Financial Data and Key Metrics Changes - In Q4 2022, total revenue was $103.9 million, up nearly 4% year-on-year, with constant currency revenue at $110.5 million, up approximately 10% year-over-year [19][22] - GAAP gross margin was 49.1% and non-GAAP gross margin was 52.8% for Q4 2022 [23] - Adjusted EBITDA was $11.7 million or 11.3% of sales, while GAAP net loss was $2.2 million or $0.12 per share [11][24] Business Line Data and Key Metrics Changes - Hardware revenue was $70.3 million, up 9% year-on-year; software revenue was $12.9 million, down 5%; and service revenue was $20.6 million, down 6% [9] - Recurring revenue increased by 10% year-on-year to $18.1 million, primarily due to growth in cloud-based software offerings [9] Market Data and Key Metrics Changes - Strong demand was noted in the European markets, with a resurgence in the AEC space and significant public safety deals [30][58] - APAC market performance was stable, with a growing opportunity funnel despite some larger deals being pushed into future quarters [30] Company Strategy and Development Direction - The company is focused on integrating recent acquisitions, including GeoSLAM and SiteScape, to enhance its product offerings and market position [20][78] - The strategy includes consolidating cloud-based environments and facilities to achieve cost savings and improve operational efficiency [12][52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business momentum despite recessionary concerns, highlighting a strong opportunity funnel [27][72] - The company anticipates approximately $12 million in annualized material cost savings as supply chain conditions normalize [10] Other Important Information - The company announced an integration plan to consolidate cloud environments and rationalize facilities, expecting to achieve $10 million in annualized expense savings [12][46] - The company has a cash balance of $37.8 million with no debt, and plans to invest a portion of proceeds from a recent convertible note offering in short-term treasuries [25][45] Q&A Session Summary Question: Comments on geographic results, particularly Europe and APAC - Management noted surprising strength in Europe, particularly in the AEC space, while APAC performance was stable with larger deals pushed to future quarters [30] Question: Details on cost savings program - Management outlined $10 million in annualized expense savings expected throughout 2024, primarily from facility consolidation and integration of acquisitions [31][52] Question: Performance of individual markets in Q4 - AEC markets showed strong performance globally, with public safety achieving the largest booking quarter in history, while 3D metrology performance was stable but not as strong [58] Question: Sales cycle and order cycle trends - Management indicated that the sales cycle remained consistent from Q3 to Q4, with a healthy backlog maintained [72] Question: Impact of recent acquisitions on recurring revenue - Management confirmed that the integration of cloud environments will not affect the trajectory of recurring revenue, which is expected to grow [76] Question: Market and competitors regarding SiteScape acquisition - Management acknowledged that the SiteScape acquisition will require investment but is seen as a technology acquisition rather than a significant market expansion [78][81]

Part I [Business](index=9&type=section&id=Item%201.%20Business) FARO Technologies provides 3D measurement and imaging solutions, focusing on a subscription model, strategic acquisitions, and global restructuring for efficiency - FARO designs and manufactures 3D measurement, imaging, and realization solutions for metrology, AEC, O&M, and public safety markets[27](index=27&type=chunk) - A global restructuring plan initiated in 2020 achieved approximately **$40 million in annualized savings**, with manufacturing outsourced to Sanmina Corporation by Q3 2022[29](index=29&type=chunk)[33](index=33&type=chunk) - Strategic acquisitions include Holobuilder (2021), GeoSLAM (2022), and SiteScape (2022) to enhance software and mobile scanning capabilities[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) Research and Development Expenses | Year | Expense (in millions) | | :--- | :--- | | 2022 | $49.4 | | 2021 | $48.8 | | 2020 | $42.9 | Order Backlog | Date | Backlog (in millions) | | :--- | :--- | | Dec 31, 2022 | $29.9 | | Dec 31, 2021 | $26.1 | | Dec 31, 2020 | $19.7 | - As of December 31, 2022, FARO had **1,490 full-time employees** worldwide, with **24% female global workforce** and **31% minorities in the US workforce**[74](index=74&type=chunk)[77](index=77&type=chunk) [Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from intense competition, technological change, acquisition integration, financial volatility, and compliance with complex regulations - Business and industry risks include intense competition, the need for broad market acceptance, and challenges in integrating acquisitions[88](index=88&type=chunk)[90](index=90&type=chunk)[92](index=92&type=chunk) - Financial and capital risks include dependence on cyclical industries, foreign currency exposure, goodwill impairment, and potential need for additional capital[124](index=124&type=chunk)[126](index=126&type=chunk)[133](index=133&type=chunk) - The **$75 