EFI Q Earnings Call. January 25, 2017

Transcription

1 EFI Q Earnings Call January 25, 2017

2 Safe Harbor For Forward-Looking Statements Certain statements in this presentation are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements other than statements of historical fact including words such as anticipate, believe, consider, continue, develop, estimate, expect, look, and plan and statements in the future tense are forward looking statements. The statements in this presentation that could be deemed forward-looking statements include statements regarding EFI s strategy, plans, expectations regarding its revenue growth, product portfolio, productivity, future opportunities for EFI and its customers, demand for products, and any statements or assumptions underlying any of the foregoing. Forward-looking statements are subject to certain risks and uncertainties that could cause our actual future results to differ materially, or cause a material adverse impact on our results. Potential risks and uncertainties include, but are not necessarily limited to potential differences between the results disclosed in this release and the Company s final results when disclosed in its Annual Report on Form 10-K as a result of developments that may arise between now and the disclosure of the final results; intense competition in each of our businesses, including competition from products developed by EFI s customers; unforeseen expenses; fluctuations in currency exchange rates; the difficulty of aligning expense levels with revenue; management s ability to forecast revenues, expenses and earnings; our ability to successfully integrate acquired businesses; changes in the mix of products sold; the uncertainty of market acceptance of new product introductions; challenge of managing asset levels, including inventory and variations in inventory levels; the uncertainty of continued success in technological advances; the challenges of obtaining timely, efficient and quality product manufacturing and supply of components; any world-wide financial and economic difficulties and downturns; adverse tax-related matters such as tax audits, changes in our effective tax rate or new tax legislative proposals; the unpredictability of development schedules and commercialization of products by the leading printer manufacturers and declines or delays in demand for our related products; the impact of changing consumer preferences on demand for our textile products; litigation involving intellectual property rights or other related matters; the uncertainty regarding the amount and timing of future share repurchases by EFI and the origin of funds used for such repurchases; the market prices of EFI's common stock prior to, during and after the share repurchases; and any other risk factors that may be included from time to time in the Company s SEC reports. have filed its Annual Report on Form 10-K for the fiscal year ended December 31, EFI undertakes no obligation to update information contained in this presentation. For further information regarding risks and uncertainties associated with EFI s businesses, please refer to the section entitled Risk Factors in the Company s SEC filings, including, but not limited to, its annual report on Form 10-K and its quarterly reports on Form 10-Q, copies of which may be obtained by contacting EFI s Investor Relations Department by phone at or by at investor.relations@efi.com or EFI s Investor Relations website at 2

3 Q Financial Summary Record Q4 revenue of $266.7M, +4% YoY Industrial Inkjet revenue of $154M, +8% YoY Fiery revenue of $70M, -8% YoY Productivity Software revenue of $43M, +11% YoY Recurring revenue of $78M, +11% YoY; 29% of total revenue Total Ink volume, +24% YoY Non-GAAP Gross Margin of 52.9%, +230 bps YoY despite product mix Non-GAAP Operating Income of $46M, +20%; 17.3% of revenue Non-GAAP EBITDA of $50M, +18%; 18.7% of revenue Non-GAAP EPS of $0.77 compared to $0.61 in Q4 2015, +26% YoY Record Cash flow from operating activities of $65M for Q4, +141% YoY $121M Cash flow from operating activities in FY 2016, +77% YoY 3

4 Earnings Comparison Guidance Actual Revenue Guidance ($M) Q (Using October '16 FX Rates) Q Reported Q (Using October '16 FX Rates)* *Currency impact calculated by applying October 2016 foreign exchange rates to Q See our description of our use of non-gaap information for a more complete explanation of our determination of ex currency amounts. ** This is a Non-GAAP metric and Currency impact calculated by applying Q monthly foreign exchange rates to Q See our description of our use of non-gaap information for a more complete explanation of our determination of ex currency amounts. Q (Using Q FX Rates)** Total Revenue $ $267 $270 $270 YoY % 5-7% 4% 5% 5% Industrial Inkjet YoY % 13-16% 8% 10% 10% Productivity Software Fiery High Single to Low Low Double Digit YoY % YoY % Double Digit Decline 11% -8% 12% -8% 12% -8% Non-GAAP Gross Margin ~50-51% 53% 53% 53% Non-GAAP Operating Income 16-17% 17% 18% 18% Non-GAAP EPS $ $0.77 $0.80 $0.80 YoY % 16-25% 26% 32% 32% The statements in this presentation made as of the date of this presentation and are subject to revision until the Company will have filed its Annual Report on Form 10-K for the fiscal year ended December 31, EFI undertakes no obligation to update 4

