FARO Announces Fourth Quarter Financial Results and Strategic Initiatives

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA

(UNAUDITED)



Three Months Ended

(in thousands)

March 31,
2018


June 30,
2018


September 30,
2018


December 31,
2018

Net income (loss)

$

455



$

1,205



$

(2,488)



$

5,758


Interest (income) expense, net

(73)



(87)



(96)



313


Income tax expense (benefit)

127



300



(354)



(445)


Depreciation and amortization

4,343



4,377



4,747



4,846


EBITDA

4,852



5,795



1,809



10,472


Loss on foreign currency transactions

184



509



226



220


Stock-based compensation

1,551



2,000



2,166



1,904


GSA sales adjustment (1)







4,789


Inventory reserve charge (2)





4,734




Adjusted EBITDA

$

6,587



$

8,304



$

8,935



$

17,385


Adjusted EBITDA margin (3)

7.1

%


8.5

%


9.0

%


14.8

%













(1)

Late in the fourth quarter of 2018, during an internal review we preliminarily determined that certain of our pricing practices may have resulted in the U.S. Government being overcharged under our General Services Administration ("GSA") Federal Supply Schedule contracts (the "Contracts") (the "GSA Matter"). In fourth quarter 2018, we reduced our total sales by an estimated cumulative adjustment of $4.8 million and recorded imputed interest expense of $0.5 million related to the GSA Matter.



(2)

During the third quarter of 2018, we performed an analysis of our inventory reserves in connection with our new product introductions and acquisitions and recorded a charge of $4.7 million, increasing our reserve for excess and obsolete inventory, based on the determination that quantities on-hand for certain legacy products exceeded our revised sales projections.



(3)

Calculated as Adjusted EBITDA as a percentage of Non-GAAP total sales, which adjusts for the GSA sales adjustment.


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