Executive Summary

Q4 revenue was $93.5M, at the upper end of guidance; non-GAAP EPS was $0.50, at the high end, with GAAP gross margin of 56.7% and non-GAAP gross margin of 57.4% . Adjusted EBITDA reached $16.7M (17.9% margin), the highest quarterly level in over a decade .
Sequential momentum improved: revenue rose ~13% QoQ (to $93.5M from $82.6M), while non-GAAP EPS increased to $0.50 from $0.21; YoY revenue declined 5% amid ongoing softness in APAC (China) and cautious EMEA .
FX headwinds reduced Q4 results (absent FX, revenue +$2M, gross margin +50 bps, non-GAAP EPS +$0.06); management remains cautious on macro/tariff uncertainty .
Q1 2025 guidance: revenue $77–$85M, GAAP GM 54.5–56.0% (non-GAAP 55.0–56.5%), GAAP opex $45–$47M (non-GAAP $38.5–$40.5M), GAAP diluted EPS $(0.36)–$(0.16), non-GAAP EPS $0.10–$0.30 . Catalysts ahead include the Topcon global distribution agreement and an OEM white-label deal expected to launch in Q4 2025 .

What Went Well and What Went Wrong

What Went Well

Material margin expansion and profitability: GAAP GM 56.7% (+580 bps YoY), non-GAAP GM 57.4% (+610 bps YoY), and Adjusted EBITDA margin 17.9% (+580 bps YoY) on improved cost structure and execution; “decade-high adjusted EBITDA margin of 18%” highlighted by CEO .
Operating cash flow strength: Q4 cash from operations of $17.3M marked the fifth straight quarter of positive OCF; cash and ST investments ended at $98.7M .
Product and go-to-market progress: refreshed Focus Premium Max (400m range, Flash Technology) and Quantum X Arm; launched handheld FARO Leap ST and updated CAM2; signed Topcon global distribution agreement to materially expand channel reach . Management: “we’re now updating [aspirational goals]…driven by ongoing optimization” .

What Went Wrong

Top-line still down YoY: Q4 sales fell 5% YoY to $93.5M with hardware -7% YoY; APAC declined over 11% YoY on China weakness; EMEA turning more cautious .
FX headwind emerged late in Q4, pressuring revenue and profitability versus intra-quarter expectations (revenue -$2M, GM -50 bps, non-GAAP EPS -$0.06 versus Q3 FX levels) .
Macro/tariffs uncertainty and customer caution, particularly in construction and select regions (China, Germany; Canada/LatAm noted by management); Q1 guide embeds similar YoY market contraction .

Financial Results

P&L and Cash Flow (Quarterly progression)

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($M)	$82.1	$82.6	$93.5
GAAP Gross Margin %	54.6%	55.7%	56.7%
Non-GAAP Gross Margin %	55.0%	56.1%	57.4%
GAAP Net Income (Loss) ($M)	$(0.5)	$(0.3)	$(1.0)
GAAP Diluted EPS	$(0.03)	$(0.02)	$(0.05)
Non-GAAP Diluted EPS	$0.18	$0.21	$0.50
Adjusted EBITDA ($M)	$8.4	$8.9	$16.7
Adjusted EBITDA Margin %	10.3%	10.7%	17.9%
Cash from Operations ($M)	$4.2	$2.6	$17.3

Notes: FX headwind reduced Q4 revenue by ~$2M, GM by ~50 bps, and non-GAAP EPS by ~$0.06 vs Q3 FX levels .

Q4 YoY comps (selected)

Metric	Q4 2023	Q4 2024
Revenue ($M)	$98.8	$93.5
GAAP Gross Margin %	50.9%	56.7%
Non-GAAP Gross Margin %	51.3%	57.4%
GAAP Diluted EPS	$0.08	$(0.05)
Non-GAAP Diluted EPS	$0.31	$0.50
Adjusted EBITDA ($M)	$11.9	$16.7
Adjusted EBITDA Margin %	12.1%	17.9%

Segment mix (Q4 2024 vs Q4 2023)

Metric	Q4 2023	Q4 2024
Hardware Revenue ($M)	$66.640	$62.297
Software Revenue ($M)	$12.178	$11.588
Service Revenue ($M)	$20.022	$19.650
Total Sales ($M)	$98.840	$93.535
Hardware as % of Sales	67.4%	66.6%
Software as % of Sales	12.3%	12.4%
Service as % of Sales	20.3%	21.0%
Recurring Revenue ($M)	$17.360	$17.077
Recurring Revenue %	17.6%	18.3%

Regional mix (Q4 2024 vs Q4 2023)

Region	Q4 2023 ($M)	Q4 2024 ($M)
Americas	$42.535	$40.563
EMEA	$33.657	$32.922
APAC	$22.648	$20.050

KPIs (Q4 2024 vs Q4 2023)

KPI	Q4 2023	Q4 2024
Free Cash Flow ($M)	$14.748	$12.455
Adjusted Free Cash Flow ($M)	$17.413	$16.219
Cash & ST Investments ($M)	$96.3 (FY23 end)	$98.7 (Q4 end)

Guidance Changes

New Guidance Issued (Q1 2025)

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q1 2025	N/A	$77–$85M	New
GAAP Gross Margin	Q1 2025	N/A	54.5%–56.0%	New
Non-GAAP Gross Margin	Q1 2025	N/A	55.0%–56.5%	New
GAAP Operating Expenses	Q1 2025	N/A	$45.0–$47.0M	New
Non-GAAP Operating Expenses	Q1 2025	N/A	$38.5–$40.5M	New
GAAP Diluted EPS	Q1 2025	N/A	$(0.36)–$(0.16)	New
Non-GAAP Diluted EPS	Q1 2025	N/A	$0.10–$0.30	New

Management added FX-normalized context: at Q3 FX rates, the mid-point would be +$1.7M revenue, +40 bps non-GAAP GM, +$0.02 non-GAAP EPS .

