FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP
(UNAUDITED)

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands, except per share data)

2022

2021

2022

2021

Gross profit, as reported

$        43,265

$        42,331

$      124,728

$      128,220

Stock-based compensation ⁽¹⁾

273

190

756

470

Non-GAAP adjustments to gross profit

273

190

756

470

Non-GAAP gross profit

$        43,538

$        42,521

$      125,484

$      128,690

Gross margin, as reported

50.7 %

53.5 %

51.6 %

54.0 %

Non-GAAP gross margin

51.0 %

53.7 %

51.9 %

54.2 %

Selling, general and administrative, as reported

$        37,226

$        33,433

$      108,734

$      100,375

Stock-based compensation ⁽¹⁾

(2,742)

(2,581)

(7,475)

(6,789)

Purchase accounting intangible amortization

(180)

(276)

(562)

(649)

Non-GAAP selling, general and administrative

$        34,304

$        30,576

$      100,697

$        92,937

Research and development, as reported

$        12,586

$        12,731

$        36,756

$        36,464

Stock-based compensation ⁽¹⁾

(651)

(509)

(1,793)

(1,398)

Purchase accounting intangible amortization

(487)

(420)

(1,522)

(1,061)

Non-GAAP research and development

$        11,448

$        11,802

$        33,441

$        34,005

Operating expenses, as reported

$        50,392

$        47,540

$      148,002

$      140,518

Stock-based compensation ⁽¹⁾

(3,393)

(3,090)

(9,268)

(8,187)

Restructuring and other costs ⁽²⁾

(2,028)

(1,376)

(4,944)

(3,679)

Purchase accounting intangible amortization

(667)

(696)

(2,084)

(1,710)

Non-GAAP adjustments to operating expenses

(6,088)

(5,162)

(16,296)

(13,576)

Non-GAAP operating expenses

$        44,304

$        42,378

$      131,706

$      126,942

Loss from operations, as reported

$        (7,127)

$        (5,209)

$      (23,274)

$      (12,298)

Non-GAAP adjustments to gross profit

273

190

756

470

Non-GAAP adjustments to operating expenses

6,088

5,162

16,296

13,576

Non-GAAP (loss) income from operations

$            (766)

$              143

$        (6,222)

$          1,748

Net loss, as reported

$        (6,261)

$        (3,855)

$      (24,521)

$        (8,252)

Non-GAAP adjustments to gross profit

273

190

756

470

Non-GAAP adjustments to operating expenses

6,088

5,162

16,296

13,576

Income tax effect of non-GAAP adjustments

(1,272)

(1,619)

(4,014)

(4,241)

Other tax adjustments ⁽³⁾

1,720

—

8,903

—

Non-GAAP net income (loss)

$              548

$            (122)

$        (2,580)

$          1,553

Net loss per share - Diluted, as reported

$           (0.34)

$           (0.21)

$           (1.34)

$           (0.45)

Stock-based compensation ⁽¹⁾

0.20

0.18

0.55

0.48

Restructuring and other costs ⁽²⁾

0.11

0.07

0.27

0.20

Purchase accounting intangible amortization

0.04

0.04

0.11

0.09

Income tax effect of non-GAAP adjustments

(0.07)

(0.09)

(0.22)

(0.23)

Other tax adjustments ⁽³⁾

0.09

—

0.49

—

Non-GAAP net income (loss) per share - Diluted

$             0.03

$           (0.01)

$           (0.14)

$             0.09

⁽¹⁾ We exclude stock-based compensation, which is non-cash, from the non-GAAP financial measures because the Company believes that such exclusion provides a better comparison of results of ongoing operations for current and future periods with such results from past periods.

⁽²⁾ On February 14, 2020, our Board of Directors approved a global restructuring plan (the "Restructuring Plan"), which is intended to support our strategic plan in an effort to improve operating performance and ensure that we are appropriately structured and resourced to deliver increased and sustainable value to our shareholders and customers. The Restructuring and other costs primarily consist of severance and related benefits.

⁽³⁾ The other tax adjustments primarily relate to the impact of certain jurisdictions maintaining a full valuation allowance where benefit is not accrued on U.S. GAAP pre-tax book losses.