Strategic Initiative Highlights
- Continue focus on core 3D growth markets; including 3D metrology, architecture, engineering and construction, or AEC, and public safety analytics
- Increase focus on software and solution offerings to create differentiated products that enhance customer value
- Revise go-to-market strategy to leverage industry proven customer intimacy model and improve the efficiency and effectiveness of FARO's sales and marketing engine
- Implement a functional organization structure to simplify processes and materially reduce overhead expenses
- Enable an estimated $40 million in annualized pre-tax cost savings in Q4 2020 when compared to 2019 expense levels
- Target financial model of 55% to 60% non-GAAP gross margin and 40% to 43% non-GAAP operating expenses as a percentage of total sales, yielding approximately 20% adjusted EBITDA margin (1)
"In the fourth quarter, we completed our strategic planning process and have identified opportunities to leverage FARO's strong market position that we expect will drive long-term profit growth," stated Michael Burger, President and Chief Executive Officer. "We believe these strategic initiatives will enable long-term revenue growth from our targeted markets while also simplifying and reducing our cost structure by an estimated $40 million, on an annualized basis, in the fourth quarter of 2020. While the near-term overall market for our products remains soft, due in large part to conditions in the automotive and broader Asian markets, we are excited about our plans to transform FARO's business and generate long-term shareholder value."
(1) These measures are non-GAAP financial measures for which a reconciliation to the most directly comparable GAAP financial measure is not available without unreasonable efforts. See "Forward-Looking Non-GAAP Financial Measures" below.
Fourth Quarter 2019 Financial Summary
Total sales were $104.1 million for fourth quarter 2019, as compared with $112.8 million for fourth quarter 2018. The decrease was a result of continuing market softness in many of the Company's served markets, with particular softness in the automotive and broader Asian markets. Non-GAAP sales, which excludes a $4.8 million reduction for our previously reported GSA matter, were $117.6 million for the fourth quarter 2018. New order bookings were $116.9 million for the fourth quarter 2019, down 4% as compared to $122.2 million for the fourth quarter 2018.
The Company recorded non-cash charges of approximately $49 million in the fourth quarter of 2019 in connection with the implementation of its new strategic plan. The Company expects to incur an additional $26 million to $36 million of restructuring charges in the first half of 2020 related to the restructuring plan approved by the Board of Directors on February 14, 2020. Taken together, the Company expects to incur approximately $75 million to $85 million in total charges related to the implementation of its plans, approximately $18 million to $22 million of which are expected to result in cash payments.
Gross margin, which includes $15.1 million of inventory write-downs, was 41.9% for the fourth quarter 2019, as compared to 55.7% for the same prior year period. Non-GAAP gross margin was 55.7% for the fourth quarter 2019 compared to 57.7% for the fourth quarter 2018.
Net loss was $49.7 million, or $2.85 per share, for the fourth quarter 2019, as compared to net income of $5.8 million, or $0.33 per share, for the fourth quarter 2018. Non-GAAP net income was $3.1 million, or $0.18 per share, for the fourth quarter 2019 compared to $10.8 million, or $0.62 per share, for the fourth quarter 2018.
Adjusted EBITDA was $8.1 million, or 8% of total sales, for the fourth quarter of 2019 compared to Adjusted EBITDA of $17.4 million, or 15% of total sales, for the fourth quarter of 2018.
The Company's cash and short-term investments increased $14.5 million to $158.5 million as of the end of the fourth quarter of 2019, and the Company remained debt-free.
Full Year 2019 Financial Summary
Total sales were $381.8 million for the full year 2019, as compared with $403.6 million for 2018. New order bookings were $418.4 million for 2019, down 2% as compared to $425.3 million for 2018.
Gross margin was 51.9% for 2019, as compared to 54.9% for 2018. Non-GAAP gross margin was 56.5% for 2019 compared to 56.8% for 2018.
Net loss was $62.1 million, or $3.58 per share, for 2019, as compared to net income of $4.9 million, or $0.29 per share, for 2018. Non-GAAP net income was $11.2 million, or $0.65 per share, for 2019 compared to $20.9 million, or $1.20 per share, for 2018.
* A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion at the end of this press release. An additional explanation of these measures is included below under the heading "Non-GAAP Financial Measures".
The Company will host a conference call to discuss these results on Thursday, February 20, 2020 at 8:00 a.m. ET. Interested parties can access the conference call by dialing (877) 876-9173 (U.S.) or +1 (785) 424-1667 (International) and using the passcode FARO. A live webcast will be available in the Investor Relations section of FARO's website at: https://www.faro.com/about-faro/investor-relations/conference-calls/
A replay webcast will be available in the Investor Relations section of the company's web site approximately two hours after the conclusion of the call and will remain available for approximately 30 calendar days.