FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP

(UNAUDITED)

Three Months Ended March 31,

(dollars in thousands, except per share data)

2023

2022

Gross profit, as reported

$                       39,716

$                       41,026

Stock-based compensation ⁽¹⁾

272

199

Restructuring and other costs ⁽²⁾

435

—

Non-GAAP adjustments to gross profit

707

199

Non-GAAP gross profit

$                       40,423

$                       41,225

Gross margin, as reported

46.7 %

53.5 %

Non-GAAP gross margin

47.6 %

53.8 %

Selling, general and administrative, as reported

$                       41,376

$                       35,490

Stock-based compensation ⁽¹⁾

(2,568)

(2,221)

Purchase accounting intangible amortization

(673)

(201)

Non-GAAP selling, general and administrative

$                       38,135

$                       33,068

Research and development, as reported

$                       12,718

$                       12,128

Stock-based compensation ⁽¹⁾

(794)

(447)

Purchase accounting intangible amortization

(499)

(545)

Non-GAAP research and development

$                       11,425

$                       11,136

Operating expenses, as reported

$                       58,332

$                       48,218

Stock-based compensation ⁽¹⁾

(3,362)

(2,668)

Restructuring and other costs ⁽²⁾

(5,033)

600

Purchase accounting intangible amortization

(1,172)

(746)

Non-GAAP adjustments to operating expenses

(9,567)

(2,814)

Non-GAAP operating expenses

$                       48,765

$                       45,404

Loss from operations, as reported

$                      (18,616)

$                        (7,192)

Non-GAAP adjustments to gross profit

707

199

Non-GAAP adjustments to operating expenses

9,567

2,814

Non-GAAP loss from operations

$                        (8,342)

$                        (4,179)

Net loss, as reported

$                      (21,164)

$                        (9,687)

Non-GAAP adjustments to gross profit

707

199

Non-GAAP adjustments to operating expenses

9,567

2,814

Income tax effect of non-GAAP adjustments

(2,569)

(967)

Other tax adjustments ⁽³⁾

6,383

3,937

Non-GAAP net loss

$                        (7,076)

$                        (3,704)

Net loss per share - Diluted, as reported

$                          (1.12)

$                          (0.53)

Stock-based compensation ⁽¹⁾

0.19

0.16

Restructuring and other costs ⁽²⁾

0.29

0.03

Purchase accounting intangible amortization

0.06

0.04

Income tax effect of non-GAAP adjustments

(0.14)

(0.05)

Other tax adjustments ⁽³⁾

0.34

0.21

Non-GAAP net loss per share - Diluted

$                          (0.38)

$                          (0.14)

⁽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 7, 2023, our Board of Directors approved an integration plan (the "Integration Plan"), which is intended to streamline and simplify operations, particularly around our recent acquisitions and the resulting redundant operations and offerings. 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.