PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements for Q1 2023 are presented, detailing balance sheets, operations, cash flows, and equity, with explanatory notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$528.7 million** by March 31, 2023, driven by debt issuance, while liabilities grew to **$232.4 million**, and equity decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$528,728** | **$473,347** | | Cash and cash equivalents | $68,564 | $37,812 | | **Total Liabilities** | **$232,415** | **$162,298** | | Loan - 5.50% convertible Senior Notes | $72,379 | $— | | **Total Shareholders' Equity** | **$296,313** | **$311,049** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2023 total sales increased to **$85.0 million**, but gross profit declined, resulting in a wider operating loss of **$18.6 million** and a net loss of **$21.2 million** Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Total Sales | $84,967 | $76,656 | | Gross Profit | $39,716 | $41,026 | | Loss from Operations | $(18,616) | $(7,192) | | Net Loss | $(21,164) | $(9,687) | | Net Loss per Share - Diluted | $(1.12) | $(0.53) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2023 net cash used in operations was **$18.3 million** and **$23.5 million** in investing, offset by **$72.3 million** from financing, leading to a **$30.8 million** net cash increase Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(18,344) | $(7,037) | | Net cash used in investing activities | $(23,532) | $(5,054) | | Net cash provided by (used in) financing activities | $72,280 | $(974) | | **Increase (Decrease) in cash and cash equivalents** | **$30,752** | **$(14,797)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business, accounting policies, revenue, restructuring plans, acquisitions, **$75 million** convertible senior notes, and subsequent events like CEO transition - Total sales for Q1 2023 were **$85.0 million**, with the Americas region contributing the most at **$42.3 million**[31](index=31&type=chunk) - In February 2023, the Board approved an Integration Plan expected to incur **$10-$16 million** in charges and realize **$10 million** in annualized savings. In Q1 2023, **$4.2 million** in restructuring costs were recognized under this plan[50](index=50&type=chunk) - On January 24, 2023, the company issued **$75 million** in 5.50% Convertible Senior Notes due 2028, with net proceeds of approximately **$72.2 million**[72](index=72&type=chunk)[74](index=74&type=chunk) - Subsequent to the quarter-end, the company announced the retirement of its CEO, effective July 1, 2023, and amended the Integration Plan to increase expected pre-tax charges to **$22-$28 million** and targeted annualized savings to **$20-$30 million**[76](index=76&type=chunk)[77](index=77&type=chunk)[79](index=79&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial results, noting **$85.0 million** sales, a gross margin decrease, and higher operating expenses, with liquidity improved by **$75 million** convertible notes [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Q1 2023 total sales grew **10.8%** to **$85.0 million**, but gross profit fell to **$39.7 million**, with gross margin contracting to **46.7%**, leading to a wider net loss of **$21.2 million** Q1 2023 vs Q1 2022 Performance (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total Sales | $84,967 | $76,656 | | Gross Profit | $39,716 | $41,026 | | Gross Margin | 46.7% | 53.5% | | Total Operating Expenses | $58,332 | $48,218 | | Restructuring Costs | $4,238 | $600 | | Net Loss | $(21,164) | $(9,687) | - The decrease in gross margin was primarily due to unfavorable price variances from global supply shortages, particularly for semiconductor components[110](index=110&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents increased by **$30.8 million** to **$68.6 million**, driven by **$72.3 million** from convertible senior notes, offsetting operational and investing cash usage - Cash and cash equivalents increased to **$68.6 million** at March 31, 2023, from **$37.8 million** at December 31, 2022[120](index=120&type=chunk) - The increase in cash was primarily driven by the issuance of 5.50% Convertible Senior Notes, which provided net proceeds of approximately **$72.2 million**[123](index=123&type=chunk)[128](index=128&type=chunk) - As of March 31, 2023, the company had authorization to repurchase an additional **$18.3 million** of its stock, though no repurchases were made in the quarter[131](index=131&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include foreign exchange exposure, with **54%** of revenue in foreign currencies, and global inflation, impacting costs and demand - The company faces significant foreign exchange risk, as **54%** of its revenue was invoiced in foreign currencies and **56%** of its assets were denominated in foreign currencies in Q1 2023. The most significant exposures are to the Euro, Japanese Yen, Swiss Franc, Chinese Yuan, and Brazilian Real[136](index=136&type=chunk) - Global inflation is identified as a key risk, negatively impacting the business by increasing costs for raw materials and salaries, and potentially decreasing customer demand[137](index=137&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2023, the Principal Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[141](index=141&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[142](index=142&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - The company is not involved in any legal proceedings expected to have a material adverse effect on its business[144](index=144&type=chunk) [Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors include banking sector instability, executive management turnover, stock price volatility, and the risk of not realizing restructuring plan benefits - A new risk factor highlights that market conditions, such as the recent failures of Silicon Valley Bank and First Republic Bank, could impair the company's ability to access its cash and investments[146](index=146&type=chunk)[147](index=147&type=chunk) - The company notes that significant changes in its executive management team, including the announced retirement of the CEO, could adversely affect sales, profitability, and stock price[148](index=148&type=chunk)[149](index=149&type=chunk) - The company warns of potential stock price volatility due to factors like fluctuations in demand, economic uncertainties, and the issuance of shares upon conversion of its outstanding Notes[150](index=150&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No stock repurchases were made in Q1 2023, with **$18.3 million** remaining authorized under the **$50.0 million** share repurchase program - No stock repurchases were made during the quarter ended March 31, 2023[155](index=155&type=chunk) - As of March 31, 2023, the company had authorization to repurchase **$18.3 million** remaining under its **$50.0 million** share repurchase program[155](index=155&type=chunk) [Other Information](index=34&type=section&id=Item%205.%20Other%20Information) On May 3, 2023, the Integration Plan was amended, increasing expected pre-tax charges to **$22-$28 million** and targeted annualized savings to **$20-$30 million** - On May 3, 2023, the Integration Plan was amended to increase expected pre-tax charges to **$22-$28 million** and targeted annualized savings to **$20-$30 million**[158](index=158&type=chunk) [Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section indexes exhibits filed with Form 10-Q, including SOX certifications and documents related to convertible senior notes

Financial Data and Key Metrics Changes - First quarter revenue was $85 million, an increase of 11% year-on-year, driven by hardware revenue of $55 million, which rose 18% [12][16] - GAAP gross margin was 46.7%, while non-GAAP gross margin was 47.6%, negatively impacted by rising raw material costs and a strong US dollar [8] - GAAP operating loss was $18.6 million, compared to a loss of $7.2 million in Q1 2022, while non-GAAP operating loss was $8.3 million, up from $3 million in the prior year [9][29] Business Line Data and Key Metrics Changes - Hardware revenue increased significantly, while software revenue was approximately flat at $10.3 million, and service revenue was $19.7 million, also flat [16] - Recurring revenue accounted for $16.7 million, representing 20% of total sales [16] - The transition from perpetual software licenses to subscriptions has led to a 60% decline in perpetual software revenue since its peak in 2019 [6] Market Data and Key Metrics Changes - The company experienced a slowdown in customer decision-making, particularly in Europe and Asia Pacific, affecting the expected close dates of opportunities [83][84] - The opportunity funnel grew significantly in Q1, but the number of opportunities for Q2 was lower than usual, indicating a potential slowdown in the second half of the year [50][83] Company Strategy and Development Direction - The company is focused on optimizing its business and delivering more value to customers while maintaining a strong technology foundation and sound strategy [36][24] - The integration of acquisitions, such as GeoSLAM and SiteScape, is progressing well, enhancing the company's portfolio of 3D capture devices [86] - A shift towards a SaaS business model is being pursued, with an emphasis on recurring revenue and broadening applications [54][23] Management's Comments on Operating Environment and Future Outlook - Management noted a challenging operating environment with higher material costs and a softer end market impacting profitability [29][84] - The company is targeting $20 million to $30 million in annualized savings, with a focus on improving profitability as it exits the second and third quarters [14][18] - Guidance for Q2 revenue is projected between $79 million and $87 million, with expected non-GAAP gross margins between 45% and 48% [32] Other Important Information - The company reported a cash balance of $88.6 million at the end of the quarter, with expectations for improved cash flow in Q2 [19] - The management team is focused on driving working capital efficiencies and achieving free cash flow objectives [31] Q&A Session All Questions and Answers Question: Insights on the retirement timing and its implications - The retiring CEO indicated that the timing was appropriate for a transition, expressing confidence in the team's capabilities and the ongoing strategy [46] Question: Details on the slowdown in orders and market conditions - Management acknowledged a significant backlog and noted that Q1 saw challenges in order fulfillment, with a concerning trend of orders being pushed to the end of the quarter [43][50] Question: Changes in software strategy with new leadership - The new leadership affirmed support for the existing software strategy, emphasizing the importance of execution and efficiency in achieving growth objectives [53][54] Question: Trajectory for cost savings and gross margin improvements - Management provided insights on expected cost savings and indicated that gross margins should improve as material costs normalize and supply chain transitions take effect [66][67]

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 ...