million convertible notes** issuance poses risks of cash shortages for settlement and potential stockholder dilution[143](index=143&type=chunk)[145](index=145&type=chunk) - Product and regulatory risks encompass product failures, supply chain constraints, and compliance with environmental and data privacy regulations[153](index=153&type=chunk)[155](index=155&type=chunk)[157](index=157&type=chunk) - Cybersecurity risks include data security attacks leading to penalties and reputational damage, alongside critical compliance with global laws like FCPA[164](index=164&type=chunk)[171](index=171&type=chunk) - Intellectual property risks involve protecting patents, avoiding infringement claims, and managing reliance on third-party vendors for key components[175](index=175&type=chunk)[178](index=178&type=chunk)[180](index=180&type=chunk) [Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None [Properties](index=36&type=section&id=Item%202.%20Properties) FARO operates from leased facilities across Americas, EMEA, and APAC, including headquarters in Lake Mary, Florida, and major hubs in Stuttgart and Singapore - Americas operations include a **46,500 sq. ft. headquarters** in Lake Mary, FL, and R&D/service facilities in Lake Mary and Exton, PA[186](index=186&type=chunk) - EMEA operations are primarily in a **105,300 sq. ft. facility** in Stuttgart, Germany, with an additional **8,300 sq. ft.** in Nottingham, UK from GeoSLAM acquisition[187](index=187&type=chunk) - APAC operations are centered in a **22,000 sq. ft. facility** in Singapore, with other key sites in Nagoya, Shanghai, and New Delhi[188](index=188&type=chunk) [Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company is not involved in any material legal proceedings beyond routine litigation in the normal course of business - The company reports no material legal proceedings, only routine litigation incidental to its business[190](index=190&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports no mine safety disclosures - None Part II [Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20For%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) FARO's common stock trades on Nasdaq, with no cash dividends paid or planned, and **$18.3 million** remaining in its share repurchase program - The company's common stock trades on the Nasdaq Global Select Market under the symbol **'FARO'**[194](index=194&type=chunk) - FARO has never paid cash dividends and plans to retain future earnings for business operations, with no foreseeable dividend payments[196](index=196&type=chunk) - No stock repurchases occurred in 2020-2022; **$18.3 million** remained authorized under the **$50.0 million** repurchase program as of December 31, 2022[200](index=200&type=chunk) Stock Performance vs. Indices (Cumulative Total Return) | Company/Index | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | FARO Technologies, Inc. | $100.00 | $86.47 | $107.13 | $150.28 | $148.98 | $62.57 | | Nasdaq Composite | $100.00 | $97.16 | $132.81 | $192.47 | $235.15 | $158.65 | | Russell 2000 | $100.00 | $88.99 | $111.70 | $134.00 | $153.85 | $122.41 | [Reserved](index=39&type=section&id=Item%206.%20Reserved) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, total sales increased **2.4%** to **$345.8 million**, but gross margin declined, resulting in a **$26.8 million** net loss and reduced cash, offset by a subsequent **$75 million** convertible note issuance Results of Operations: 2022 vs 2021 (in millions) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Sales | $345.8 | $337.8 | $8.0 | 2.4% | | Gross Profit | $175.8 | $183.9 | ($8.1) | -4.4% | | Gross Margin | 50.8% | 54.4% | -3.6 p.p. | N/A | | Loss from Operations | ($24.9) | ($8.5) | ($16.4) | 192.9% | | Net Loss | ($26.8) | ($40.0) | $13.2 | -33.0% | - Total sales increased **2.4%** in 2022, driven by a **$14.2 million (5.6%)** rise in product sales, partially offset by a **$6.2 million (7.2%)** decline in service sales and a **$20.4 million** negative FX impact[235](index=235&type=chunk) - Gross margin decreased to **50.8%** in 2022 from **54.4%** in 2021, mainly due to unfavorable product manufacturing cost variances from global supply shortages[236](index=236&type=chunk) - Recurring revenue, including service contracts, software maintenance, and subscriptions, grew to **$68.3 million** in 2022 from **$64.1 million** in 2021[225](index=225&type=chunk) - Cash and cash equivalents decreased by **$84.2 million** to **$37.8 million** at year-end 2022, primarily due to **$24.9 million** used in operating and **$49.9 million** in investing activities[254](index=254&type=chunk)[255](index=255&type=chunk) - Subsequent to year-end, on January 24, 2023, the company issued **$75 million** of **5.50% Convertible Senior Notes** due 2028 for working capital and general corporate purposes[260](index=260&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces significant market risks from foreign exchange exposure, with **60%** of 2022 revenue in foreign currencies, and global inflation impacting costs and customer spending - In 2022, **60% of revenue** and **45% of assets** were foreign currency denominated, with the company relying on natural hedges instead of hedging instruments[283](index=283&type=chunk) - Rising global inflation negatively impacts