FARO Technologies, Inc.

Stand by, your program is about to begin. Should you need audio assistance during today's program, please press star zero. Good day, everyone, and welcome to the FIRO Technologies fourth quarter and year end 2023 earnings call. For opening remarks and introductions, I would now turn the call over to Mike Finari at Sapphire Investor Relations. Please go ahead.

Thank you, and good morning. With me today from Farrow are Peter Lau, President and Chief Executive Officer, and Matt Horwath, Chief Financial Officer. Yesterday after market close, the company released its financial results for the fourth quarter and full year of 2023. The related press release in Form 10-K is 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, some of which are beyond our control, and include statements regarding future business results, product and technology development, customer demand, inventory levels, our outlook and financial guidance, economic and industry projections, or subsequent events. Various factors could cause actual results to differ materially. For a more detailed description of these and other risks and uncertainties, please refer to yesterday's press release and 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'll 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 an isolation or a substitute for a measure of financial performance prepared in accordance with GAAP. Now, I'd like to turn the call over to Peter Lau.

Thank you, Mike. Good morning and welcome everyone to our call. In the fourth quarter, our focus on execution across all aspects of our operations continue to drive meaningful results. Whether it be refining our product development process and roadmap, enhancing customer experiences, or streamlining our internal processes, we remain committed to delivering on our three core tenets. First, to grow revenue faster than the markets we serve. Second, to grow earnings at a faster rate than revenue. And third, to grow cash at a faster rate than earnings. We not only met but exceeded our targets in the fourth quarter, delivering $98.8 million in revenue, which was towards the high end of our guidance range. We delivered $0.36 of non-GAAP EPS, which was above the high end of our guidance range, $13.2 million of adjusted EBITDA, a 12% year-over-year increase, and $14.7 million of free cash flow. From a top line perspective, the better than expected performance resulted from strong execution by our sales teams in the Americas and Europe. including a $3 million order with a channel partner in Romania to outfit the Romanian police force with Faro's public safety solutions. This deal is the largest public safety order in Faro's history and demonstrates the value of our unique solutions. As expected, the industrial and construction markets in China remained especially weak, creating a headwind to year-over-year revenue growth. Operationally, we saw a notable sequential improvement in gross margin in the fourth quarter, which we attribute to several factors. First, due to seasonality and the strong year-end demand environment, we benefited from fixed cost absorption. Second, as we have discussed on prior calls, the purchase price variance headwind we have incurred since the beginning of 2023 continued to abate in the fourth quarter, and we have taken a number of steps to ensure PPV remains at nominal levels going forward. Lastly, our supply chain efforts within Southeast Asia continue to progress as planned. Taken together, our non-GAAP gross margin improved 360 basis points sequentially to 52.5%. This is very encouraging progress towards our stated objective of expanding gross margins. As I mentioned earlier, from a cash flow perspective, we generated $14.7 million in free cash flow in the fourth quarter, delivering on our commitment to achieve positive cash flow in the second half of 2023. This was achieved by significantly improving our operating performance and driving efficiency in working capital. Although I am pleased with the progress we've made in the last two quarters, it is still clear to me that we are in the early stages of improving execution and results. Our team understands there's still much to accomplish and is dedicated to executing on the plan ahead. The adjustments made to our cost structure, as evidenced by our fourth quarter expense base, and increased gross margin, as well as working capital performance, indicate the strides we've taken in refining our operational framework. Moving forward, we will remain committed to operational excellence, being diligent in controlling expenses with an emphasis on expanding gross margins while making targeted investments in new products and technologies. On the product front, following October's launch of our new FARO Orbis Mobile Scanner, I am very pleased to report that customer feedback thus far has been extremely positive. While still early in the launch cycle, initial interest has been robust, and we are extremely excited about the future prospects of this product. With our new mobile scanner gaining global adoption, we believe the hardware success we have seen thus far from our new products validates our customer-driven approach to product definition. Expanding our footprint of data acquisition devices expands our future opportunity to monetize that installed base through software that allows customers to store, analyze, and collaborate in the cloud. In addition, in December, we launched Ferro Zone 2024, expanding upon our strong position in the public safety market. Zone 2024 empowers investigators, forensic analysts, and law enforcement agencies to enhance their capabilities in documenting, analyzing, and presenting evidence. Key highlights of the new PHARO Zone product include the conversion of photos and videos to 3D visuals, ortho image creation, and collision prediction systems. These advancements reflect the fusion of Ferro's legacy technologies with those of our recent acquisitions, GeoSlam and HoloBuilder, and further demonstrates our commitment to innovation. We look forward to discussing more new product launches in the quarters to come. Reflecting on the progress we've achieved thus far, none of it would have been possible without the skill and devotion of all of our teammates that work together every day at Ferro. The team's steadfast commitment to our organization was clearly evident in this past year. Despite macro challenges and uncertainties, their dedication to driving results and outcomes is truly commendable. To further support this momentum, we've recently added three new members to our leadership team. including our new chief financial officer, Matt Horwath, chief digital officer, Roger Isern, and software solutions leader, Shelley Gretlein. Overall, I'm proud to say our global organization remains highly motivated by a common goal, namely to continue our market leadership by prioritizing both customers and shareholders alike. As we look ahead, Farrow's brand holds a strong position in the market, reflecting the trust of customers and our reputation for 3D application expertise and innovation. We intend to capitalize on this market position by focusing on where we add value. We will maintain our leading edge product performance and will leverage our channels to market to solve more of our existing customers' existing challenges. Customer feedback thus far supports our product solution strategy, laying a solid foundation for further improvement. Operationally, to help profitably capture these opportunities, we're utilizing an 80-20 philosophy, prioritizing activities that maximize shareholder value and profitability, irrespective of market conditions. Our ongoing organizational initiatives ensure alignment among our 1,200 employees, fostering a focus and a rigor to drive performance enhancements. As we assess the market opportunity ahead, we believe there is significant value in leveraging 3D capture and virtual management tools to reduce waste and inefficiencies in managing physical assets across the globe. While our growth potential is vast, converting it to demand requires a focused product roadmap and go-to-market strategy, targeting high-probability success areas where we feel we have a right to play and a right to win. To further expand on our strategy, which I've highlighted over the last two quarters, the company will be hosting an investor event in New York City on March 11, 2024. Myself, as well as several members of the senior executive team, will discuss our key priorities, target markets, targeted financial model, and long-term goals, as well as conduct product demonstrations. We look forward to seeing many of you in person. With that, I'll now turn the call over to Matt to provide an overview of our fourth quarter financial results.