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)

2023

2022

2023

2022

Gross profit, as reported

$        41,674

$        43,265

$      114,713

$      124,728

Stock-based compensation ⁽¹⁾

280

273

972

756

Inventory reserve charge ⁽³⁾

—

—

8,132

—

Restructuring and other costs ⁽²⁾

456

—

1,326

—

Non-GAAP adjustments to gross profit

736

273

10,430

756

Non-GAAP gross profit

$        42,410

$        43,538

$      125,143

$      125,484

Gross margin, as reported

48.0 %

50.7 %

44.1 %

51.6 %

Non-GAAP gross margin

48.9 %

51.0 %

48.1 %

51.9 %

Selling, general and administrative, as reported

$        37,970

$        37,226

$      117,907

$      108,734

Stock-based compensation ⁽¹⁾

(3,588)

(2,742)

(9,710)

(7,475)

Purchase accounting intangible amortization

(663)

(180)

(2,024)

(562)

Non-GAAP selling, general and administrative

$        33,719

$        34,304

$      106,173

$      100,697

Research and development, as reported

$          8,188

$        12,586

$        32,568

$        36,756

Stock-based compensation ⁽¹⁾

176

(651)

(1,594)

(1,793)

Purchase accounting intangible amortization

(501)

(487)

(1,541)

(1,522)

Non-GAAP research and development

$          7,863

$        11,448

$        29,433

$        33,441

Operating expenses, as reported

$        48,600

$        50,392

$      165,605

$      148,002

Stock-based compensation ⁽¹⁾

(3,411)

(3,393)

(11,304)

(9,268)

Restructuring and other costs ⁽²⁾

(2,495)

(2,028)

(16,337)

(4,944)

Purchase accounting intangible amortization

(1,164)

(667)

(3,565)

(2,084)

Non-GAAP adjustments to operating expenses

(7,070)

(6,088)

(31,206)

(16,296)

Non-GAAP operating expenses

$        41,530

$        44,304

$      134,399

$      131,706

Loss from operations, as reported

$        (6,926)

$        (7,127)

$      (50,892)

$      (23,274)

Non-GAAP adjustments to gross profit

737

273

10,430

756

Non-GAAP adjustments to operating expenses

7,070

6,088

31,206

16,296

Non-GAAP loss from operations

$              881

$            (766)

$        (9,256)

$        (6,222)

Net loss, as reported

$        (8,756)

$        (6,261)

$      (58,165)

$      (24,521)

Non-GAAP adjustments to gross profit

737

273

10,430

756

Non-GAAP adjustments to operating expenses

7,070

6,088

31,206

16,296

Income tax effect of non-GAAP adjustments

(1,952)

(1,272)

(10,409)

(4,014)

Other tax adjustments ⁽⁴⁾

3,358

1,720

17,700

8,903

Non-GAAP net gain/(loss)

$              457

$              548

$        (9,238)

$        (2,580)

Net loss per share - Diluted, as reported

$           (0.46)

$           (0.34)

$           (3.08)

$           (1.34)

Stock-based compensation ⁽¹⁾

0.19

0.20

0.65

0.55

Restructuring and other costs ⁽²⁾

0.16

0.11

0.93

0.27

Inventory reserve charge ⁽³⁾

—

—

0.43

—

Purchase accounting intangible amortization

0.06

0.04

0.19

0.11

Income tax effect of non-GAAP adjustments

(0.10)

(0.07)

(0.55)

(0.22)

Other tax adjustments ⁽⁴⁾

0.18

0.09

0.94

0.49

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

$             0.02

$             0.03

$           (0.49)

$           (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⁾ During the nine months ended September 30, 2023, we recorded a charge of $8.1 million, increasing our reserve for excess and obsolete inventory, based on our analysis of our inventory reserves in connection with our strategy to simplify our product portfolio and cease selling certain products.

⁽⁴⁾ 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.