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Faro Technologies Inc (NASDAQ:FARO)
Q2 2021 Earnings Call
Jul 29, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to today's FARO Technologies Second Quarter 2021 Earnings Call. For opening remarks and introductions, I will now turn the call over to Michael Funari at Sapphire Investor Relations. Please go ahead.

Michael Funari -- Corporate

Thank you and good morning. With me today from FARO are Michael Burger, Chief Executive Officer; and Allen Muhich, Chief Financial Officer. Yesterday, after the market close, the company released its financial results for the second quarter of 2021. The related press release and Form 10-Q for the second quarter are available on FARO's website at www.faro.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 and include statements regarding future business results, product and technology development, customer demand, inventory levels, economic and industry projections or subsequent events. Various factors could cause actual results to differ materially. Some of these factors have been set forth in yesterday's press release and are described at length in our annual and quarterly SEC 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 will 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 in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP.

Now, I'd like to turn the call over to Michael.

Michael D. Burger -- Corporate

Thank you, Mike. Good morning. Welcome to our call.

Demand for our products in the second quarter reflected a return to a seasonal growth following the typically soft first quarter. On a geographic basis, the Asia-Pacific market and in particular China performed well, while U.S. and Europe markets continue to recover, albeit at a slower pace. With the second-quarter improvement across our served markets, we continue to believe the demand environment will improve throughout 2021 as our customers activities normalize. Taken together with our ongoing flow of new product introductions, we believe year-end demand levels will be similar to those experienced in the fourth quarter of 2019. That said, we remain cautious, as market uncertainties, such as the continuing softness in commercial construction starts, the prioritization of capacity expansion over quality control initiatives and the ongoing steps local governments take to combat the pandemic may adversely impact the ultimate slope and the timing of our recovery.

We remain focused on laying the foundation for expanding the breadth and depth of our product offerings while streamlining our operations to continue to capture the long-term opportunities ahead. As discussed in our prior calls, FARO is in the process of transitioning to a marketing led organization, focus on understanding our customers' problems and delivering hardware and software solutions to meet their needs. As an example of these efforts -- An example of this effort could be found in our recently announced Quantum Max ScanArm Solution. Quantum Max was conceived by identifying our customers' need for both speed and accuracy. As a result, we have developed an advanced portable measurement solution, which features three purpose-built hot-swappable laser line probes, each of which offer distinct advantages for specific use cases.

The xR Probe provides 30% better accuracy and resolution for high-precision measurement tasks. The xS increases scanning speeds by over 65% and the versatile xP offers a balance of the xR's resolution and the xS's speed. Unlike prior physical arm solutions, the Quantum Max allows customers to swap laser heads on the plot, creating a versatile tool which meets a wide spectrum of speed, accuracy and resolution needs in a single solution. This unique solution results in the productivity and value increase of over 30% compared to prior generation devices.

Another critical component the ScanArm solution was the launch of our latest version of CAM2, a Metrology Software, which greatly improves scanning with our new laser probes. Through the combination of our new ARM probes and the latest software, we believe we've set a new standard in the industry from Metrology Grade Measurement Solutions. While we continue to introduce new solutions throughout the year, it's worth highlighting that between launching a workflow solution and generating meaningful revenue takes time. That said, we are very encouraged by our recent customer feedback.

In addition to our internal product development roadmaps, we continue to expand the breadth of our offerings through acquisitions. Building off last year's ATS acquisition, which focused on high-precision digital twin applications. In the second quarter, we expanded our capabilities with the acquisition of HoloBuilder, a leading photogrammetry-based 3D platform, which delivers hardware agnostic image capture, registration and viewing. With an initial focus on construction management, HoloBuilder's platform provides general contractors a solution to efficiently capture and virtually manage construction progress using off the shelf panoramic cameras. HoloBuilder's SaaS platform adds a fast and easy reality-capture photo documentation and remote access capability to FARO's highly accurate 3D point cloud-based laser scanning to create the industry's first end-to-end Digital Twin solution.

The combined solution will provide a comprehensive scanning and image management capabilities for the Digital Twin market aimed at robotic assembly simulation, construction management, facilities operations and management, and incident pre-planning in the public safety market. Ultimately, these Digital Twin capabilities will be brought into our soon to be announced cloud-based solution, which we call FARO Sphere, with this underlying subscription model representing FARO's future long-term software go to market.