5 Revenue Impact from Currency Q Currency 2016 Currency 2016 Revenue ($M) Q (Using Q (Using 2015 YTD (Using October 2013 FX Rates * ) Impact FX Rates ** ) Impact FX Rates *** ) Total Revenue $267 $270-1 pts $992 $1,002-2 pts $1,064 YoY % 4% 5% 12% 14% 21% Industrial Inkjet $154 $156 $563 $570 $623-2 pts -1 pts YoY % 8% 10% 26% 27% 39% Productivity Software $43 $44 $152 $154 $162-1 pts -2 pts YoY % 11% 12% 12% 14% 20% Fiery $70 $70 - pts $278 $278 - pts $278 YoY % -8% -8% -7% -7% -7% Americas $136 $136 $500 $501 $505 - pts - pts YoY % 0% 0% 6% 6% 7% EMEA $96 $98 $360 $368 $417-2 pts -2 pts YoY % 12% 14% 24% 26% 43% APAC $34 $35 $131 $134 $142-2 pts -1 pts YoY % 1% 3% 12% 13% 21% Currency Impact -9 pts -13 pts -8 pts - pts -1 pts -19 pts -9 pts * This is a Non-GAAP metric and currency impact is calculated by applying Q monthly foreign exchange rates to Q See our description of our use of non-gaap information for a more complete explanation of our determination of ex currency amounts. **This is a Non-GAAP metric and currency impact is calculated by applying FY 2015 monthly foreign exchange rates to FY See our description of our use of non-gaap information for a more complete explanation of our determination of ex currency amounts. *** This is a Non-GAAP metric and currency impact is calculated by applying October 2013 foreign exchange rates to FY See our description of our use of non-gaap information for a more complete explanation of our determination of ex currency amounts. information contained in this presentation. 5

6 Impact from Currency (Non-GAAP) Non-GAAP Q Currency 2016 Q (Using Q (Using 2015 YTD ($M) FX Rates * ) Impact FX Rates * ) Total Revenue $267 $270-1 pts $992 $1,002 YoY % 4% 5% 12% 14% Gross Margin 52.9% 53.0% -10 bps 51.6% 51.6% YoY Variance 230 bps 240 bps -80 bps -80 bps Industrial Inkjet 37.4% 37.8% -40 bps 35.5% 35.7% YoY Variance 350 bps 390 bps 130 bps 150 bps Productivity Software 76.9% 76.7% +20 bps 75.2% 75.0% YoY Variance 200 bps 180 bps 190 bps 170 bps Fiery 72.1% 72.1% 71.4% 71.4% 0 bps YoY Variance 270 bps 270 bps 120 bps 120 bps Currency Impact -2 pts 0 bps -20 bps +20 bps 0 bps Operating Income $46 $47 $148 $150-3 pts YoY % 20% 23% 15% 17% EBITDA $50 $51 $162 $164-3 pts -1 pts YoY % 18% 21% 15% 16% Non-GAAP EPS $0.77 $0.80 $2.44 $2.52 -$0.03 YoY % 26% 31% 20% 24% -2 pts -$0.08 * This is a Non-GAAP metric and currency impact is calculated by applying Q monthly foreign exchange rates to Q See our description of our use of non-gaap information for a more complete explanation of our determination of ex currency amounts. 6

7 Q Guidance Revenue Guidance ($M) Non-GAAP Gross Margin Q (Using Current FX Rates) Industrial Inkjet in the mid-30% range and Total EFI ~51-53% Non-GAAP Operating Income of approximately 15-16% of revenue Non-GAAP EPS of $ , ex-currency $ Q (Using Q FX Rates * ) Total Revenue $ $ YoY % Low Single Digit 2% - 4% Industrial Inkjet YoY % Productivity Software YoY % Fiery YoY % Mid to High Single Digits High Single to Low Double Digits Low Double Digit Decline High Single to Low Double Digits Low Double Digit Low Double Digit Decline 7

8 Reconciliation of GAAP to Non-GAAP Q Guidance Q Guidance ($M) (Using Current FX Rates) Gross Margin approx 51-53% Non-GAAP Gross Margin approx 51-53% Operating Income 5% -6% of revenue Non-GAAP Operating Income 15% - 16% of revenue GAAP net income per diluted common share $ $0.07 Non-GAAP net income per diluted common share $ $0.57 Shares used in diluted per share calculation 47,440 8

9 Q Summary $M Q Q QoQ % Q YoY % Revenue $ $ % $ % Non-GAAP Net Income* % % GAAP Net Income* % % Non-GAAP Operating Expenses % % GAAP Operating Expenses (4%) % Non-GAAP Gross Margin % 52.9% 51.2% +170 bps 50.6% +230 bps GAAP Gross Margin % 52.5% 51.0% +150 bps 50.4% +210 bps Non-GAAP EPS % % GAAP EPS % % Non-GAAP Operating Profit % % GAAP Operating Profit % % Non-GAAP Operating Profit % 17.3% 14.0% +330 bps 15.0% +230 bps GAAP Operating Profit % 10.7% 3.8% +680 bps 7.6% +310 bps *Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of

10 2016 Summary $M YoY % Revenue $ $ % Non-GAAP Net Income* % GAAP Net Income* % Non-GAAP Operating Expenses % GAAP Operating Expenses % Non-GAAP Gross Margin % 51.6% 52.4% -80 bps GAAP Gross Margin % 51.3% 52.1% -80 bps Non-GAAP EPS % GAAP EPS % Non-GAAP Operating Profit % GAAP Operating Profit (0%) Non-GAAP Operating Profit % 14.9% 14.5% +40 bps GAAP Operating Profit % 5.7% 6.4% -70 bps *Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of

