Table of Contents Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $.001 FARO Nasdaq Global Select Market 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, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ...

Financial Data and Key Metrics Changes - Total sales for Q1 2019 were $93.6 million, an increase of 0.8% compared to $92.8 million in Q1 2018, with a negative impact from foreign exchange rates of $4.0 million [26][27] - Gross margin for Q1 2019 was 58.8%, an increase of 0.9 percentage points from 57.9% in Q1 2018, primarily due to higher service margins [31] - Net income was $0.2 million or $0.01 per share for Q1 2019, compared to $0.5 million or $0.03 per share in Q1 2018 [35] Business Line Data and Key Metrics Changes - 3D manufacturing segment sales were $56.6 million, a decrease of 6.7% from $60.7 million in the prior year, driven by lower product unit sales [28] - Construction BIM segment sales increased by 12.2% to $25.4 million, attributed to higher product unit sales and service revenue [29] - Emerging Verticals segment sales were $11.6 million, up 22.3% compared to $9.5 million in the same prior year period [30] Market Data and Key Metrics Changes - The 3D manufacturing segment experienced declines in the Americas and Asia Pacific regions, while EMEA saw modest growth on a constant-currency basis [28] - Strong year-over-year sales growth in the Asia-Pacific region for Construction BIM indicates high customer demand potential [29] Company Strategy and Development Direction - The company aims to be a technology leader in 3D measurement and imaging solutions, focusing on new product introductions and expanding its global sales force [5][10] - A new key performance indicator was introduced to measure orders per sales full-time experienced headcount, reflecting a modernized sales process [7] - The company is investing in new technologies and acquisitions to expand into new vertical applications, including a new Photonics vertical [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the sales force disruption was primarily in the 3D manufacturing segment and impacted all regions, but necessary for future growth [38] - The company expects challenges in Q2 due to foreign exchange impacts and sales headcount turnover, but anticipates better performance in the second half of the year [76] - Preliminary indicators do not suggest a worsening macro environment, although there are concerns regarding the automotive and aerospace markets [51][80] Other Important Information - The company plans to increase its sales headcount by 15% during 2019, but only achieved a 4% increase in Q1 due to higher-than-expected turnover [21] - General and administrative expenses increased by 19.4% due to CEO succession costs and GSA-related expenses [33] Q&A Session Summary Question: Can you characterize the sales force disruption? - The disruption was only in the 3D manufacturing segment and impacted all regions, correlated with lower sales in regions with lower PMI scores [38] Question: What is the expected timeline for improvements in the 3D manufacturing segment? - It is expected to take a couple of quarters to work itself out, with long-term advantages from the portfolio restructuring [40] Question: How much of the sales force turnover was concentrated in the U.S. market? - Higher turnover was observed in the Americas, correlating with a 3% year-over-year decline in that region [42] Question: What are the implications of the macro environment on the business? - The most direct correlation with the macro environment was seen in the 3D manufacturing segment, particularly in Japan's automotive market [79] Question: Is the service gross margin increase sustainable? - Management believes the service margin increase is sustainable, with minor fluctuations expected as efficiencies are explored [49]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-23081 FARO TECHNOLOGIES INC (Exact Name of Registrant as Specified in Its Charter) Florida 59-3157093 (State or o ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | |----------------------------------------------------------------------------|---------------------------------------------| | | | | | | | ...

Financial Data and Key Metrics Changes - Total sales for Q4 2018 were $112.8 million, an increase of 6.0% compared to $106.4 million in Q4 2017, primarily driven by higher unit sales across all segments and higher average selling prices [20][31] - New order bookings for Q4 2018 were $122.2 million, up 10.5% from $110.6 million in Q4 2017, supporting the sales force growth strategy [20][21] - Gross margin for Q4 2018 was 57.2%, down 1.1 percentage points from 58.3% in Q4 2017, reflecting the impact of the GSA cumulative sales adjustment [26] - Net income for Q4 2018 was $5.8 million or $0.33 per share, including a $1.0 million income tax benefit and a $3.9 million unfavorable after-tax impact from the GSA matter [29] Business Line Data and Key Metrics Changes - In the 3D manufacturing segment, sales for Q4 2018 were $75.6 million, a 6.6% increase from $70.9 million in the prior year, despite a $3.0 million reduction due to the GSA adjustment [22] - The construction BIM segment saw sales of $26.2 million in Q4 2018, a 1.7% increase from $25.8 million in Q4 2017, but fell short of growth expectations due to weaker demand [23] - Emerging vertical segment sales were $11.0 million in Q4 2018, a 13.7% increase from $9.7 million in the previous year, also impacted by the GSA adjustment [24] Market Data and Key Metrics Changes - The Asia Pacific region experienced a strong performance with approximately 16% year-over-year growth for the full year, particularly in Japan [38] - The automotive market faced disruptions due to plant closures and geographical shifts, while demand in the aerospace sector remained strong [36] Company Strategy and Development Direction - The company aims to continue increasing sales headcount by 15% throughout 2019, focusing on the construction BIM segment and expanding the 3D manufacturing sales headcount [14] - FARO is transitioning all software products to a subscription model to enhance recurring revenue streams, with a focus on maintaining customer relationships [9][10] - The company is committed to achieving a double-digit operating margin by the end of 2019, despite challenges from the GSA matter [34][69] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving sales growth and operational objectives, despite the GSA matter impacting Q4 results [34] - The company is focused on mitigating risks associated with economic disruptions and trade discussions by diversifying across geographies and verticals [54] - Management remains upbeat about overall demand for products, as reflected in the growth achieved in 2018 [37] Other Important Information - The company reported a cumulative sales adjustment of $4.8 million related to the GSA matter, which affected total sales and resulted in an estimated total liability of $5.3 million [12][19] - General and administrative expenses increased by 16.8% in Q4 2018, driven by headcount increases and costs associated with compliance and acquisitions [27][28] Q&A Session Summary Question: What are the fiscal year 2019 targets? - Management remains optimistic about achieving double-digit operating margins by the end of 2019, despite the GSA matter impacting results [34] Question: Are there specific areas of strength or weakness in end markets? - The automotive market is experiencing disruptions, while aerospace demand remains strong; Asia Pacific showed significant growth [36][38] Question: How large is the US government vertical? - Sales to the government represent approximately 3% of total sales, indicating it is not a major revenue driver but compliance is taken seriously [40] Question: What is the outlook for service gross margin improvement? - Management believes achieving a service margin above 50% is sustainable and will positively impact overall gross margin [41] Question: What is the status of the CEO search process? - The search for a new CEO is ongoing, with candidates being interviewed, but no specific timeline has been established [48] Question: How will headcount growth correlate with revenue? - Management expects headcount growth to drive sales growth, with initiatives in place to improve productivity metrics [50][53]