FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three Months Ended

(in thousands)

March 31, 2018

March 31, 2017

Cash flows from:

Operating activities:

Net income (loss)

$

455

$

(1,461)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization

4,343

3,718

Stock-based compensation

1,553

1,417

Provision for bad debts

24

89

Loss on disposal of assets

127

77

Provision for excess and obsolete inventory

312

567

Deferred income tax (benefit) expense

(128)

6

Change in operating assets and liabilities:

Decrease (increase) in:

Accounts receivable

1,808

1,722

Inventories

(5,208)

(2,480)

Prepaid expenses and other current assets

(936)

(1,181)

(Decrease) increase in:

Accounts payable and accrued liabilities

(4,846)

(2,442)

Income taxes payable

(2,571)

(618)

Customer deposits

(213)

(123)

Unearned service revenues

1,231

430

Net cash used in operating activities

(4,049)

(279)

Investing activities:

Purchases of property and equipment

(2,243)

(1,745)

Payments for intangible assets

(650)

(332)

Acquisition of businesses

(3,966)

—

Net cash used in investing activities

(6,859)

(2,077)

Financing activities:

Payments on capital leases

(46)

(2)

Proceeds from issuance of stock related to stock option exercises

6,785

268

Net cash provided by financing activities

6,739

266

Effect of exchange rate changes on cash and cash equivalents

2,035

1,779

Decrease in cash and cash equivalents

(2,134)

(311)

Cash and cash equivalents, beginning of period

140,960

106,169

Cash and cash equivalents, end of period

$

138,826

$

105,858