10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________

FORM 10-Q

_____________________________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 000-18805

______________________________________________________________

ELECTRONICS FOR IMAGING, INC.

(Exact name of registrant as specified in its charter)

______________________________________________________________

Delaware	94-3086355
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6750 Dumbarton Circle, Fremont, CA 94555

(Address of principal executive offices) (Zip code)

(650) 357-3500

(Registrant’s telephone number, including area code)

______________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act) (Check one):

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    Yes  ☐    No  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x

The number of shares of Common Stock outstanding as of October 30, 2018 was 43,931,611.

Electronics For Imaging, Inc.

Table of Contents

		Page No.
PART I.	Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018 and 2017	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4.	Controls and Procedures	50
PART II.	Other Information
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 6.	Exhibits	54
Signatures		55
Exhibit 3.1
Exhibit 3.2
Exhibit 4.1
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 101

2

PART I         FINANCIAL INFORMATION

Item 1:        Condensed Consolidated Financial Statements (Unaudited)

Electronics For Imaging, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands)	September 30, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	180,942		$	170,345
Short-term investments	112,986			148,697
Accounts receivable, net of allowances of $30.2 million and $32.2 million, respectively	240,150			244,416
Inventories	121,290			125,813
Income taxes receivable	13,958			4,565
Assets held for sale	3,143			4,200
Other current assets	47,814			41,799
Total current assets	720,283			739,835
Property and equipment, net	79,495			98,762
Restricted cash equivalents	39,809			32,531
Goodwill	394,372			403,278
Intangible assets, net	86,246			123,008
Deferred tax assets	43,265			45,083
Other assets	34,369			15,504
Total assets	$	1,397,839		$	1,458,001
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	118,703		$	123,935
Accrued and other liabilities	74,797			98,090
Deferred revenue	65,181			55,833
Convertible senior notes, net – current	330,367			—
Income taxes payable	6,762			5,309
Total current liabilities	595,810			283,167
Convertible senior notes, net – non-current	—			318,957
Imputed financing obligation related to build-to-suit lease	—			13,944
Noncurrent contingent and other liabilities	17,307			28,801
Deferred tax liabilities	6,151			11,652
Noncurrent income taxes payable	18,305			20,169
Total liabilities	637,573			676,690
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding	—			—
Common stock, $0.01 par value; 150,000 shares authorized; 54,990 and 54,249 shares issued, respectively	550			542
Additional paid-in capital	785,475			745,661
Treasury stock, at cost; 10,747 and 9,070 shares, respectively	(428,074		)	(375,574		)
Accumulated other comprehensive income (loss)	(6,996		)	8,138
Retained earnings	409,311			402,544
Total stockholders’ equity	760,266			781,311
Total liabilities and stockholders’ equity	$	1,397,839		$	1,458,001

See accompanying notes to condensed consolidated financial statements.

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Electronics For Imaging, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share amounts)	2018			2017			2018			2017
Revenue	$	257,134		$	248,359		$	758,072		$	724,097
Cost of revenue*	131,615			120,902			384,858			345,858
Gross profit	125,519			127,457			373,214			378,239
Operating expenses:
Research and development*	40,341			39,585			119,701			118,201
Sales and marketing*	44,661			42,269			137,448			129,018
General and administrative*	24,466			25,075			57,093			67,239
Amortization of identified intangibles	11,137			12,299			34,801			34,829
Restructuring and other	2,799			832			10,477			5,421
Total operating expenses	123,404			120,060			359,520			354,708
Income from operations	2,115			7,397			13,694			23,531
Interest expense	(4,796		)	(4,912		)	(14,739		)	(14,538		)
Interest income and other income, net	336			1,760			1,270			2,802
Income (loss) before income taxes	(2,345		)	4,245			225			11,795
Benefit from (provision for) income taxes	4,265			(791		)	1,868			(795		)
Net income	$	1,920		$	3,454		$	2,093		$	11,000
Net income per basic common share	$	0.04		$	0.07		$	0.05		$	0.24
Net income per diluted common share	$	0.04		$	0.07		$	0.05		$	0.23
Shares used in basic per-share calculation	44,428			46,348			44,714			46,442
Shares used in diluted per-share calculation	45,354			46,937			45,388			47,102

____________________

* Includes stock-based compensation expense as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Cost of revenue	$	904	$	486	$	2,715	$	1,985
Research and development	3,649		1,640		9,517		7,556
Sales and marketing	2,377		1,108		6,767		5,176
General and administrative	4,993		1,414		11,479		7,824

See accompanying notes to condensed consolidated financial statements.

