FARO’s first quarter results were notably well received, as the company delivered non-GAAP profitability and margins ahead of Wall Street expectations despite a modest revenue decline. Management credited this outperformance to ongoing operational improvement initiatives and early returns from refreshed product lines and strategic partnerships. CEO Peter Lau pointed to higher gross margins, disciplined cost control, and strong customer uptake for newly launched scanning and metrology solutions as key contributors to the quarter. Notably, FARO built backlog and generated positive operating cash flow, which marked a continuation of recent trends.
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FARO (FARO) Q1 CY2025 Highlights:
- Revenue: $82.86 million vs analyst estimates of $80.25 million (1.6% year-on-year decline, 3.3% beat)
- Adjusted EPS: $0.33 vs analyst estimates of $0.16 (significant beat)
- Adjusted EBITDA: $12.47 million vs analyst estimates of $7.78 million (15% margin, 60.2% beat)
- Revenue Guidance for Q2 CY2025 is $83 million at the midpoint, roughly in line with what analysts were expecting
- Adjusted EPS guidance for Q2 CY2025 is $0.30 at the midpoint, above analyst estimates of $0.20
- Operating Margin: 4.7%, up from -6.3% in the same quarter last year
- Market Capitalization: $844.5 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions FARO’s Q1 Earnings Call
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Jim Ricchiuti (Needham & Company) asked about the outlook for hardware revenue in Q2 and whether historical end-of-quarter bookings patterns were repeating. CEO Peter Lau explained that while hardware softness was assumed in guidance, early Q2 trends did not yet reflect a 10% decline, and that the company remains cautious but prepared for volatility.
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Jim Ricchiuti (Needham & Company) inquired about the immediate and longer-term impact of new product launches on revenue. Lau clarified that Leap ST and Blink are expected to have greater influence in Q2 and beyond, as sales enablement and customer adoption scale up following their recent launches.
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Greg Palm (Craig-Hallum Capital Group) asked for detail on how macro uncertainty and tariffs are affecting demand by end market and geography. Lau responded that while general manufacturing and aerospace remain stable, automotive and associated supply chains are showing more cautious purchasing behavior, especially in North America.
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Greg Palm (Craig-Hallum Capital Group) followed up on backlog and order timing, asking whether the company intentionally built backlog for later quarters. Lau said backlog growth in Q1 was a function of late orders and not a strategic decision, but it does provide some buffer if demand worsens.
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Greg Palm (Craig-Hallum Capital Group) questioned whether uncertainty could delay partnerships or product launches. Lau indicated that, if anything, challenging conditions may accelerate partner-driven product introductions as both FARO and its partners seek new growth avenues.
Catalysts in Upcoming Quarters
In the quarters ahead, our analyst team will monitor (1) the pace of adoption and revenue contribution from Leap ST and Blink, (2) the scale-up and success of recently established global partnerships, and (3) the company’s ability to mitigate tariff-related cost headwinds through pricing actions and potential supply chain adjustments. Execution on expanding software and service revenues will also be a key indicator of resilience.
FARO currently trades at $43.69, up from $26.40 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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