recover And we approach our stated success model of 20% EBITDA margin on roughly $110 million of quarterly revenue. Since our launch in July of 2021, we have continued to receive extremely positive customer feedback and wide acceptance of our new quantum max scan arm across nearly every geography. As a result, fourth quarter volumes increased 43% sequentially as customers realized greater value from the speed, accuracy, and versatility of the Quantum Max, which dramatically increases their productivity in metrology-grade scanning applications. We are seeing signs of accelerated legacy tool replacement, as well as customers' new deferral embracing our differentiated solution. We view this as a positive indicator and validates our strategy of early customer engagement to better understand their needs, leading to differentiated solutions that generate higher customer value and additional product demand. Also in the fourth quarter, we continue to see strong demand for our photogrammetry-based solution, which we acquired through the HoloBuilder acquisition in June of 2021. HoloBuilder's unique workflow, which combines hardware-agnostic image capture, artificial intelligence-based task automation, along with an easy-to-use time-phased image viewer delivered via a SaaS business model, has a wide-ranging application across a broad set of markets. We are initially focusing on construction and facilities management markets, but expect to broaden our focus as capabilities in this area continue to expand and mature. We continue to believe there is a large, untapped market potential for PREROS technology that combines our long-held, high-accuracy laser scanning expertise, along with HoloBuilder's easy-to-use photogrammetry-based solution. Bringing these capabilities together into the Ferro Sphere, our soon-to-be-released cloud-based platform, is an area where we are placing increased levels of focus and investment, as we believe together with our other software applications form the tip of the spear for Ferro's broad digital reality offering into the metaverse. The market potential for digitizing the physical world is enormous, and we're excited our technology and expertise position us well over the long term. Illustrating the potential for this solution, in the fourth quarter, we signed a mid-six-figure annual recurring revenue deal with one of the world's largest retailers, who is deploying HoloBuilder across all U.S. stores as a part of a new space management initiative. As a frame of reference, the single recurring revenue deal with a three-year term is Sparrow's largest single transaction in the last three-plus years. Even more exciting is the magnitude of the potential applications we are just beginning to explore. Last quarter, we indicated our first set of capabilities with Ferrosphere had begun customer beta testing. Those tests continue to go well, and we expect to have formal product announcement in the second quarter of 2022. We believe our strategic transition to developing differentiated solutions through a deeper understanding of our customers' workflows, while at the same time adjusting our operating structure to generate leverage, is paying off. We are encouraged by the underlying market demand for our products, and while we expect to experience typical seasonal softness in the first quarter, we believe the combination of new product introductions and the launch of Ferrosphere will strengthen demand as we move through 2022. Before Alan provides an overview of our fourth quarter financials, let me provide a brief update on our manufacturing outsource initiative with our partner, Sanmina. Our two teams have been working exceptionally well together, and the foundation is set for the manufacturing transition to be complete by the end of the first half of 2022. We continue to believe in the long-term financial and operational benefits we previously outlined and expect to realize $12 million in annualized savings primarily from supply chain changes. That said, today's unprecedented supply chain environment has resulted in short-term material cost headwinds and delayed long-term savings. With that, I'll turn the call over to Alan for an overview of our fourth quarter financial results.