Shifting to operations, two weeks ago, we announced the signing of an agreement to outsource our manufacturing to Sanmina Corporation. As the next step in our business transformation, we plan to transition FARO production from three manufacturing sites in Lake Mary, Florida; Exton, Pennsylvania; and Stuttgart, Germany to Sanmina Facility based in Thailand. Following a rigorous selection process, chose Sanmina as our partner based upon their proven ability to deliver quality products on the required timelines. Together, we are very confident in our ability to meet our customers' demand throughout this transition process. Once complete our new operational model, greatly simplifies operations, reduces cost and allows our management team to focus on the development and sale of differentiated solutions to customers in our target markets. Allen will discuss the financial impact of these changes in the few minutes.

Taken together, these actions form the basis of our strategic transition, namely developing a deep understanding of our customer workflows, which allow us to further differentiate our capabilities in the marketplace; while at the same time placing a solid operating structure in place to ensure incremental top line growth translates to greater operating leverage and higher shareholder value over the time.

Finally, we announced the election of two new members to our Board of Directors. As previously disclosed, the key element of enabling our successful transformation is ensuring that we maintain the right experience on our board to help guidance. I am particularly pleased with the addition of, Moonhie Chin and Alex Davern to the FARO board. Each have demonstrated success in leading hardware and cloud-based software businesses at markets that are closely aligned with our strategic direction. I very much look forward to their contributions as they officially join us on October 1st.

With that, I'll turn the call over to Allen for an overview of our second quarter financial results.

Allen Muhich -- Corporate

Thank you, Michael, and good morning everyone. Second quarter revenue of $82.1 million grew 36% when compared to the second quarter of 2020, as a result of continuing market demand improvement compared to last year's market softness caused by the pandemic. Product revenue of $60.3 million was up 43% and service revenue of $21.8 million was up 19%. Bookings of $88.2 million grew 44% year-over-year and were slightly ahead of revenue in the quarter signaling a modest building of backlog. GAAP gross margin was 55.4% and non-GAAP gross margin was 55.7% for the second quarter of 2021. Gross margin increased year-over-year and sequentially, largely due to volume increases versus prior periods.

Our second quarter material costs did not reflect inflationary pressures prevalent in today's market. That said, we do anticipate material cost headwinds to modestly impact gross margins in the near term. GAAP operating expenses were $46.1 million and included approximately $3.6 million in acquisition-related intangible amortization and stock compensation expenses, and $800,000 restructuring costs. Non-GAAP operating expense of $41.8 million was $4.1million higher than Q2 of 2020 as we continue to increase our software investments and is a portion of the travel related expense savings realized during the pandemic began to return. GAAP operating loss was $700,000 for the second quarter of 2021 compared with an operating loss of $12 million for the second quarter of 2020, primarily due to lower volumes in the prior year period. Non-GAAP operating income was $3.9 million in the second quarter of 2021 compared to an $8.1 million loss in the second quarter of 2020.

Adjusted EBITDA was $6.5 million or approximately 8% of revenue. Our GAAP net loss was $1.2 million or $0.06 per share. Non-GAAP net income was $2.2 million or $0.12 per share for the second quarter of 2021 compared to a non-GAAP net loss of $0.36 per share in Q2 2020. We continue to maintain a strong capital structure with a cash balance of $133 million and no debt. The second quarter decrease in cash was primarily a result of the acquisition of HoloBuilder, for which we paid $34 million in cash. With the addition of HoloBuilder and ongoing investments in our core software platform, our quarterly non-GAAP operating expense is expected to increase to a mid $40 million run rate. As a result to achieve our target model of 20% EBITDA margins, our quarterly revenue level has increased to $110 million versus the $100 million objective previously set.

Given the long-term opportunities within the Digital Twin market, we believe these are the right investments to ensure future growth. Offsetting the spend over the mid-term, we recently announced our plans to consolidate and outsource our manufacturing. Despite transition to Sanmina is expected to be completed over the next 12 months and result in approximately $12 million in annualized labor and material savings when complete, we believe the expected savings will have a negligible impact on 2021, followed by steady improvement through 2022, with the full benefit to be realized in the first quarter of 2023. The company expects to incur a cash charge of approximately $6 million in the second half of 2021, primarily consisting of cash severance. Total pre-tax charges of $15 million to $20 million are expected through the first half of 2022, when including the impact of facility and other asset write-down.

