FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP

TOTAL SALES, GROSS PROFIT AND GROSS MARGIN

(UNAUDITED)

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

2019

2018

2019

2018

Total sales, as reported

$

93,491

$

98,244

$

187,108

$

191,078

GSA sales adjustment ⁽¹⁾

5,805

—

5,840

—

Non-GAAP total sales

$

99,296

$

98,244

$

192,948

$

191,078

Three months ended June 30,

Six Months Ended June 30,

(dollars in thousands)

2019

% of
Sales

2018

% of
Sales

2019

% of
Sales

2018

% of
Sales

Gross profit and gross margin,
as reported

$

52,319

56.0

%

$

57,691

58.7

%

$

107,338

57.4

%

$

111,477

58.3

%

GSA sales adjustment ⁽¹⁾

5,805

6.2

%

—

—

%

5,840

3.1

%

—

—

%

Non-GAAP gross profit and
gross margin

$

58,124

58.5

%

$

57,691

58.7

%

$

113,178

58.7

%

$

111,477

58.3

%

⁽¹⁾ Late in the fourth quarter of 2018, during an internal review we preliminarily determined that certain of our pricing practices may have resulted in the U.S. Government being overcharged under our General Services Administration ("GSA") Federal Supply Schedule contracts (the "Contracts"). In fourth quarter 2018, we reduced our total sales by an estimated cumulative adjustment of $4.8 million. We also retained outside legal counsel and forensic accountants to conduct a comprehensive review of our pricing and other practices under the Contracts (the "Review"). On July 15, 2019, we submitted a report to the GSA and its Office of Inspector General setting forth the findings of the Review. Based on the results of the Review, in second quarter 2019 we reduced our total sales by an incremental $5.8 million (the "GSA sales adjustment").