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

Gross profit, as reported

$        43,307

$        39,716

Stock-based compensation ⁽¹⁾

330

272

Restructuring and other costs ⁽²⁾

8

435

Non-GAAP adjustments to gross profit

338

707

Non-GAAP gross profit

$        43,645

$        40,423

Gross margin, as reported

51.4 %

46.7 %

Non-GAAP gross margin

51.8 %

47.6 %

Selling, general and administrative, as reported

$        39,593

$        41,376

Stock-based compensation ⁽¹⁾

(3,942)

(2,568)

Purchase accounting intangible amortization

(543)

(673)

Non-GAAP selling, general and administrative

$        35,108

$        38,135

Research and development, as reported

$          9,024

$        12,718

Stock-based compensation ⁽¹⁾

(267)

(794)

Purchase accounting intangible amortization

(489)

(499)

Non-GAAP research and development

$          8,268

$        11,425

Operating expenses, as reported

$        48,617

$        58,332

Stock-based compensation ⁽¹⁾

(4,209)

(3,362)

Restructuring and other costs ⁽²⁾

(2,708)

(5,033)

Purchase accounting intangible amortization

(1,032)

(1,172)

Non-GAAP adjustments to operating expenses

(7,949)

(9,567)

Non-GAAP operating expenses

$        40,668

$        48,765

Loss from operations, as reported

$        (5,310)

$      (18,616)

Non-GAAP adjustments to gross profit

338

707

Non-GAAP adjustments to operating expenses

7,949

9,567

Non-GAAP loss from operations

$          2,977

$        (8,342)

Net loss, as reported

$        (7,267)

$      (21,164)

Non-GAAP adjustments to gross profit

338

707

Non-GAAP adjustments to operating expenses

7,949

9,567

Income tax effect of non-GAAP adjustments ⁽³⁾

(2,072)

(2,569)

Other tax adjustments ⁽⁴⁾

2,748

6,383

Non-GAAP net gain/(loss)

$          1,696

$        (7,076)

Net loss per share - Diluted, as reported

$           (0.38)

$           (1.12)

Stock-based compensation ⁽¹⁾

0.24

0.19

Restructuring and other costs ⁽²⁾

0.14

0.29

Purchase accounting intangible amortization

0.06

0.06

Income tax effect of non-GAAP adjustments ⁽³⁾

(0.11)

(0.14)

Other tax adjustments ⁽⁴⁾

0.14

0.34

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

$             0.09

$           (0.38)

⁽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. 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 associated with the Restructuring Plan, Integration Plan, and executive transitions.

⁽³⁾ The Income tax effect of non-GAAP adjustments is calculated by applying a statutory tax rate to Non-GAAP adjustments, including Stock-based compensation, Restructuring and other costs, and Purchase accounting intangible amortization.

⁽⁴⁾  When estimating our Non-GAAP income tax rate, we exclude the effect of items that impact our reported income tax rate that we do not believe are representative of our ongoing operating results, including the impact of valuation allowances we are currently recording in certain jurisdictions and certain discrete items such as adjustments to uncertain tax position reserves, as these items are difficult to predict and can impact our effective income tax rate.