FARO Technologies, Inc.

Good afternoon, everyone, and welcome to the Ferro Technologies first quarter 2022 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, and good afternoon. With me today from Ferro are Michael Berger, Chief Executive Officer, and Alan Mewich, Chief Financial Officer. Today, after market close, the company released its financial results for the first quarter of 2022. The related press release and Form 10-Q are available on FARO's website at www.faro.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 FCC filings. Forward-looking statements reflect our views only as of today and, except 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 Berger.

Thank you, Mike. Welcome to our call. While broad-based demand across our served markets remained healthy in the first quarter, several headwinds impacted our performance, driving the results below our expectations. As many of you are aware, at the end of the first quarter, the Chinese government mandated a COVID lockdown throughout the Shanghai area. Shanghai is Faroe's lone logistics hub for all Chinese shipments. As a result, the lockdown prevented the shipment of booked orders at the end of March. This lockdown, which was originally planned to last one week, remains in effect today and continues to challenge both our own logistics operations as well as those of our Chinese customers. Ultimately, these disruptions could potentially last into the second half of 2022 or beyond. Our logistics operations teams are continuing to work on short-term plans to mitigate this situation. Beyond this specific challenge, in the first quarter, supply chain constraints and component shortages continued to impact our overall material availability, limiting the amount of inventory of certain goods we had available to ship. Our supply chain team continued to work hard to mitigate disruptions. However, at this point, we expect these challenges to continue to impact second quarter shipments. Lastly, in the first quarter, we experienced softer than expected demand for our previous generation laser scanner, particularly in the European AEC market, brought on by anticipation of our launch of a new laser scanner. Despite our overall disappointment with our first quarter revenue and profit performance, we remain excited about the continued progress toward our long-term strategic goals. Our manufacturing outsource initiative with Sanmina remains on track, as we have now moved manufacturing of both our scan arm and laser tracker product lines to Sanmina's Thailand facility. All future shipments of these two product lines will now be sourced from Sanmina and shipped through our existing logistics center. We have stopped manufacturing activities in both of our U.S. sites as of the end of Q1. We expect to complete this transition of the remaining laser scanner product line by the end of this current quarter. We continue to believe in the long-term financial and operational benefits of this transition that we've previously outlined, including the realization of a $12 million in annualized savings. However, the timing of these savings continues to be pushed out as our teams wrestle with both cost increases and supply limitations. Earlier this month, we launched our new three-dimensional digital reality capturing collaboration platform, which includes our next-generation Ferro Focus Premium Laser Scanner, our mobile Ferro Stream app, as well as Ferro Sphere. Sphere is a cloud-based environment which enables full 3D model creation, storage, and collaboration, and will be the platform for all future Ferro workflow and software applications, including HoloBuilder. While each of these offerings take an individually increased customer value, the combination of all three can decrease customer scanning and processing time by over 50%, effectively doubling productivity. Also, the interplay between new stream apps functionality and our new laser scanner has enabled several enhancements, including remote scanner control, real-time on-site scan validation and preregistration, as well as remote software upgrade capabilities. It is these types of step function performance changes in which we are keenly focused on delivering in the years ahead. While as early days, feedback from both our beta and early post-launch customers has been overwhelmingly positive. With the launch of our new focus premium scanner, combined with the recently launched quantum max scan arm, We have now refreshed 75% of our high volume hardware product lines with products that have resulted from our maniacal focus on voice of the customer. We believe the differentiation of these products will continue to push Ferro to the forefront and the industry to new levels of productivity. In addition to these exciting new offerings, we continue to see strong demand for a hollow builder application and its construction progress management workflow. HoloBuilder's unique 360-degree photo-based technology, coupled with the software-as-a-service business model, continues to have wide-ranging applications. The HoloBuilder application and its associated workflows will be integrated into our Sphere platform by the end of this calendar year. We continue to believe there is a large untapped market potential for Barrow's technology that leverages our high-accuracy fixed laser scanning expertise along with HoloBuilder's easy-to-use photo-based solutions, coupled ultimately to our mobile scanning solution. With the launch of Ferro Sphere, which centralizes the collection and management of 3D data projects, we are now bringing these capabilities together to provide a one-stop user experience across Ferro's application software, workflow insights, and customer support tools. The market potential for digitizing the physical world is enormous, and we're excited that our technology and expertise positions us well over the long term. We remain focused and committed to our strategic transition toward developing differentiated solutions and insights to a deeper understanding of our customers' workflows, while at the same time adjusting our operating structure to generate leverage. While the ongoing uncertainties in the market, including the lingering effects of COVID, as well as the current geopolitical tensions, create risks to our near-term results, the long-term opportunity for FARO remains stronger than ever. With that, I will turn the call over to Alan for an overview of our first quarter financial results.