EFI Reports Third Quarter 2012 Results

The statements in this press release are made as of the date of this press release. EFI undertakes no obligation to update information contained in this press release. 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 650-357-3828 or by email at [e-mail] or EFI's Investor Relations website at www.efi.com .

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income (loss), as the case may be, and earnings per diluted share that are GAAP net income (loss), as the case may be, and GAAP earnings per diluted share adjusted to exclude certain recurring and non-recurring costs, expenses and gains. A reconciliation of the adjustments to GAAP results for the three and nine months ended September 30, 2012 and 2011 is provided below. In addition, an explanation of how management uses non-GAAP financial information to evaluate its business, the substance behind management's decision to use this non-GAAP financial information, the material limitations associated with the use of non-GAAP financial information, the manner in which management compensates for those limitations, and the substantive reasons management believes that this non-GAAP financial information provides useful information to investors is included under "About our Non-GAAP Net Income and Adjustments" after the tables below.

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 (loss), as the case may be, or earnings per diluted share prepared in accordance with GAAP.

Electronics For Imaging, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2012	2011	2012	2011
Revenue	$ 154,074	$ 147,284	$ 478,031	$ 428,498
Cost of revenue	70,997	64,506	217,495	188,432
Gross profit	83,077	82,778	260,536	240,066
Operating expenses:
Research and development	29,068	29,473	90,194	85,850
Sales and marketing	30,329	30,137	93,480	88,036
General and administrative	12,775	14,095	36,831	40,550
Amortization of identified intangibles	4,619	2,311	13,434	8,720
Restructuring and other	2,280	604	4,530	2,316
Total operating expenses	79,071	76,620	238,469	225,472
Income from operations	4,006	6,158	22,067	14,594
Interest and other income, net	1,555	1,363	800	4,571
Income before income taxes	5,561	7,521	22,867	19,165
Benefit from (provision for) income taxes	7,850	(1,397)	3,783	(3,177)
Net income	$ 13,411	$ 6,124	$ 26,650	$ 15,988
Fully Diluted EPS calculation
Net income	$ 13,411	$ 6,124	$ 26,650	$ 15,988
Net income per diluted common share	$ 0.28	$ 0.13	$ 0.56	$ 0.34
Shares used in diluted per share calculation	48,009	47,307	47,670	47,701

Electronics For Imaging, Inc.
Reconciliation of GAAP Net Income to Non-GAAP Net Income
(in thousands, except per share data)
(unaudited)
	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2012	2011	2012	2011
Net income	$ 13,411	$ 6,124	$ 26,650	$ 15,988
Amortization of identified intangibles	4,619	2,311	13,434	8,720
Stock based compensation – Cost of revenue	293	657	826	1,334
Stock based compensation – Research and development	1,365	1,245	4,189	4,013
Stock based compensation – Sales and marketing	790	1,027	2,404	3,086
Stock based compensation – General and administrative	2,457	2,358	6,919	9,130
Acquisition-related transaction costs	384	673	1,208	1,540
Change in fair value of contingent consideration	—	1,476	(1,404)	1,476
Restructuring and other	2,280	604	4,530	2,316
Litigation settlements	506	—	255	—
Gain on sale of minority investment in a privately-held company	—	(2,866)	—	(2,866)
Tax effect of non-GAAP adjustments	(12,797)	(2,005)	(17,355)	(8,302)
Non-GAAP net income	$ 13,308	$ 11,604	$ 41,656	$ 36,435
Non-GAAP net income per diluted common share	$ 0.28	$ 0.25	$ 0.87	$ 0.76
Shares used in per share calculation	48,009	47,307	47,670	47,701
Note: all items included within general and administrative expense unless otherwise indicated by the caption.