Financial Data and Key Metrics Changes - First quarter revenue was $76.7 million, approximately equal to the first quarter of 2021, impacted by the Shanghai lockdown and supply chain shortages [24] - GAAP gross margin was 53.5%, while non-GAAP gross margin was 53.8%, showing an incremental year-over-year increase [27] - GAAP net loss was $9.7 million or $0.53 per share, compared to a loss of approximately $600,000 or $0.03 per share in Q1 2021 [31] Business Line Data and Key Metrics Changes - Hardware revenue was $46.5 million, up 5% year-over-year; software revenue was $10.3 million, up 1%; service revenue was $19.9 million, down 8% [25] - Recurring revenue increased to $16.5 million, up 6% compared to Q1 2021, primarily due to increased subscription revenue [25] - The service revenue decline was attributed to improved product quality, leading to fewer repair billings [66] Market Data and Key Metrics Changes - China accounted for 12% of revenue in 2021, with early Q2 demand remaining strong despite logistics challenges [34] - EMEA region saw a decline in AEC market performance, while 3DM and public safety sectors remained robust [48] - North America experienced a year-over-year revenue increase of about 13%, while EMEA revenue was down 13% due to currency effects [71] Company Strategy and Development Direction - The company is transitioning manufacturing to Sanmina's Thailand facility, expecting $12 million in annualized savings, although timing for these savings has been delayed [15] - The launch of the new FARO Sphere platform aims to centralize 3D data management and enhance customer workflows [21] - The company is focused on developing differentiated solutions and insights through a deeper understanding of customer workflows [22] Management Comments on Operating Environment and Future Outlook - Management expressed concerns about ongoing supply chain constraints and the impact of geopolitical tensions on near-term results, but remains optimistic about long-term opportunities [23] - The Shanghai lockdown has significantly affected logistics operations, with potential disruptions lasting into the second half of 2022 or beyond [10] - Despite challenges, management noted strong demand for new products and positive feedback from early customers [18] Other Important Information - The company maintains a strong capital structure with a cash balance of $107 million and no debt [32] - Guidance for Q2 2022 revenue is expected to be between $77 million and $85 million, with non-GAAP earnings per share projected between negative $0.17 and positive $0.04 [35] Q&A Session Summary Question: Impact of China lockdown on shipments - Management indicated that typically 30% to 40% of total quarterly shipments occur in the last three weeks of the quarter, which were significantly affected by the lockdown [37][38] Question: Demand in EMEA and AEC market - Management noted that while the AEC market was softer, overall EMEA performance was better than expected, with delays in projects rather than cancellations [49] Question: Initial market reception of new products - Positive feedback was reported for the new Laser Scanner, with significant interest and inquiries following its launch [42] Question: Service revenue decline - Management explained that the decline in service revenue was due to improved product quality, leading to fewer repair needs [66] Question: Guidance for China revenue - Management is approaching Q2 guidance conservatively, acknowledging robust demand but uncertainty in logistics capabilities [56][58] Question: Performance in Americas and broader Asia - North America performed as expected, while Asia faced challenges due to the Shanghai lockdown, affecting bookings [62] Question: Transition to subscription model - Management expects the transition to subscription revenue to continue through 2022, with a more significant impact anticipated in early 2023 [76]