11 Revenue by Segment & Region Revenue ($M) Q Q QoQ % Q YoY % Industrial Inkjet % % % of Total 58% 58% 55% Productivity Software % % % of Total 16% 16% 15% Fiery % 75.8 (8%) % of Total 26% 26% 30% Americas % (0%) % of Total 51% 52% 53% EMEA % % % of Total 36% 35% 34% APAC % % % of Total 13% 13% 13% EFI $ $ % $ % 11

12 2016 Revenue by Segment & Region Revenue ($M) YoY % Inkjet % % of Total 57% 51% Productivity Software % % of Total 15% 15% Fiery (7%) % of Total 28% 34% Americas % % of Total 51% 54% EMEA % % of Total 36% 33% APAC % % of Total 13% 13% EFI $ $ % 12

13 Q Key Performance Metrics * * 13

14 Operating Expenses Non-GAAP Non-GAAP Operating Expenses ($M) Q Q QoQ % Q YoY % Research & Development % % % of Revenue 14.0% 14.2% -20 bps 14.0% - bps Sales & Marketing (2%) 41.1 (2%) % of Revenue 15.0% 16.6% -160 bps 16.0% -100 bps General & Administrative % % % of Revenue 6.6% 6.4% +20 bps 5.6% +100 bps EFI % % % of Revenue 35.6% 37.2% -160 bps 35.5% +10 bps 14

15 Q GAAP to Non-GAAP Expense Bridge Operating Expenses ($M) GAAP Stock Based Comp Exp Amort of Identifited Intangibles Acquisition Related Transaction Costs Restruct. & Other Personnel & Facilities Restruct. & Other Integration Special Items* Non-GAAP Cost of Sales (1.1) % of Revenue 47.5% (0.4%) % Operating Expenses (4.1) (10.2) (0.5) (0.3) (0.7) (0.7) 95.0 % of Revenue 41.8% (1.5%) (3.8%) (0.2%) (0.1%) (0.3%) (0.3%) 35.6% Research & Development 39.5 (2.1) % of Revenue 14.8% (0.8%) % Sales & Marketing 41.7 (1.6) % of Revenue 15.6% (0.6%) % General & Administrative 19.3 (0.5) - (0.5) - - (0.7) 17.5 % of Revenue 7.2% (0.2%) - (0.2%) - - (0.3%) 6.6% Amortization of Intangibles (10.2) % of Revenue 3.8% - (3.8%) Restructuring & Other (0.3) (0.7) - - % of Revenue 0.4% (0.1%) (0.3%) - - EFI (5.2) (10.2) (0.5) (0.3) (0.7) (0.7) % of Revenue 89.3% (1.9%) (3.8%) (0.2%) (0.1%) (0.3%) (0.3%) 82.7% Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of * Represents the change in fair value of contingent consideration and litigation settlements. 15

16 FY 2016 GAAP to Non-GAAP Operating Expenses Bridge Operating Expenses ($M) GAAP Stock Based Comp Exp Amort of Identifited Intangibles Acquisition Related Transaction Costs Restruct. & Other Personnel & Facilities Restruct. & Other Integration Special Items* Non-GAAP Cost of Sales (3.2) (0.0) % of Revenue 48.7% (0.3%) (0.0%) 48.4% Operating Expenses (31.7) (39.5) (2.3) (4.6) (2.1) (7.9) % of Revenue 45.6% (3.2%) (4.0%) (0.2%) (0.5%) (0.2%) (0.8%) 36.7% Research & Development (10.7) % of Revenue 15.2% (1.1%) % Sales & Marketing (8.3) % of Revenue 17.0% (0.8%) % General & Administrative 85.7 (12.8) - (2.3) - - (7.9) 62.7 % of Revenue 8.6% (1.3%) - (0.2%) - - (0.8%) 6.3% Amortization of Intangibles (39.5) % of Revenue 4.0% - (14.8%) Restructuring & Other (4.6) (2.1) - - % of Revenue 0.7% (0.5%) (0.2%) - - EFI (34.9) (39.5) (2.3) (4.6) (2.1) (7.9) % of Revenue 94.3% (3.5%) (4.0%) (0.2%) (0.5%) (0.2%) (0.8%) 85.1% Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of * Represents the change in fair value of contingent consideration and litigation settlements. 16