the business by increasing raw material and salary costs, potentially reducing customer capital spending and orders[284](index=284&type=chunk) [Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2022, including balance sheets, income statements, cash flows, and detailed notes on accounting policies, acquisitions, restructuring, and subsequent events - Grant Thornton LLP issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting as of December 31, 2022[287](index=287&type=chunk)[288](index=288&type=chunk) Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $219,365 | $273,450 | | Total Assets | $473,347 | $479,740 | | Total Current Liabilities | $106,239 | $98,881 | | Total Liabilities | $162,298 | $153,281 | | Total Shareholders' Equity | $311,049 | $326,459 | Consolidated Statement of Operations Data (in thousands) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Sales | $345,765 | $337,814 | $303,768 | | Gross Profit | $175,763 | $183,927 | $159,847 | | Loss from Operations | ($24,923) | ($8,436) | ($30,682) | | Net (Loss) Income | ($26,756) | ($39,964) | $629 | - In 2022, FARO acquired GeoSLAM for **$44.9 million** (**$29.1 million cash**, **$15.9 million stock**) and SiteScape for **$1.9 million cash**, adding **$25.4 million** and **$1.1 million** in goodwill respectively[412](index=412&type=chunk)[416](index=416&type=chunk)[419](index=419&type=chunk) - A **$4.6 million** pre-tax charge was recorded in 2022 for restructuring, with **$25.3 million** in cash payments, primarily for severance, since the plan's inception[424](index=424&type=chunk) - Subsequent events include the January 24, 2023 issuance of **$75 million** in **5.50% Convertible Senior Notes** due 2028 and a new Integration Plan approved February 7, 2023, projecting **$10-16 million** in charges and **$10 million** in annualized savings[425](index=425&type=chunk)[432](index=432&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=85&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None [Controls and Procedures](index=86&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with the auditor issuing an unqualified opinion - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2022[436](index=436&type=chunk) - Internal control over financial reporting was effective as of December 31, 2022, excluding 2022 acquisitions (GeoSLAM and SiteScape) representing approximately **2% of total assets and sales**[441](index=441&type=chunk) - Grant Thornton LLP issued an unqualified opinion on the effectiveness of internal control over financial reporting as of December 31, 2022[444](index=444&type=chunk) - No material changes in internal control over financial reporting occurred during the year[437](index=437&type=chunk) [Other Information](index=89&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=89&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections%2E) The company reports no disclosures regarding foreign jurisdictions that prevent inspections - None Part III [Directors, Executive Officers and Corporate Governance](index=90&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders[454](index=454&type=chunk) [Executive Compensation](index=90&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders[455](index=455&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=90&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of beneficial owners and management is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders[456](index=456&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=90&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders[457](index=457&type=chunk) [Principal Accountant Fees and Services](index=90&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders[458](index=458&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=91&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits, with consolidated financial statements in Part II, Item 8, and an Exhibit Index detailing filed documents - Consolidated financial statements are included in Part II, Item 8 of the Annual Report[460](index=460&type=chunk) - All financial statement schedules are omitted as not required, not applicable, or included elsewhere in the report[461](index=461&type=chunk) - Key exhibits include the Indenture for the **5.50% Convertible Senior Notes** due 2028, the 2022 Equity Incentive Plan, and the Manufacturing Services Agreement with Sanmina Corporation[465](index=465&type=chunk)[466](index=466&type=chunk)[468](index=468&type=chunk) [Form 10-K Summary](index=95&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary under this item - None

FARO Technologies, Inc. (NASDAQ:FARO) Q3 2022 Earnings Conference Call November 2, 2022 5:00 PM ET Company Participants Michael Funari - Sapphire Investor Relations Michael Burger - Chief Executive Officer Allen Muhich - Chief Financial Officer Conference Call Participants Greg Palm - Craig-Hallum Capital Group Rob Mason - Baird Ben Rose - Battle Road Research Operator Good day, everyone, and welcome to the FARO Technologies Third Quarter 2022 Earnings Call. For opening remarks and introductions, I will now ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | --- | |---------------------------------------------------------------------------------|--------------------------------------------------|---------- ...

