FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP

(UNAUDITED)

Three Months Ended December 31,

Twelve Months Ended December 31,

(dollars in thousands, except per share data)

2022

2021

2022

2021

Gross profit, as reported

$        51,035

$        55,707

$      175,763

$      183,927

Stock-based compensation ⁽¹⁾

294

165

1,050

635

Purchase accounting intangible amortization and

fair value adjustments

3,550

—

3,550

—

Non-GAAP adjustments to gross profit

3,844

165

4,600

635

Non-GAAP gross profit

$        54,879

$        55,872

$      180,363

$      184,562

Gross margin, as reported

49.1 %

55.6 %

50.8 %

54.4 %

Non-GAAP gross margin

52.8 %

55.8 %

52.2 %

54.6 %

Selling, general and administrative, as reported

$        37,923

$        35,859

$      146,657

$      136,234

Stock-based compensation ⁽¹⁾

(2,179)

(2,196)

(9,654)

(8,985)

Purchase accounting intangible amortization

(811)

(259)

(1,373)

(908)

Non-GAAP selling, general and administrative

$        34,933

$        33,404

$      135,630

$      126,341

Research and development, as reported

$        12,659

$        12,297

$        49,415

$        48,761

Stock-based compensation ⁽¹⁾

(818)

(438)

(2,611)

(1,836)

Purchase accounting intangible amortization

(488)

(1,072)

(2,010)

(2,133)

Non-GAAP research and development

$        11,353

$        10,787

$        44,794

$        44,792

Operating expenses, as reported

$        52,684

$        51,845

$      200,686

$      192,363

Stock-based compensation ⁽¹⁾

(2,997)

(2,634)

(12,265)

(10,821)

Restructuring and other costs ⁽²⁾

(2,604)

(3,689)

(7,548)

(7,368)

Purchase accounting intangible amortization

(1,299)

(1,331)

(3,383)

(3,041)

Non-GAAP adjustments to operating expenses

(6,900)

(7,654)

(23,196)

(21,230)

Non-GAAP operating expenses

$        45,784

$        44,191

$      177,490

$      171,133

(Loss) Income from operations, as reported

$        (1,649)

$          3,862

$      (24,923)

$        (8,436)

Non-GAAP adjustments to gross profit

3,844

165

4,600

635

Non-GAAP adjustments to operating expenses

6,900

7,654

23,196

21,230

Non-GAAP income from operations

$          9,095

$        11,681

$          2,873

$        13,429

Net loss, as reported

$        (2,235)

$      (31,712)

$      (26,756)

$      (39,964)

Non-GAAP adjustments to gross profit

3,844

165

4,600

635

Non-GAAP adjustments to operating expenses

6,900

7,654

23,196

21,230

Income tax effect of non-GAAP adjustments

(2,149)

(1,191)

(6,163)

(5,432)

Other tax adjustments ⁽³⁾

772

33,779

9,675

33,779

Non-GAAP net income

$          7,132

$          8,695

$          4,552

$        10,248

Net loss per share - Diluted, as reported

$           (0.12)

$           (1.74)

$           (1.46)

$           (2.20)

Stock-based compensation ⁽¹⁾

0.18

0.16

0.73

0.63

Restructuring and other costs ⁽²⁾

0.14

0.20

0.41

0.40

Purchase accounting intangible amortization and
fair value adjustments

0.25

0.07

0.37

0.17

Income tax effect of non-GAAP adjustments

(0.11)

(0.06)

(0.33)

(0.30)

Other tax adjustments ⁽³⁾

0.04

1.85

0.53

1.86

Non-GAAP net income per share - Diluted

$             0.38

$             0.48

$             0.25

$             0.56

⁽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.