17 Condensed Consolidated Statement of Operations Three Months Ended Years Ended December 31, December 31, Ex-Currency Ex-Currency Ex-Currency Oct 2013 Rates Net income $ 20,546 $ 10,329 $ 20,546 $ 45,546 $ 33,540 $ 45,546 $ 45,546 Amortization of identified intangibles 10,200 8,390 10,200 39,560 26,510 39,560 39,560 Ex-currency adjustment 1,287 1,722 10,230 Stock based compensation Cost of revenue 1, ,065 3,252 2,951 3,252 3,252 Stock based compensation Research and development 2,065 1,657 2,065 10,696 9,910 10,696 10,696 Stock based compensation Sales and marketing 1,573 1,141 1,573 8,242 7,926 8,242 8,242 Stock based compensation General and administrative 482 2, ,696 14,637 12,696 12,696 Restructuring and other 996 3, ,729 5,731 6,729 6,729 General and administrative: - Acquisition-related transaction costs 541 1, ,241 5,494 2,241 2,241 Changes in fair value of contingent consideration ,939 (2,135) 6,939 6,939 Litigation settlements , ,027 1,027 Interest income and other (income) expense, net - Non-cash interest expense related to our convertible notes 3,163 2,997 3,163 12,400 11,781 12,400 12,400 Foreign exchange fluctuation related to contingent consider ,049 1,049 1,049 Balance sheet currency remeasurement impact 1,029 2,767 2,767 Tax effect of non-gaap adjustments (5,643) (3,020) (6,082) (33,565) (18,990) (34,417) (36,035) Non-GAAP net income $ 36,320 $ 29,435 $ 38,197 $ 116,812 $ 97,939 $ 120,449 $ 127,339 Non-GAAP net income per diluted common share $ 0.77 $ 0.61 $ 0.80 $ 2.44 $ 2.03 $ 2.52 $ 2.66 Shares used in diluted per share calculation 47,460 48,447 47,460 47,797 48,150 47,797 47,797 Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of

18 Key Balance Sheet Figures Key Balance Sheet Figures ($M) Q Q Q Total Cash & Investments $ 460 $ 449 $ 497 Cash Conversion Cycle (CCC) Accounts Receivable (net) $ 221 $ 222 $ 193 DSO Inventory (net) $ 99 $ 107 $ 106 Inventory Turns Accounts Payable (net) $ 114 $ 102 $ 114 DPO Total Assets $ 1,480 $ 1,489 $ 1,450 Convertible Debt* $ $ $ Cash Flow from Operations $ 65.2 $ 24.0 $ 27.1 *Debt Issuance Costs. ASU , Simplifying the Presentation of Debt Issuance Costs, requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt, which is consistent with the presentation of debt discounts and premiums. Retrospective application is required information contained in this presentation. 18

19 Key Cash and Valuation Metrics ($M) Q Q QoQ % Q YoY % Cash Metrics Cash Flow From Operations $ 65.2 $ % $ % % of Non-GAAP Net Income 179% 87% +9,160 bps 92% +8,660 bps LTM* Cash Flow From Operations $ $ % $ % % of Non-GAAP Net Income 104% 75% +2,830 bps 70% +3,390 bps Valuation Metrics ** Enterprise Value (EV)*** $ 1,948 $ 2,181 (11%) $ 2,058 (5%) EV Multiple of LTM EBITDA**** (15%) 14.6 (18%) EV Multiple of LTM Revenue***** (12%) 2.3 (16%) P/E Ratio (15%) 23.0 (21%) Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of * Last 12 months ending on the last day of the third calendar month of the quarter indicated ** Calculated using closing common stock share price on last trading day of the quarter indicated *** Market Cap Cash and short-term investments + Long-Term Bond Payable **** EV/EBITDA ***** EV/Revenue 19 information contained in this presentation.

20 Details of LTM Cash Flow from Operations LTM Cash Flow from Operations ($M) Q Q Q Q LTM Q LTM Q $ 9.0 $ 22.9 $ 24.0 $ 65.2 $ LTM Cash Flow from Operations ($M) Q Q Q Q LTM Q LTM Q $ 27.1 $ 9.0 $ 22.9 $ 24.0 $ 83.0 LTM Cash Flow from Operations ($M) Q Q Q Q LTM Q LTM Q $ 7.2 $ 24.8 $ 9.2 $ 27.1 $ 68.3 Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of information contained in this presentation. 20

21 Appendix 21

22 Convertible Debt Offering Summary Issuer: Electronics For Imaging, Inc. Security: Convertible Senior Notes due 2019 Ranking: Senior Unsecured Maturity 5 years Call Protection: Non-Call 5 Years Coupon: 0.75% Conversion Premium: 22.5% Size: $300MM Greenshoe: $45MM Approximate Conversion Price (1) $52.72 Approximate Shares Underlying Convertible 6.5MM Bond Hedge Strike (%) / Bond Hedge Cost ($) 22.5% / $63.9MM Warrant Strike (%) / Warrant Proceeds ($) 60% / $34.5MM Net Premium / % of Proceeds $29.4MM / 8.52% Net Proceeds $308MM Effective Pre-tax Interest Rate on Proceeds (incl. BH+W Cost) 2.58% Effective After-tax Interest Rate on Proceeds (2) 1.50% Offering: 144A / One-Day Marketed Bookrunners: Morgan Stanley and Goldman Sachs Notes 1. Reference price of $ Assumes 23% tax rate information contained in this presentation. 22

23 Convertible Debt Share Count Impact Share Price Cash Conversion (Principal) GAAP Diluted Share Count Impact Actual Share Count Dilution (millions) (shares) (shares) Price at Offering Date $ $ Conversion Price Warrant Strike Price We have elected cash conversion, which allows use of the treasury stock method to calculate the GAAP diluted share count impact (use of the if-converted method would have resulted in immediate GAAP dilution of 6.5M shares) We have hedged the convertible debt dilution with a bond hedge. As a result, there is no actual share count dilution from the convertible debt conversion However, the impact of the bond hedge is considered to be antidilutive and must be ignored for purposes of determining the GAAP diluted share count impact Actual share dilution begins at the warrant strike price of $68.86 as the warrant Is not hedged. information contained in this presentation. 23