With these charges, the company expects it will fully realize the $75 million to $85 million in restructuring charges announced in February 2020. We're pleased in the continued end-market demand improvements and the organic and inorganic progress we're making toward realizing our strategic vision of hardware, software solutions that solve our customers' real world problems in a cloud-based environment. With the addition of HoloBuilder, our end-to-end solution for Digital Twin management positions us well to capitalize on this large and growing market. We have line of sight to completing the transformation of our cost structure with our new manufacturing partner, Sanmina. Lastly, we remain committed to the achievement of our financial success model, which is a reminder to achieve 55% to 60% gross margin with 40% to 43% operating expense resulting in 20% adjusted EBITDA that we expect will be realized with approximately $110 million in quarterly revenue. We look forward to reporting our continued progress in the coming quarters.

This concludes our prepared remarks, and at this time, we'd be pleased to take any of your questions.

Questions and Answers:

Operator

[Operator Instructions]. We'll take our first question from Greg Palm from Craig-Hallum Capital. Your line is open. Please go ahead.

Greg Palm -- Craig-Hallum Capital Group LLC -- Analyst

Yeah, thanks, good morning everyone. I guess, just starting off with the orders. It looks like orders outpaced revenue by a decent amount in the quarter. So, was there anything, supply chain related or was that just simply orders received late in the quarter that weren't able to ship, just kind of curious if you're seeing any kind of supply chain related logistics issues out there?

Michael D. Burger -- Corporate

Yeah, we've experienced some. Yeah, the order rate was back-end loaded for the quarter and so we ended up basically pushing some of the booking over into Q3. It's hard to say if that was really supply chain related from a customer perspective, but we didn't -- we've seen some logistics issues throughout the quarter, but it really didn't impact the end of quarter revenue, it was more around when we actually receive the order.

Greg Palm -- Craig-Hallum Capital Group LLC -- Analyst

Okay, makes sense. And Allen, I think you said something about elevated material costs. I don't know if that was an impact at all in the June quarter, but how should we be thinking about that impact going forward?

Allen Muhich -- Corporate

Yeah. Greg, good question. Not much of an impact in the second quarter. We do expect to see some material increases in the third quarter. That said, we do have some opportunity to be able to pass those along to our customers. And so, as I indicated in our prepared remarks, we would expect some modest impact to our gross margins here over the near-term depending upon it ultimately how the length and duration and depth and changes of these material cost, but again, at this point in time, we think it's relatively modest, but maybe a little bit more toward the lower end of the range versus the middle of the range, which is where we've been operating.

Greg Palm -- Craig-Hallum Capital Group LLC -- Analyst

Okay, got it. And then, in terms of the kind of increasing opex, some of the investments, I think most of us understand what the opportunity is, but maybe for those that don't, can you just go in a little bit more detail on sort of the excitement and opportunity around Digital Twin because it certainly seems like a kind of a theme that lots and lots of companies are starting to talk about?

Michael D. Burger -- Corporate

Yeah, I think Digital Twin is a manifestation of, I think many of our customers' desire to plan both facility changes or facility layouts or in some cases in public safety pre-incident planning to be able to actually have a very accurate model in a virtual environment that allows you to plan. And I think, the better you plan, the less waste. And I think, we all know, in the construction space and frankly running factories one of the biggest issue you have is, how do you minimize waste. And Digital Twin is becoming a catch-all if you will, and Digital Twin means different things to different people. But our Digital Twin is a physical representation of the space and the ability to take that space and is close to accurate as close to the truth as you can, and then change it virtually and plan, all in the context of reducing waste. It seems that it is to your point, a kind of a catch-all, but definitely, it's a conversation we're having with a lot of customers, a lot of customers that we didn't really anticipate having that conversation with.

Greg Palm -- Craig-Hallum Capital Group LLC -- Analyst

Got it. It's interesting. And then, just last one. So, the EBITDA 20% run rate with the revenue increasing to $110 million to achieve that. What would that number look like if you were to be able to capture all of the savings from the manufacturing outsourcing. Would that number be closer to the number that you've been alluding to in the past, just sort of curious how that will affect that number once those are -- those costs are fully realized?

