FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP

(UNAUDITED)

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands, except per share data)

2022

2021

2022

2021

Gross profit, as reported

$        40,437

$        45,482

$        81,462

$        85,889

Stock-based compensation ⁽¹⁾

284

214

483

280

Non-GAAP adjustments to gross profit

284

214

483

280

Non-GAAP gross profit

$        40,721

$        45,696

$        81,945

$        86,169

Gross margin, as reported

50.6 %

55.4 %

52.0 %

54.2 %

Non-GAAP gross margin

51.0 %

55.7 %

52.3 %

54.4 %

Selling, general and administrative, as reported

$        36,018

$        33,594

$        71,508

$        66,942

Stock-based compensation ⁽¹⁾

(2,512)

(2,526)

(4,733)

(4,208)

Purchase accounting intangible amortization

(181)

(188)

(382)

(373)

Non-GAAP selling, general and administrative

$        33,325

$        30,880

$        66,393

$        62,361

Research and development, as reported

$        12,042

$        11,760

$        24,170

$        23,733

Stock-based compensation ⁽¹⁾

(695)

(543)

(1,142)

(889)

Purchase accounting intangible amortization

(490)

(313)

(1,035)

(641)

Non-GAAP research and development

$        10,857

$        10,904

$        21,993

$        22,203

Operating expenses, as reported

$        49,393

$        46,133

$        97,610

$        92,978

Stock-based compensation ⁽¹⁾

(3,207)

(3,069)

(5,875)

(5,097)

Restructuring and other costs ⁽²⁾

(2,317)

(779)

(2,916)

(2,303)

Purchase accounting intangible amortization

(671)

(501)

(1,417)

(1,014)

Non-GAAP adjustments to operating expenses

(6,195)

(4,349)

(10,208)

(8,414)

Non-GAAP operating expenses

$        43,198

$        41,784

$        87,402

$        84,564

Loss from operations, as reported

$         (8,956)

$            (651)

$       (16,148)

$         (7,089)

Non-GAAP adjustments to gross profit

284

214

483

280

Non-GAAP adjustments to operating expenses

6,195

4,349

10,208

8,414

Non-GAAP (loss) income from operations

$         (2,477)

$          3,912

$         (5,457)

$          1,605

Net loss, as reported

$         (8,574)

$         (1,176)

$       (18,261)

$         (4,397)

Non-GAAP adjustments to gross profit

284

214

483

280

Non-GAAP adjustments to operating expenses

6,195

4,349

10,208

8,414

Income tax effect of non-GAAP adjustments

(1,775)

(1,144)

(2,742)

(2,622)

Other tax adjustments ⁽³⁾

3,246

—

7,183

—

Non-GAAP net (loss) income

$            (624)

$          2,243

$         (3,129)

$          1,675

Net loss per share - Diluted, as reported

$           (0.47)

$           (0.06)

$           (1.00)

$           (0.24)

Stock-based compensation ⁽¹⁾

0.19

0.18

0.35

0.30

Restructuring and other costs ⁽²⁾

0.13

0.04

0.16

0.13

Purchase accounting intangible amortization

0.04

0.02

0.08

0.05

Income tax effect of non-GAAP adjustments

(0.10)

(0.06)

(0.15)

(0.15)

Other tax adjustments ⁽³⁾

0.18

—

0.39

—

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

$           (0.03)

$             0.12

$           (0.17)

$             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.