24 2016 Revenue by Business Segment Revenue ($M) Q Q Q Q Industrial Inkjet $ $ $ $ $ YoY Change 44% 47% 17% 8% 26% Productivity Software YoY Change 5% 8% 25% 11% 12% Fiery YoY Change 0% -6% -15% -8% -7% Total Revenue $ $ $ $ $ YoY Change 20% 21% 7% 4% 12% information contained in this presentation. 24

25 2015 Revenue by Business Segment Revenue ($M) Q Q Q Q Industrial Inkjet $ 87.6 $ 95.6 $ $ $ YoY Change 0% 2% 28% 39% 18% Productivity Software YoY Change -2% 10% -6% 12% 4% Fiery YoY Change 10% 7% 9% 2% 7% Total Revenue $ $ $ $ $ YoY Change 3% 5% 16% 21% 12% information contained in this presentation. 25

26 2014 Revenue by Business Segment Revenue ($M) Q Q Q Q Industrial Inkjet $ 87.9 $ 93.9 $ 95.5 $ $ YoY Change 10% 7% 10% 3% 7% Productivity Software YoY Change 14% 8% 18% 3% 10% Fiery YoY Change 9% 7% 9% 16% 10% Total Revenue $ $ $ $ $ YoY Change 10% 7% 11% 7% 9% information contained in this presentation. 26

27 2013 Revenue by Business Segment information contained in this presentation. 27

28 2012 Revenue by Business Segment information contained in this presentation. 28

29 2016 Gross Margin by Business Segment Non-GAAP Non-GAAP Gross Margin % Q Q Q Q Industrial Inkjet 33.7% 35.0% 35.3% 37.4% 35.5% YoY Change -10 bps +60 bps +70 bps +350 bps +130 bps Productivity Software 72.8% 74.9% 75.7% 76.9% 75.2% YoY Change +70 bps +180 bps +270 bps +200 bps +190 bps Fiery 70.3% 71.3% 72.1% 72.1% 71.4% YoY Change -140 bps +90 bps +290 bps +270 bps +120 bps Total Gross Margin 51.0% 51.1% 51.2% 52.9% 51.6% YoY Change -370 bps -270 bps - bps +230 bps -80 bps 29

30 2015 Gross Margin by Business Segment Non-GAAP Non-GAAP Gross Margin % Q Q Q Q Industrial Inkjet 33.8% 34.4% 34.6% 33.9% 34.2% YoY Change -350 bps -410 bps -490 bps -280 bps -380 bps Productivity Software 72.1% 73.1% 73.0% 74.9% 73.3% YoY Change - bps +100 bps +70 bps +160 bps +80 bps Fiery 71.7% 70.4% 69.2% 69.4% 70.2% YoY Change +240 bps +300 bps -20 bps -50 bps +120 bps Total Gross Margin 54.7% 53.8% 51.2% 50.6% 52.4% YoY Change -20 bps -30 bps -420 bps -380 bps -230 bps 30

31 2014 Gross Margin by Business Segment Non-GAAP Non-GAAP Gross Margin % Q Q Q Q Industrial Inkjet 37.3% 38.5% 39.5% 36.7% 38.0% YoY Change -250 bps -150 bps -30 bps -190 bps -150 bps Productivity Software 72.1% 72.1% 72.3% 73.3% 72.5% YoY Change +20 bps +110 bps +80 bps -10 bps +50 bps Fiery 69.3% 67.4% 69.4% 69.9% 69.0% YoY Change +230 bps - bps +190 bps +210 bps +160 bps Total Gross Margin 54.9% 54.1% 55.4% 54.4% 54.7% YoY Change -10 bps -50 bps +80 bps +40 bps +10 bps 31

32 Gross Margin by Business Segment Non-GAAP Non-GAAP Gross Margin % Q Q QoQ % Q YoY % Industrial Inkjet 37.4% 35.3% +210 bps 33.9% +350 bps Productivity Software 76.9% 75.7% +120 bps 74.9% +200 bps Fiery 72.1% 72.1% - bps 69.4% +270 bps EFI 52.9% 51.2% +170 bps 50.6% +230 bps 32

33 Reconciliation of GAAP to Non-GAAP Gross Margin: GAAP to Non-GAAP Reconciliation ($M) Q115 Q215 Q315 Q415 FY15 Q116 Q216 Q316 Q416 FY16 GAAP Gross Margin ADJUSTMENTS COGS: Stock Based Compensation Expense NON-GAAP Gross Margin $ $ $ $ $ $ $ $ $ $