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Electronics For Imaging, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2018			2017			2018			2017
Net income	$	1,920		$	3,454		$	2,093		$	11,000
Net unrealized investment gains (losses):
Unrealized holding gains (losses), net of tax*	182			48			(254		)	283
Reclassification adjustments included in net income, net of tax*	(1		)	(27		)	10			(49		)
Net unrealized investment gains (losses)	181			21			(244		)	234
Currency translation adjustments	(1,975		)	4,931			(14,850		)	23,121
Net unrealized losses on cash flow hedges	—			(28		)	(41		)	(24		)
Comprehensive income (loss)	$	126		$	8,378		$	(13,042	)	$	34,331

____________________

* Tax effects were less than $0.2 million for the periods presented above.    

See accompanying notes to condensed consolidated financial statements.

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Electronics For Imaging, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Nine Months Ended September 30,
(in thousands)	2018			2017
Cash flows from operating activities:
Net income	$	2,093		$	11,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	50,094			48,029
Deferred taxes	(248		)	(9,149		)
Provisions for bad debt and sales-related allowances	2,424			10,868
Provision for inventory obsolescence	4,488			3,642
Stock-based compensation expense	30,478			22,541
Non-cash accretion of interest expense on convertible notes and imputed financing obligation	11,304			11,211
Change in fair value of contingent consideration, including accretion	(11,860		)	2,187
Net change in derivative assets and liabilities	(2,431		)	737
Other non-cash charges	88			330
Changes in operating assets and liabilities, net of effect of acquired businesses	(36,275		)	(58,955		)
Net cash provided by operating activities	50,155			42,441
Cash flows from investing activities:
Purchases of short-term investments	—			(87,623		)
Proceeds from sales and maturities of short-term investments	35,129			164,979
Purchases of restricted investments*	—			(15,775		)
Purchases, net of proceeds from sales, of property and equipment	(9,785		)	(8,745		)
Proceeds from sale of held-for-sale building and land	1,137			—
Businesses purchased, net of cash acquired	696			(16,739		)
Net cash provided by investing activities*	27,177			36,097
Cash flows from financing activities:
Proceeds from issuance of common stock	10,165			11,730
Purchases of treasury stock and net share settlements	(52,500		)	(56,937		)
Repayment of acquisition-related debt	(11,956		)	(10,786		)
Contingent consideration payments related to businesses acquired	(3,116		)	(9,512		)
Net cash used for financing activities	(57,407		)	(65,505		)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash equivalents	(2,050		)	4,168
Increase in cash, cash equivalents, and restricted cash equivalents*	17,875			17,201
Cash, cash equivalents, and restricted cash equivalents at beginning of period*	202,876			165,455
Cash, cash equivalents, and restricted cash equivalents at end of period*	$	220,751		$	182,656

____________________

* Certain prior period amounts have been revised due to the implementation of ASU 2016-18. See Note 1 for details.

See accompanying notes to condensed consolidated financial statements.

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Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

Note 1.     Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements (“condensed consolidated financial statements”) include the accounts of Electronics For Imaging, Inc. and its subsidiaries (“EFI” or “Company”). All intercompany accounts and transactions have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information, rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements, and accounting policies consistent in all material respects with those applied in preparing our audited annual consolidated financial statements included in our Annual Report on Form 10-K, as amended by Amendment No. 1, for the year ended December 31, 2017 (the “2017 Form 10-K”). These condensed consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and notes included in the 2017 Form 10-K. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments, management considers necessary for the fair presentation of our financial position, operating results, comprehensive income, and cash flows for the interim periods presented. Our results for the interim periods are not necessarily indicative of results for the entire year.

Out-of-Period Adjustments

In the nine months ended September 30, 2017, we recorded out-of-period adjustments related to certain bill and hold transactions, which decreased revenue by $3.4 million, gross profit by $0.5 million, and net income by $0.3 million (or $0.01 per diluted share). We evaluated these adjustments considering both qualitative and quantitative factors and their impact in relation to each period, as well as the periods in which they originated. The impact of recognizing these adjustments in prior years was not significant to any individual period. Management believes the adjustments are immaterial to these condensed consolidated financial statements for the nine months ended September 30, 2017 and all previously issued financial statements.

Recently Adopted Accounting Pronouncements

Revenue Recognition. Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606 Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method applied to all incomplete contracts as of the date of initial application. ASC 606 supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (“ASC 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. In addition, ASC 606 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Effective January 1, 2018, we also adopted ASC 340-40, Other Assets and Deferred Costs – Contracts with Customers (“ASC 340-40”), using the modified retrospective method to all incomplete contracts as of the date of initial application. ASC 340-40 requires the deferral of incremental costs of obtaining a contract with a customer.

Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 and ASC 340-40, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. Additional discussion of these recently adopted pronouncements and their impact on our Condensed Consolidated Financial Statements is included below under Significant Accounting Policies, in Note 4 – Revenue, and in Note 5 – Supplemental Financial Statement Information.