Michael D. Burger -- Corporate

Yeah, it's a very good question and I think that the timing -- and you picked up on the new ones, right -- the timing difference between the expenses coming on with the HoloBuilder acquisition versus our ability to be able to realize the savings with our outsource manufacturing does cause over the next, call it 12 to 18 months, an adverse impact on our model. I do think that there is a path toward getting to that 20% EBITDA on the lower revenue number or at the higher revenue number over achieving the 20%. But we're not ready to commit to that just yet.

Greg Palm -- Craig-Hallum Capital Group LLC -- Analyst

Okay, fair enough. All right. Thanks for the help. Best of luck going forward.

Michael D. Burger -- Corporate

Thanks, Greg.

Allen Muhich -- Corporate

Thanks, Greg.

Operator

Our next question comes from James Ricchiuti from Needham & Company. Your line is open. Please go ahead.

James Ricchiuti -- Needham & Company -- Analyst

Hi, good morning.

Michael D. Burger -- Corporate

Good morning, James.

James Ricchiuti -- Needham & Company -- Analyst

Question is just about the seasonality that you're seeing, you normally experience in this quarter. I'm wondering if there's anything that you've seen in the first month and that may not be a fair question just given how back-end loaded typically the quarters are, but is there anything that you're seeing that you might be able to share with us that give us a little better sense to have the momentum might be entering Q3?

Michael D. Burger -- Corporate

Actually, we've started Q3 pretty in typical fashion as we have probably most quarters. We're typically back end loaded within the quarter and I think the concern that we all have around Q3, is typically the vacation -- the broad based vacations that our customers are experiencing in Europe, which typically starts in August. So the first part of the quarter is kind of as expected, but again, we're not really -- we traditionally see August kind of take a sideways step and that's borne out in our history Q2 to Q3 over the last several years. So, I think started off pretty normal and we're anxious to see how August stacks up.

James Ricchiuti -- Needham & Company -- Analyst

Okay. On the transition to Sanmina, Allen, maybe this question for you. Is there any reason why as this process really gets going. You would not see some or be able to realize some sort of supply chain benefits just from some of their buying tower. I know you were talking about seeing opportunities in '22 gradually over the course of the year, but I'm wondering how to think about just some of the supply chain benefits, at what point they maybe perhaps take a more active role on that side of the business?

Allen Muhich -- Corporate

Yeah, it's a good question. And again, I think as we've articulated the savings opportunity we have indicated that there is both a labor and a material component. As everybody knows, our manufacturing has been centered in a couple of locations in the U.S. and one in Germany and the supply chains for those manufacturing are localized to those facilities. So, as we move more toward Sanmina, Thailand based facility, there is an opportunity absolutely to enhance the supply chain from a cost standpoint, at the same time leverage Sanmina's purchasing power. So, we do think that there is an opportunity for decreased material cost savings as time goes by and that's built into the numbers that we've been talking about, Jim.

James Ricchiuti -- Needham & Company -- Analyst

Okay. But [Indecipherable] ahead of the move to Thailand, you really need to be there with them before you're really able to realize some of that buying, the purchasing power that they have?

Allen Muhich -- Corporate

I think, that's correct.

Michael D. Burger -- Corporate

I would say from a cost perspective, correct. But Sanmina has already begun to help us in some of the hard to source materials. They've helped us in advance of actually the announcement in anticipation thereof, they have been a big help. So, we're excited about what we think they can do, maybe not short-term in terms of better pricing on materials, but really access to materials.

James Ricchiuti -- Needham & Company -- Analyst

Got it. And then, just a question on the initiatives you have underway to build out the recurring revenue on the software side, are there similar deals out there to HoloBuilder that you see, which areas actually hold the most interest per year?

Michael D. Burger -- Corporate

I think. we are having the ability to actually capture whatever the truth is and the truth is the actual measurement. We -- there are technologies out there that we're looking at, nothing that's burning a hole in our pocket at this juncture. But there is a quite a few companies that are kind of getting into this space if you will from a software perspective or a algorithm perspective that speeds up either our processing or as in HoloBuilder's case adds a completely different technology that we didn't really have commercially. So, we're looking at all of those, Jim, but again there is nothing burning a hole in our pocket right now.