34 Q GAAP to Non-GAAP Expense Bridge Operating Expenses ($M) GAAP Stock Based Comp Exp Amort of Identifited Intangibles Acquisition Related Transaction Costs Restruct. & Other Personnel & Facilities Restruct. & Other Integration Special Items* Non-GAAP Cost of Sales (0.5) % of Revenue 49.6% (0.2%) % Operating Expenses (5.4) (8.4) (1.3) (1.7) (1.5) (0.3) 91.2 % of Revenue 42.8% (2.1%) (3.3%) (0.5%) (0.7%) (0.6%) (0.1%) 35.5% Research & Development 37.5 (1.7) % of Revenue 14.6% (0.7%) % Sales & Marketing 42.2 (1.1) % of Revenue 16.5% (0.4%) % General & Administrative 18.5 (2.6) - (1.3) - - (0.3) 14.3 % of Revenue 7.2% (1.0%) - (0.5%) - - (0.1%) 5.6% Amortization of Intangibles (8.4) % of Revenue 3.3% - (3.3%) Restructuring & Other (1.7) (1.5) - - % of Revenue 1.2% (0.7%) (0.6%) - - EFI (5.9) (8.4) (1.3) (1.7) (1.5) (0.3) % of Revenue 96.5% (2.4%) (3.4%) (0.5%) (0.7%) (0.6%) (0.1%) 88.8% * Represents the change in fair value of contingent consideration 34

35 FY 2015 GAAP to Non-GAAP Operating Expenses Bridge Operating Expenses ($M) GAAP Stock Based Comp Exp Amort of Identifited Intangibles Acquisition Related Transaction Costs Restruct. & Other Personnel & Facilities Restruct. & Other Integration Special Items* Non-GAAP Cost of Sales (2.9) % of Revenue 48.0% (0.3%) % Operating Expenses (32.4) (26.6) (5.6) (0.9) (4.9) % of Revenue 45.6% (3.7%) (3.0%) (0.6%) (0.1%) (0.6%) 0.2% 37.9% Research & Development (9.9) % of Revenue 16.0% (1.1%) % Sales & Marketing (7.9) % of Revenue 17.7% (0.9%) % General & Administrative 72.8 (14.6) - (5.6) % of Revenue 8.2% (1.7%) - (0.6%) % 6.1% Amortization of Intangibles (26.6) % of Revenue 3.0% - (3.0%) Restructuring & Other (0.9) (4.9) - - % of Revenue 0.6% (0.1%) (0.6%) - - EFI (35.3) (26.6) (5.6) (0.9) (4.9) % of Revenue 93.6% (4.0%) (3.0%) (0.6%) (0.1%) (0.6%) 0.2% 85.5% Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of * Represents the change in fair value of contingent consideration and litigation settlements. 35

36 Q GAAP to Non-GAAP Expense Bridge Operating Expenses ($M) GAAP Stock Based Comp Exp Amort of Identifited Intangibles Acquisition Related Transaction Costs Restruct. & Other Personnel & Facilities Restruct. & Other Integration Special Items* Non-GAAP Cost of Sales (0.6) % of Revenue 49.0% (0.2%) % Operating Expenses (8.0) (10.4) (0.4) (0.7) (0.6) (4.3) 91.4 % of Revenue 47.1% (3.2%) (4.2%) (0.2%) (0.3%) (0.2%) (1.8%) 37.2% Research & Development 37.0 (2.1) % of Revenue 15.0% (0.9%) % Sales & Marketing 43.1 (2.3) % of Revenue 17.5% (0.9%) % General & Administrative 24.0 (3.6) - (0.4) - - (4.3) 15.7 % of Revenue 9.8% (1.5%) - (0.2%) - - (1.8%) 6.4% Amortization of Intangibles (10.4) % of Revenue 4.2% - (4.2%) Restructuring & Other (0.7) (0.6) - - % of Revenue 0.5% (0.3%) (0.2%) - - EFI (8.6) (10.4) (0.4) (0.7) (0.6) (4.3) % of Revenue 96.2% (3.5%) (4.2%) (0.2%) (0.3%) (0.2%) (1.8%) 86.0% Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of * Represents the change in fair value of contingent consideration and litigation settlements. 36

37 Reconciliation of GAAP to Non-GAAP Operating Income: GAAP to Non-GAAP Reconciliation ($M) Q115 Q215 Q315 Q415 FY15 Q116 Q216 Q316 Q416 FY16 GAAP Operating Income (Loss) ADJUSTMENTS COGS: Stock Based Compensation Expense OPEX: Stock Based Compensation Expense OPEX: Amortization of Identified Intangibles OPEX: Acquisition-Related Transaction Costs OPEX: Litigation Settlement OPEX: Change in Fair Value of Contingent Consideration - (1.3) (1.1) 0.3 (2.1) (0.2) OPEX: Restructuring & Other Integration (0.0) OPEX: Restructuring & Other Personnel & Facilities NON-GAAP Non-GAAP Operating Income (Loss) $ 28.3 $ 29.3 $ 32.1 $ 38.5 $ $ 33.5 $ 33.8 $ 34.4 $ 46.1 $