Q4 2024 Guidance (given Nov 6, 2024) vs Actual Outcome

Metric	Q4 2024 Guidance (Nov 6)	Q4 2024 Actual	Result
Revenue	$88–$96M	$93.5M	In-range (upper end)
Non-GAAP GM	56.0%–57.5%	57.4%	At high end
Non-GAAP Opex	$40.5–$42.5M	$39.9M	Better than guided
Non-GAAP Diluted EPS	$0.32–$0.52	$0.50	Near high end

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 and Q3 2024)	Current Period (Q4 2024)	Trend
Margin expansion via localization, logistics, price	Q2: localization/logistics savings, pricing lift; non-GAAP GM 55% . Q3: non-GAAP GM 56.1% (highest since 2019) .	Q4: non-GAAP GM 57.4%; FX headwind masked further upside .	Improving
Regional demand (China/EMEA/Amers)	Q2: APAC softness led by China; EMEA stable; Amers stable . Q3: APAC -17% YoY; EMEA sequentially better; Amers stable .	Q4: APAC down >11% YoY; EMEA increasingly cautious; Amers stable post-election .	Mixed/soft
Construction end-market	Cautious discretionary CapEx; construction sluggish in China/GER .	Continued weakness in commercial construction (China/Germany) .	Unchanged/soft
Product roadmap refresh	Orbis/Sphere XG traction; plan to refresh key lines .	Quantum X Arm, Focus Premium Max refresh; Leap ST launched Jan-25; CAM2 updates .	Accelerating
Partnerships/channels	Strategy outlined; not yet announced .	Topcon global distribution; OEM white-label (launch 4Q25); adds 200+ partners/1,000+ sellers .	Positive
Tariffs/macro caution	Macro choppy; measured guides .	Management cautious; tariffs could be covered by price; diversified manufacturing (Thailand) .	Cautious

Management Commentary

“We are proud to conclude the year with strong momentum…achieving a decade-high adjusted EBITDA margin of 18%…our multi-phase strategy…positions us for sustained market leadership” – Peter Lau, CEO .
“Had exchange rates remained in line with…third quarter, revenue would have been $2 million higher…gross margin…50 bps better and…non-GAAP EPS…$0.06 greater” – CFO .
“We refreshed…Quantum X [Arm]…and…Focus premium laser scanner…[and] launched our new Orbis premium mobile scanner in November” .
“We successfully launched…FARO LEAP ST handheld scanner…enter a new category of handheld scanning…35%–40% of the $800M addressable opportunity expansion” .
“We signed…Topcon [global] distribution…to make FARO…solutions more widely accessible…add over 200 new channel partners and 1,000+ sellers in 2025” .

Q&A Highlights

Channel strategy: Topcon agreement expected to reach “8 figures…at its full ramp”; management will scale pragmatically; OEM white-label targeted for 4Q25 launch .
Tariffs/manufacturing footprint: Products manufactured with partner in Thailand; flexibility to relocate production; early view is absolute tariff impact manageable and may be covered with price .
Pricing: List prices increased Jan-25 (also raised Jan-24); early 2025 realization “no significant pushback”; discounting flexibility remains .
New product traction: Early LEAP ST KPIs (pipeline, demos, orders) “ahead of initial expectations” .
Macro tone: Q1 demand environment similar to Q4; measured guide reflects continued softness and FX/tariff uncertainty .

Estimates Context

Wall Street consensus (S&P Global) for FARO was unavailable via our data connector at this time; therefore, we are not presenting beat/miss versus S&P Global consensus for Q4 2024 or the prior two quarters. We instead benchmarked against company-issued guidance, where applicable .

Key Takeaways for Investors

FARO continues to execute an operational turnaround: Q4 non-GAAP GM 57.4% and Adjusted EBITDA margin 17.9% demonstrate structural margin improvement and operating leverage .
Sequential revenue and earnings acceleration into Q4 (despite FX), with OCF strength, provide a solid base heading into 2025 .
Near-term top-line risk persists (APAC softness, construction caution, tariffs), and Q1 guide embeds ongoing market contraction; FX remains a swing factor .
Product cycle and channel expansion are potential 2025+ growth drivers: Focus/Quantum refresh, Leap ST handheld entry, CAM2 update, Topcon distribution, and OEM white-label ramp (4Q25) .
Mix shift toward software/recurring and pricing discipline support margin durability; non-GAAP opex execution below targeted range underscores cost control .
Watch for: cadence of Topcon sell-through, Leap ST order momentum, China stabilization, and confirmation of OEM partner details/timing; these are likely stock catalysts alongside sustained margin/FCF delivery .

FARO TECHNOLOGIES INC (FARO)·Q4 2024 Earnings Summary