Electronics For Imaging, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
	September 30,	December 31,
	2012	2011
Assets
Cash and cash equivalents	$ 110,870	$ 120,058
Short-term investments	81,624	99,100
Accounts receivable, net	122,910	91,923
Inventories	63,653	44,788
Assets held for sale	62,144	—
Other current assets	39,288	20,792
Total current assets	480,489	376,661
Property and equipment, net	25,804	30,096
Restricted investments	—	56,850
Goodwill	202,203	164,323
Intangible assets, net	72,779	55,992
Other assets	49,640	55,812
Total assets	$ 830,915	$ 739,734
Liabilities & Stockholders' equity
Accounts payable	$ 62,707	$ 46,965
Accrued and other liabilities	99,515	82,289
Income taxes payable	6,069	2,583
Total current liabilities	168,291	131,837
Contingent and other liabilities	12,785	3,427
Deferred tax liabilities	13,446	4,090
Long term taxes payable	30,359	35,597
Total liabilities	224,881	174,951
Total stockholders' equity	606,034	564,783
Total liabilities and stockholders' equity	$ 830,915	$ 739,734

Electronics For Imaging, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
	Nine Months Ended
	September 30,
	2012	2011
Cash flows from operating activities:
Net income	$ 26,650	$ 15,988
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	19,558	14,413
Deferred taxes	1,317	(247)
Excess tax benefit from stock-based compensation	(1,186)	(1,872)
Stock-based compensation	14,338	17,563
Provision for inventory obsolescence	2,574	6,055
Gain on sale of minority investment in a privately-held company	—	(2,866)
Other non-cash charges and adjustments	3,867	3,805
Changes in operating assets and liabilities	(41,508)	(9,994)
Net cash provided by operating activities	25,610	42,845
Cash flows from investing activities:
Purchases of short-term investments	(34,611)	(75,178)
Proceeds from sales and maturities of short-term investments	50,851	71,896
Purchases, net of proceeds from sales, of property and equipment	(5,319)	(7,687)
Businesses purchased, net of cash acquired	(45,133)	(28,966)
Proceeds from sale of minority investment in a privately-held company	—	2,866
Proceeds from collection of notes receivable of acquired business	5,216	713
Net cash used for investing activities	(28,996)	(36,356)
Cash flows from financing activities:
Proceeds from issuance of common stock	18,557	8,088
Purchases of treasury stock and net settlement of restricted stock	(18,392)	(45,055)
Repayment of acquired business debt	(6,817)	(210)
Contingent consideration related to businesses acquired	(382)	—
Excess tax benefit from stock-based compensation	1,186	1,872
Net cash used for financing activities	(5,848)	(35,305)
Effect of foreign exchange rate changes on cash and cash equivalents	46	(23)
Decrease in cash and cash equivalents	(9,188)	(28,839)
Cash and cash equivalents at beginning of year	120,058	126,363
Cash and cash equivalents at end of period	$110,870	$ 97,524

Electronics For Imaging, Inc.
Revenue by Operating Segment and Geographic Area
(in thousands)
(unaudited)
	Three Months Ended		Nine Months Ended
	September 30,		September 30,
Revenue by Operating Segment	2012	2011	2012	2011
Industrial Inkjet	$ 79,096	$ 59,411	$ 234,008	$ 167,689
Productivity Software (1)	24,252	21,520	74,043	57,506
Fiery	50,726	66,353	169,980	203,303
Total	$ 154,074	$ 147,284	$ 478,031	$ 428,498
Revenue by Geographic Area
Americas	$ 86,445	$ 84,935	$ 251,351	$ 241,980
EMEA	41,137	46,589	147,823	133,770
APAC	26,492	15,760	78,857	52,748
Japan	7,471	7,267	22,290	28,587
ROW	19,021	8,493	56,567	24,161
Total	$ 154,074	$ 147,284	$ 478,031	$ 428,498
(1) Previously referred to as APPS. In Q1 2012, we re-named our APPS operating segment as the "Productivity Software operating segment."

About our Non-GAAP Net Income 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 net income and earnings per diluted share that are GAAP net income and GAAP earnings per diluted share adjusted to exclude certain recurring and non-recurring costs, expenses, and gains.

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