Income Taxes. Staff Accounting Bulletin (“SAB”) 118 provides guidance for the application of ASC 740 for a measurement period to complete the accounting for certain elements of the Tax Cut & Jobs Act of 2017 (the “2017 Tax Act”). The measurement period is defined as up to one year from the enactment date, which will expire on December 22, 2018. SAB 118 requires that we recognize those income tax effects in our financial statements for which the accounting can be completed, as may be the case for the effect of rate changes on deferred tax assets and deferred tax liabilities. For matters that have not been completed, we are required to recognize provisional amounts to the extent that they are reasonably estimable, adjust them during the measurement period when more information becomes available, and report this information in our financial statements in that period. See additional information in Note 14 – Income Taxes.

Restricted Cash. Accounting Standard Update (“ASU”) 2016-18, Statement of Cash Flows: Restricted Cash, became effective in the first quarter of 2018 and requires the statement of cash flows to explain the change in cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts in

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Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

(Continued)

the statement of cash flows. We previously included the changes in restricted cash equivalents in operating or investing activities in the Consolidated Statements of Cash Flows. Prior period amounts have been revised to conform to the current year presentation.

Reconciliation of cash, cash equivalents, and restricted cash equivalents

(in thousands)	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash and cash equivalents	$	180,942	$	170,345	$	175,830	$	164,313
Restricted cash equivalents	39,809		32,531		6,826		1,142
Total cash, cash equivalents, and restricted cash equivalents shown in the statement of cash flows	$	220,751	$	202,876	$	182,656	$	165,455

Definition of a Business. In January 2017, the Financial Accounting Standard Board (“FASB’) issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, which became effective in the first quarter of 2018 and significantly narrows how businesses are defined. Under ASU 2017-01, when substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar identifiable assets, then the assets acquired do not constitute a business. If substantially all of the fair value of the gross assets acquired is not concentrated in a single asset or group of similar assets, then the assets acquired may constitute a business if certain criteria are met. We must determine whether the acquired gross assets and activities include an input and a “substantive” process that together “significantly” contribute to the ability to create an output. A framework and specific criteria are provided to assist with the evaluation of whether a process is “substantive” and “significantly contributes” to the ability to create an output. “Output” is narrowly defined to be consistent with the description of a performance obligation in the new revenue guidance or this ASU. Missing inputs and processes may not be replaced by integration with our own inputs and processes under the new guidance. The adoption of ASU 2017-1 did not impact our condensed consolidated financial statements as of September 30, 2018 because we did not acquire a business during the nine months ended September 30, 2018.

Nonfinancial Asset Derecognition. In February 2017, the FASB issued ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets: Clarifying the Scope of Asset Derecognition and Accounting for Partial Sales of Nonfinancial Assets, which clarifies the scope of recent guidance as it relates to nonfinancial asset derecognition and the accounting for partial sales of nonfinancial assets. The ASU conforms the derecognition guidance as it relates to nonfinancial assets with the derecognition guidance in the new revenue standard (ASC 606) and is not expected to have a material impact on the accounting for real estate dispositions. ASU 2017-5 became effective in the first quarter of 2018. During the nine months ended September 30, 2018, we sold a non-financial asset, which is discussed further in Note 10–Commitments and Contingencies. There was no material impact from the adoption of this ASU in our condensed consolidated financial statements during the three and nine months ended September 30, 2018.

Stock Compensation Modification. In May 2017, the FASB issued ASU 2017-09, Stock Compensation – Scope of Modification Accounting, which clarifies the scope of modification accounting for share-based payment arrangements, which became effective in the first quarter of 2018. Specifically, we do not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. We elected to adopt this guidance prospectively to awards modified on or after the adoption date. The adoption of ASU 2017-09 did not have a material impact on our condensed consolidated financial statements during the three and nine months ended September 30, 2018.

Settlement of Convertible Debt. ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, issued in August 2016, requires that cash settlements of principal amounts of debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the debt must classify the portion of the principal payment attributable to the accreted interest related to the debt discount as cash outflows from operating activities. This is consistent with the classification of the coupon interest payments.

ASU 2016-15 became effective in the first quarter of 2018. Accordingly, $63.6 million of the debt discount attributable to the difference between the 0.75% coupon interest rate on our 0.75% Convertible Senior Notes due 2019 (“Notes”) and the 4.98% (5.46% inclusive of debt issuance costs) effective interest rate on the Notes will be classified as an operating cash outflow in the Condensed Consolidated Statement of Cash Flows upon any cash settlement of the Notes. The Notes were not settled as of September 30, 2018. We will apply ASU 2016-15 upon any cash settlement of the Notes.