38 Reconciliation of GAAP to Non-GAAP Net Income: GAAP to Non-GAAP Reconciliation ($M) Q115 Q215 Q315 Q415 FY15 Q116 Q216 Q316 Q416 FY16 GAAP Net Income (Loss) EPS $ 0.11 $ 0.16 $ 0.21 $ 0.21 $ 0.70 $ 0.04 $ 0.11 $ 0.37 $ 0.43 $ 0.95 ADJUSTMENTS COGS: Stock Based Compensation Expense OPEX: Stock Based Compensation Expense OPEX: Amortization of Identified Intangibles OPEX: Acquisition-Related Transaction Costs OPEX: Litigation Settlement OPEX: Change in Fair Value of Contingent Consideration - (1.3) (1.1) 0.3 (2.1) (0.2) OPEX: Restructuring & Other Personnel & Facilities OPEX: Restructuring & Other Integration OI&E: Non-cash Interest Expense OPEX: FX on Contingent Consideration Tax Effect of Non-GAAP Adjustments NON-GAAP (0.0) (4.0) (3.6) (8.6) (3.0) (19.2) (5.8) (3.7) (18.3) (5.6) (33.4) Non-GAAP Net Income (Loss) $ 21.4 $ 22.9 $ 24.1 $ 29.4 $ 97.9 $ 26.3 $ 26.7 $ 27.6 $ 36.3 $ Non-GAAP EPS $ 0.45 $ 0.48 $ 0.50 $ 0.61 $ 2.03 $ 0.55 $ 0.56 $ 0.58 $ 0.77 $ 2.44 Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of

39 Reconciliation of EBITDA: Reconciliation of EBITDA ($M) Q115 Q215 Q315 Q415 FY15 Q116 Q216 Q316 Q416 FY16 GAAP Net Income (Loss) ADJUSTMENTS COGS: Stock Based Compensation Expense OPEX: Stock Based Compensation Expense OPEX: Amortization of Identified Intangibles OPEX: Acquisition-Related Transaction Costs OPEX: Litigation Settlement OPEX: Change in FV of Contingent Consideration OPEX: Restructuring & Other Personnel & Facilities OPEX: Restructuring & Other Integration Depreciation OI&E Tax (1.3) (1.1) 0.3 (2.1) (0.2) (0.0) (2.9) (11.7) 3.1 (5.7) EBITDA $ 31.0 $ 32.0 $ 35.5 $ 42.0 $ $ 36.9 $ 37.2 $ 38.0 $ 49.7 $ Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of

40 Details of Revenue by Segment and Region 2016 Revenue ($M) Q Q Q Q Inkjet % of Total 54% 57% 58% 58% 57% Productivity Software % of Total 14% 15% 16% 16% 15% Fiery % of Total 32% 28% 26% 26% 28% Americas % of Total 51% 47% 52% 51% 50% EMEA % of Total 36% 39% 35% 36% 37% APAC % of Total 13% 14% 13% 13% 13% EFI $ $ $ $ $ information contained in this presentation. 40

41 Details of Revenue by Segment and Region 2015 Revenue ($M) Q Q Q Q Inkjet % of Total 45% 47% 54% 55% 51% Productivity Software % of Total 16% 17% 14% 15% 15% Fiery % of Total 39% 36% 32% 30% 34% Americas % of Total 55% 53% 53% 53% 54% EMEA % of Total 31% 32% 35% 34% 33% APAC % of Total 14% 15% 12% 13% 13% EFI $ $ $ $ $ information contained in this presentation. 41

42 Details for $M Q Q Q Q Q Q Q Q Revenue $ $ $ $ $ $ $ $ $ $ Non-GAAP Net Income* GAAP Net Income* Non-GAAP Operating Expenses GAAP Operating Expenses Non-GAAP Gross Margin % 51.0% 51.1% 51.2% 52.9% 51.6% 54.7% 53.8% 51.2% 50.6% 53.5% GAAP Gross Margin % 50.6% 50.9% 51.0% 52.5% 51.3% 54.2% 53.5% 50.8% 50.4% 53.1% Non-GAAP Operating Profit GAAP Operating Profit Non-GAAP Operating Profit % 14.3% 13.8% 14.0% 17.3% 14.9% 14.6% 14.4% 14.0% 15.0% 14.7% GAAP Operating Profit % 3.0% 4.8% 3.8% 10.7% 5.7% 5.7% 6.6% 5.6% 7.6% 6.5% *Stock Based Compensation. As permitted by ASU , Stock Compensation Improvements to Employee Share Based Payment Accounting, which we have adopted in Q2 2016, we have elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. Adoption of this provision during the second quarter of 2016 resulted in a retroactive net income adjustment of $0.2 million in the first quarter of

