FARO Technologies Announces Proposed $60 Million Convertible Senior Notes Offering

Rhea-AI Summary

FARO Technologies announced a proposed offering of $60 million in convertible senior notes due 2028, subject to market conditions. The private placement will be made to qualified institutional buyers under Rule 144A. An additional $15 million in notes may be purchased by the initial purchaser. The notes will be general unsecured obligations of FARO and will accrue interest payable semiannually, maturing on February 1, 2028. Holders can convert notes under specified conditions, and FARO may redeem them starting February 5, 2026, if the stock price meets certain criteria. Proceeds from the offering will be used for working capital and corporate purposes.

Positive

• Proposed offering of $60 million in convertible senior notes may strengthen capital structure.
• Potential additional $15 million in notes demonstrates investor interest.

Negative

• Convertible senior notes could dilute existing shareholders if converted into common stock.
• Interest obligations may increase financial strain if cash flow is limited.

LAKE MARY, Fla., Jan. 19, 2023 /PRNewswire/ -- FARO^® Technologies, Inc. (Nasdaq: FARO) ("FARO") announced that it intends to offer, subject to market conditions and other considerations, $60 million aggregate principal amount of convertible senior notes due 2028 (the "Notes") in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). FARO also expects to grant the initial purchaser of the Notes a 13-day option to purchase up to an additional $15 million in aggregate principal amount of Notes.

The Notes will be general unsecured obligations of FARO and will accrue interest payable semiannually in arrears and will mature on February 1, 2028, unless repurchased, redeemed or converted prior to such date. The interest rate, conversion rate and certain other terms of the Notes will be determined upon pricing of the offering.

Prior to November 1, 2027, the Notes will be convertible at the option of holders only upon satisfaction of certain conditions and during certain periods. On and after November 1, 2027, the Notes will be convertible at the option of holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion of the Notes, FARO will pay or deliver, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at FARO's election.

FARO may redeem for cash all or (subject to certain limitations) any part of the Notes, at its option, on or after February 5, 2026, if the last reported sale price of FARO's common stock has been at least 130% of the conversion price for the Notes then in effect on (1) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately preceding the date on which FARO sends the related notice of redemption, and (2) the trading day immediately before the date FARO sends notice. The redemption price will be 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Holders of the Notes will have the right to require FARO to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of a fundamental change (as defined in the indenture relating to the Notes).

FARO, under certain circumstances, will also be required to increase the conversion rate for holders who convert their Notes in connection with a make-whole fundamental change (as defined in the indenture relating to the Notes) occurring prior to the maturity date. The definition of make-whole fundamental change includes the calling of Notes for redemption.

FARO intends to use the net proceeds from this offering for working capital and other general corporate purposes.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful. The offer and sale of the Notes and the shares of common stock issuable upon conversion of the Notes, if any, have not been, and will not be, registered under the Securities Act or the securities laws of any other jurisdiction, and the Notes and such shares may not be offered or sold in the United States without registration or an applicable exemption from registration requirements.

About FARO

For 40 years, FARO has provided industry-leading technology solutions that enable customers to measure their world, and then use that data to make smarter decisions faster. FARO continues to be a pioneer in bridging the digital and physical worlds through data-driven reliable accuracy, precision, and immediacy.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties, such as statements about the proposed terms of the Notes, the completion, timing and size of the proposed offering and the anticipated use of proceeds from the offering. Statements that are not historical facts or that describe FARO's plans, beliefs, objectives, projections, expectations, assumptions, strategies, goals or future events are forward-looking statements. In addition, words such as "is," "will," "intend," "believe," "expect," "may," "might," "would," "will," "will be," "future," "strategy," "believe," "plan," "should," "could," "seek," "expect," "anticipate," "intend," "estimate," "goal," "objective," "project," "forecast," "target" and similar words identify forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to various known and unknown risks, uncertainties, and other factors that may cause actual results, performances, or achievements to differ materially from future results, performances or achievements expressed or implied by such forward-looking statements. Consequently, undue reliance should not be placed on these forward-looking statements. Factors that could cause actual results to differ materially from what is expressed or forecasted in such forward looking statements include, but are not limited to, those risks detailed in Part I, Item 1A. Risk Factors in FARO's Annual Report on Form 10-K for the year ended December 31, 2021 that was filed with the Securities and Exchange Commission ("SEC") on February 16, 2022, and in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 that was filed with the SEC on November 2, 2022, as well as in other documents FARO files from time to time with the SEC. Forward-looking statements in this release represent FARO's judgment as of the date of this release. FARO undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law.

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SOURCE FARO

FAQ

What is FARO's proposed convertible senior notes offering?

FARO announced a proposed offering of $60 million in convertible senior notes due 2028.

When will the convertible senior notes mature?

The notes will mature on February 1, 2028.

What is the additional option for the convertible senior notes?

The initial purchaser may buy up to an additional $15 million in aggregate principal of the notes.

How will FARO use the proceeds from the notes offering?

FARO intends to use the net proceeds for working capital and other general corporate purposes.

What are the interest payment terms for the senior notes?

The notes will accrue interest payable semiannually in arrears.