James Ricchiuti -- Needham & Company -- Analyst

Okay. And Sphere on track. When should we think about this launching and how should we think about it looking out to next year?

Michael D. Burger -- Corporate

Q4 is our current schedule. And I think -- as I've said, I think, it will be a slow ramp from a revenue perspective as we sign up subscribers. So, I would expect very much to probably toward the end of 2022, where we can actually start pointing to I think meaningful revenue impact. That said, coincident with the launch of Sphere, we will begin to break out our recurring revenue for you guys, so that we're talking about it and you can track us on it.

James Ricchiuti -- Needham & Company -- Analyst

Okay, good. All right. Thanks a lot.

Michael D. Burger -- Corporate

Thanks, Jim.

Allen Muhich -- Corporate

Thanks, Jim.

Operator

We will take our next question from Andrew DeGasperi from Berenberg Capital. Your line is open. Please go ahead.

Andrew DeGasperi -- Berenberg Capital Markets LLC -- Analyst

Thanks. Good morning, Mike and Allen.

Michael D. Burger -- Corporate

Good morning, Andrew.

Allen Muhich -- Corporate

Good morning.

Andrew DeGasperi -- Berenberg Capital Markets LLC -- Analyst

I had a quick one on HoloBuilder. I know you said in the past when you announced the acquisition that was generating $4 million or so of revenue per year and it's growing on a compounded annual basis at 75% of 2019, just curious to know like with the integration, should we expect that high level of growth to continue, if not even accelerate as you potentially look at other use cases for that asset?

Michael D. Burger -- Corporate

We expect the growth rate to continue on its current trajectory. I don't think we're planning on talking about accelerating that at this point, it's early days for us. We've had it under our belt here for just about six weeks. So, we're still learning from them. We're very excited by what they offer and we're extremely excited by the feedback that we're getting from their customer base, which we have some overlap, but frankly they brought a different customer base to us. So, the feedback that we're getting is fantastic. So, we believe that we should be able to continue the growth rate that they've already experienced.

Andrew DeGasperi -- Berenberg Capital Markets LLC -- Analyst

That's helpful. And I guess, when it comes to the Q4 revenue number, I think that -- that's the quarter that you expect to actually reach back to what we consider a normalized rate. Is that still kind of that plan based on what you're seeing in the market or should -- has that changed at all, would you think that the issues that you mentioned earlier eventually localized [Indecipherable] may impact that?

Michael D. Burger -- Corporate

Well, I think we're optimistic. I think we've said publicly, we're not really giving guidance, but what we said is we would be disappointed if we weren't back at those levels, I don't think things have fundamentally changed with perhaps the supply chain shortages. And supply chain shortages may not necessarily affect our ability to ship product, but more our customers' ability for them to ship their products and therefore maybe damp in their appetite to buy capital. That's our concern. The supply chain situation is real, and while I don't see it coming to an end in the next quarter or two. Our sales force is very optimistic about customer demand in general. And as we said in our script, our new products are really beginning to gain traction, so everything has headed the right direction. It's just -- it's been a crazy year. So, we're just -- we're just-- we're cautiously optimistic, how is that?

Andrew DeGasperi -- Berenberg Capital Markets LLC -- Analyst

That's helpful. And then, I guess the last one I have, and just a follow-up to Jim's question in terms of the Sanmina. I guess, transition to [Indecipherable] better supply chain like I said from a materials perspective than what you would have had with your own three sites.

Michael D. Burger -- Corporate

Absolutely. And I think, Allen alluded to. FARO had not really integrated many of the supply chains that weren't attached to each of the factories -- each of our factories. And as a result, we weren't really even internally gaining any buying power if you will by consolidating our internal demand. By transitioning to Sanmina, not only do we get their manufacturing expertise, but we actually get to leverage their supply chain, and as I mentioned to Jim, we've already seen some benefit of that even prior to the announcement in helping us source some hard to get material. So, we're very confident that they'll be able to help us on the supply chain side. In this environment, however, where supply is really tight, you're really not talking about getting price reduction, you're more talking about getting access to materials and that's where Sanmina has helped us short-term, I think long-term, they should be able to help us with cost and the way our contracts are written, they are very motivated to help us with cost, it is a big part of the -- of their business model and that Industries business model. So, we're very -- I think we're very fortunate to have Sanmina and we're looking forward to a streamlined and probably healthier supply chain than we currently have.