Summary of FARO Technologies, Inc. Q2 Earnings Conference Call Company Overview - **Company**: FARO Technologies, Inc. (NASDAQ:FARO) - **Date of Call**: August 3, 2022 - **Participants**: - Michael Burger - CEO - Allen Muhich - CFO - Michael Funari - Sapphire IR Key Industry and Company Insights Industry Context - The company operates in the 3D measurement and laser scanning technology industry, which is experiencing healthy demand across service markets. Financial Performance - **Q2 Revenue**: $79.9 million, down approximately 3% year-over-year [14] - **Constant Currency Revenue**: $83.9 million, representing a 3% year-over-year increase [7][15] - **Hardware Revenue**: $49.2 million, down 2% year-over-year [16] - **Software Revenue**: $10.5 million, up 4% year-over-year [16] - **Service Revenue**: $20.2 million, down 7% year-over-year [16] - **Recurring Revenue**: $17.1 million, up 8% year-over-year [16] Product Demand and Backlog - Strong demand for Quantum Max scan arm and Focus Premium laser scanner, with overall orders in the Americas growing 14% year-over-year [16] - Backlog increased due to strong demand, particularly in the last month of the quarter [30][32] Currency Impact - Approximately 60% of revenue was impacted by a stronger U.S. dollar, which appreciated about 10% against major currencies [7][15] - The strengthening dollar adversely affected gross margins and revenue recognition [17][18] Gross Margin and Operating Expenses - **GAAP Gross Margin**: 50.6%, lower than historical levels due to currency effects and lower-margin configurations [17] - **Non-GAAP Gross Margin**: 51% [17] - **GAAP Operating Loss**: $9 million, compared to a loss of $650,000 in Q2 2021 [19] - **Non-GAAP Operating Loss**: $2.5 million, compared to a profit of $3.9 million in Q2 2021 [19] Strategic Initiatives - Transition of manufacturing to Sanmina in Thailand is largely complete, expected to yield $12 million in annualized savings, although timing is delayed due to supply chain disruptions [9] - Launch of FARO Sphere, a cloud-based platform for 3D model creation and collaboration, is progressing well with positive adoption rates [10][13] - HoloBuilder's construction progress management application is set to be integrated into the Sphere platform by year-end [11] Market Outlook - Guidance for Q3 revenue is projected between $79 million and $87 million, contingent on currency stability [22] - The company remains cautiously optimistic about the second half of the year, driven by new product traction and a growing opportunity pipeline [38][40] Risks and Challenges - Ongoing supply chain disruptions and potential recessionary impacts are being monitored closely [13][40] - The company has not yet seen direct effects from recessionary rhetoric but remains cautious [13][50] Long-term Vision - The goal is to achieve 25% of total revenue from recurring sources, with a current CAGR of 8% in recurring revenue since 2019 [43] - The company is focused on leveraging its technology to capitalize on the growing market for digitizing physical objects [25] Additional Important Points - The company has maintained a strong capital structure with a cash balance of $102 million and no debt [21] - Significant progress has been made in reducing aged receivables and short-term inventory [21] - The highest non-Q4 quarter of laser scanner units booked in the company's history was recorded [23] This summary encapsulates the key points discussed during the FARO Technologies Q2 earnings call, highlighting the company's performance, strategic initiatives, and market outlook.

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | --- | |-----------------------------------------------------------------------------|-----------------------------------|---------------------------------- ...

FARO Technologies, Inc. (NASDAQ:FARO) Q4 2021 Earnings Conference Call February 16, 2021 5:00 PM ET Company Participants Michael Burger – Chief Executive Officer Allen Muhich – Chief Financial Officer Michael Funari – Sapphire Investor Relations Conference Call Participants Greg Palm – Craig-Hallum Capital James Ricchiuti – Needham & Company Andrew DeGasperi – Berenberg Capital Robert Mason – Baird Ben Rose – Battle Road Research Operator Please stand by your program is about to begin. Good afternoon everyo ...

FARO Technologies, Inc. (NASDAQ:FARO) Q1 2022 Earnings Conference Call April 27, 2022 5:00 PM ET Company Participants Michael Funari - Sapphire Investor Relations Michael Burger - Chief Executive Officer Allen Muhich - Chief Financial Officer Conference Call Participants Greg Palm - Craig-Hallum Jim Ricchiuti - Needham & Company Rob Mason - R.W. Baird Ben Rose - Battle Road Research Andrew DeGasperi - Berenberg Capital Markets Operator Good afternoon, everyone. And welcome to the FARO Technologies First Qua ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | --- | |-----------------------------------------------------------------------------|-----------------------------------|--------------------------------- ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | --- | |--------------------------------------------------------------------------------------|----------------------------------------------------------------------|-- ...