43 About our Non-GAAP Financial Measures and Adjustments Use of Non-GAAP Financial Information To supplement our condensed consolidated financial results prepared in accordance with GAAP, we use non-gaap measures of operating income, net income, and earnings per diluted share that are GAAP operating income, GAAP net income, GAAP operating expenses, GAAP gross margin, GAAP operating profit, GAAP earnings, operating expenses, gross margin, and operating profit per diluted share adjusted to exclude certain cost, expenses, and gains. We believe that the presentation of non-gaap operating income, non-gaap net income, and non-gaap earnings per diluted share provides important supplemental information regarding non-cash expenses and significant items that we believe are important to understanding financial and business trends relating to our financial condition and results of operations. Non-GAAP operating income, non-gaap net income, and non-gaap earnings per diluted share are among the primary indicators used by management as a basis for planning and forecasting future periods and by management and our Board of Directors to determine whether our operating performance has met specified targets and thresholds. Management uses non-gaap operating income, non-gaap net income, and non-gaap earnings per diluted share when evaluating operating performance because it believes the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending on our activities and other factors, facilitates comparability of our operating performance from period to period. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our business and the valuation of our Company. Use and Economic Substance of Non-GAAP Financial Measures We compute non-gaap operating income, non-gaap net income, and non-gaap earnings per diluted share by adjusting GAAP operating income, GAAP net income, and GAAP earnings per diluted share to remove the impact of amortization of acquisition-related intangibles, stock-based compensation expense, restructuring and other expenses, acquisition-related transaction expenses, costs to integrate such acquisitions into our business, changes in the fair value of contingent consideration, litigation settlement charges, and non-cash interest expense related to our 0.75% convertible senior notes ( Notes ). We use a constant non-gaap tax rate of 19%, which we believe reflects the long term average tax rate based on our international structure and geographic distribution of revenue and profit. Ex-Currency. To better understand trends in our business, we believe it is helpful to adjust our statement of operations to exclude the impact of year-over-year changes in the translation of foreign currencies into U.S. dollars. This is a non-gaap measure that is calculated by adjusting revenue, non-gaap operating income, and non-gaap net income by using historical exchange rates in effect during the comparable prior year period and removing the balance sheet currency remeasurement impact from interest income and other expense, net, including removal of any hedging gains and losses. We refer to these adjustments as ex-currency. Management believes the ex-currency measures provide investors with an additional perspective on year-over-year financial trends and enables investors to analyze our operating results in the same way management does. The year-over-year currency impact can be determined as the difference between year-over-year actual growth rates and year-over-year ex-currency growth rates. These excluded items are described below: Intangible assets acquired to date are being amortized on a straight-line basis. Stock-based compensation expense of $34.9 and $35.4 million during the twelve months ended December 30, 2016 and 2015, respectively, consists of $31.8 and $34.0 million of stock-based compensation expense recognized in accordance with ASC 718, Stock Compensation, and the non-cash settlement of $3.1 and $1.4 million of vacation liabilities settled through the issuance of RSUs during the twelve months ended December 31, 2016 and 2015, which is not included in the GAAP presentation of our stockbased compensation expense. 43

44 About our Non-GAAP Financial Measures and Adjustments (continued) o o o o o o Restructuring and other expenses consist of: Restructuring charges incurred as we consolidate the number and size of our facilities and, as a result, reduce the size of our workforce. Expenses incurred to integrate businesses acquired of $0.7 and $2.1 million for the three and twelve months ended December 31, 2016, respectively, and $1.5 and $1.8 million for the three and twelve months ended December 31, 2015, respectively. Acquisition-related transaction costs associated with businesses acquired and anticipated transactions of $0.5 and $2.2 million for the three and twelve months ended December 31, 2016, respectively, and $1.3 and $5.5 million for the three and twelve months ended December 31, 2015, respectively. Changes in fair value of contingent consideration. Our management determined that we should analyze the total return provided by the investment when evaluating operating results of an acquired entity. The total return consists of operating profit generated from the acquired entity compared to the purchase price paid, including the final amounts paid for contingent consideration without considering any post-acquisition adjustments related to changes in the fair value of the contingent consideration. Because our management believes the final purchase price paid for the acquisition reflects the accounting value assigned to both contingent consideration and to the intangible assets, we exclude the GAAP impact of any adjustments to the fair value of acquisition-related contingent consideration from the operating results of an acquisition in subsequent periods, including the related foreign exchange fluctuation impact. We believe this approach is useful in understanding the long-term return provided by our acquisitions and that investors benefit from a supplemental non-gaap financial measure that excludes the impact of this adjustment. Non-cash interest expense on our Notes. Our Notes may be settled in cash on conversion. We are required to separately account for the liability (debt) and equity (conversion option) components of the Notes in a manner that reflects our non-convertible debt borrowing rate. Accordingly, for GAAP purposes, we are required to amortize a debt discount equal to the fair value of the conversion option as interest expense on our $345 million of 0.75% convertible senior notes that were issued in a private placement in September 2014 over the term of the Notes. Litigation settlements. We settled or accrued reserves related several litigation claims of $1.0 and $0.6 million during the twelve months ended December 31, 2016 and 2015 respectively. We use a constant non-gaap tax rate of 19%, which we believe reflects the long term average tax rate based on our international structure and geographic distribution of revenue and profit. The long-term average tax rate is calculated in accordance with the principles of ASC 740, Income Taxes, to estimate the non-gaap income tax provision in each jurisdiction in which we operate after excluding the tax effect of the non-gaap items described above and $10.3 million of previously unrecognized tax benefits associated with the 2012 sale of our Foster City building and land which we recognized in the twelve months ended December 31, 2016 Usefulness of Non-GAAP Financial Information to Investors These non-gaap measures are not in accordance with or an alternative to GAAP and may be materially different from other non-gaap measures, including similarly titled non-gaap measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income or earnings per diluted share prepared in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. We expect to continue to incur expenses of a nature similar to the non-gaap adjustments described above, and exclusion of these items from our non-gaap financial metrics should not be construed as an inference that these costs are unusual, infrequent, or non-recurring. 44