Andrew DeGasperi -- Berenberg Capital Markets LLC -- Analyst

Great, thank you.

Michael D. Burger -- Corporate

You're welcome. Thank you.

Operator

[Operator Instructions]. We'll take our next question from Rob Mason from Baird. Your line is open. Please go ahead.

Rob Mason -- Baird -- Analyst

Yes, good morning.

Michael D. Burger -- Corporate

Good morning.

Allen Muhich -- Corporate

Good morning.

Rob Mason -- Baird -- Analyst

Michael, if you think about where your targets may reside for getting back to these 2019 levels by the fourth quarter. I'm just curious in terms of your sales force and its productivity level. How much capacity does the existing sales force have beyond that level or do we need to consider adding more resources once you get, get back to, call it $100 million a quarter or type revenue level?

Michael D. Burger -- Corporate

We don't believe that we need to add sales to get to the $100 million, and we're feeling really good about our productivity metrics of our selling organization as we kind of come out of the COVID situation. I don't anticipate that we would need to add any dramatic resource much beyond, I would say probably $130 million to $140 million a quarter. So, I think we've got a lot of gas in the tank if you will with our current sales force. It's the demand environment that has precluded us from getting to those levels, I don't believe it's the number of sales people.

Rob Mason -- Baird -- Analyst

Okay. Just on that point. I mean, could you offer some perspective on how you're seeing the 3D Metrology versus your AEC markets perform as you came through the second quarter and into the third, any distinctions either by geography or again between those two key markets that you'd call out?

Michael D. Burger -- Corporate

Yeah, we've seen the automotive space recover a bit, which is very encouraging. 3D metrology in Asia, I think we've been underserved in that market and so we've seen a really nice gain if you will, particularly in China in 3D -- led by 3D metrology. I think,North America, other than automotive has been slower than we'd hoped, particularly in some of the smaller machine shops, which provide a long tail in terms of the number of customers that we have. So, it looks like the big guys are buying again, maybe not at the rates they were, but they are buying again which is super encouraging. In Europe, we've seen 3D metrology bounce along, we haven't seen a huge recovery yet, and we're hopeful that we'll be a driver for Q4. So, summarizing 3D metrology in general has been slower than, for example in 2019. But we're seeing nice signs of recovery.

Rob Mason -- Baird -- Analyst

Just within AEC, you had made a reference to commercial construction starts, is that still maybe the trigger point for uptake on the AEC product. Is the new starts comes at the front end?

Michael D. Burger -- Corporate

We believe so. Many of our customers actually buy capital based on the projects that they are actually working on. So, they actually bill out or charge against the project, some of the equipment cost that they buy from us. And so, as new project start, there is an opportunity for us to actually add equipment. But it's been relatively slow, particularly in commercial. We don't really participate as a company much on the residential side, that's changing, albeit it's relatively small. So really, the commercial starts is really kind of I think should be the bellwether for us.

Rob Mason -- Baird -- Analyst

Okay, very good. Thank you.

Michael D. Burger -- Corporate

Hey, congratulations on your new position.

Rob Mason -- Baird -- Analyst

Thank you.

Operator

It appears that we have no further questions at this time, I will now turn the program back over to Michael Burger.

Michael D. Burger -- Corporate

Well, we're excited. We're very pleased with where we are in terms of momentum and we're making a lot of progress to our stated plans. So, we appreciate everyone's interest and look forward to giving you an update next quarter. Thank you.

Operator

[Operator Closing Remarks]

Duration: 34 minutes

Call participants:

Michael Funari -- Corporate

Michael D. Burger -- Corporate

Allen Muhich -- Corporate

Greg Palm -- Craig-Hallum Capital Group LLC -- Analyst

James Ricchiuti -- Needham & Company -- Analyst

Andrew DeGasperi -- Berenberg Capital Markets LLC -- Analyst

Rob Mason -- Baird -- Analyst

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