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Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

(Continued)

Recent Accounting Pronouncements Not Yet Adopted

Lease Arrangements. Under current guidance, the classification of a lease by a lessee as either an operating or capital lease determines whether an asset and liability is recognized on the balance sheet. ASU 2016-2, Leases, which was issued in February 2016 and will be effective in the first quarter of 2019, requires that a lessee recognize an asset and liability on its balance sheet related to all leases with terms more than one year. For all leases, a lessee will be required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. The right-to-use asset represents the right to use the underlying asset during the lease term.

The recognition, measurement, and presentation of expenses and cash flows by a lessee will not significantly change from previous guidance. There continues to be a differentiation between finance leases and operating leases. The criteria for determining whether a lease is a finance or operating lease are substantially the same as existing guidance except that the “bright line” percentages have been removed. Also, an additional criterion has been added in the new guidance to consider whether the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Additional judgment will be required in applying the new lease guidance.

• For finance leases, interest is recognized on the lease liability separately from depreciation of the right-of-use asset in the statement of operations. Principal repayments are classified within financing activities and interest payments are classified as operating activities in the statement of cash flows.

• For operating leases, a lessee is required to recognize lease expense generally on a straight-line basis. All operating lease payments are classified as operating activities in the statement of cash flows.

The current build-to-suit lease accounting guidance will be rescinded by the new guidance, although simplified guidance will remain regarding lessee control during the construction period. Consequently, the accounting for build-to-suit leases will be the same as operating leases unless the lessee control provisions are applicable.

We expect to apply the additional transition method provided in ASU 2018-11, which allows us to initially apply the new leases standard at our January 1, 2019 adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. We expect to elect all of the available transition practical expedients which permit us not to reassess our prior conclusions about lease identification, lease classification, and initial direct costs. While we continue to assess the effects of the adoption, we have not yet quantified the impact but we believe there will be material increases in our non-current assets and liabilities, and in our current liabilities on our Consolidated Balance Sheets at the time of adoption. The adoption of this new standard to our lease transactions as lessee is not expected to have a material impact on our results of operations as reflected in our Consolidated Statements of Operations. We do not expect a material impact on our results of operations or financial position from adoption of this standard to our lease transactions as lessor.

Significant Accounting Policies

There have been no material changes in our significant accounting policies, as compared to the significant accounting policies described in our 2017 Form 10-K, with the exception of the following:

Revenue Recognition

On January 1, 2018, we adopted ASC 606 using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. On January 1, 2018, we also adopted ASC 340-40 using the modified retrospective method applied to all contracts as of the date of initial application.

We apply judgment in determining the customer’s ability and intention to pay. Judgments are made after considering a variety of factors including the customer’s historical payment experience, current creditworthiness, current economic impacts on the customer, past due balances, and significant one-time events or, in the case of a new customer, published credit and financial information.

For customer arrangements that include multiple products or services, judgment is required to determine the standalone selling price (“SSP”) for each distinct performance obligation. Where an observable price is not available, we gather all reasonable available data points, consider adjustments based on market conditions, entity-specific factors, and the need to stratify selling prices into meaningful groups (e.g., geographic region) in determining SSP. We allocate the total contract consideration to each distinct performance obligation on a relative SSP basis. Revenue is then recognized in accordance with the timing of the transfer of control of each performance obligation to the customer.

Accounting for long-term contracts where we provide information technology system development and implementation services requires significant judgment to estimate total contract revenue and costs. For long-term contracts, we estimate the profit on a contract

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Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

(Continued)

as the difference between the total estimated revenue and expected costs to complete the services. We then recognize that revenue and profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that could span several years.

A change in our estimate of total costs to complete could affect the profitability of our contracts. We review and update our contract-related estimates regularly, and the effects of changes, if any, are reflected in the Condensed Consolidated Statements of Operations in the period that they are determined. Changes in estimates related to certain types of contracts accounted for using an input method measure of progress, such as cost-to-cost, can occur over the life of a contract for a variety of reasons, including the availability of labor and labor productivity, the nature and complexity of the work to be performed, cost estimates, level of effort and/or other assumptions impacting revenue or cost to perform a contract. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If, at any time, the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter it is identified.

Management exercises judgment to determine the period of benefit to amortize contract acquisition costs by considering factors such as expected renewals of customer contracts, duration of customer relationships and our technology development life cycle. Although we believe that the historical assumptions and estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. Amortization of deferred contract acquisition costs is included in sales and marketing expense in the Condensed Consolidated Statements of Operations. We periodically review these deferred costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred contract acquisition costs.

The nature of our products and services are as follows:

Hardware. Our hardware, such as Industrial Inkjet printers and Fiery digital front ends (“DFEs”), is generally sold with software that is integral to the functionality of the product. In these cases, the hardware and software license are accounted for as a single performance obligation. The contract consideration is generally in the form of a fixed fee at contract inception and revenue is recognized at the point in time when control is transferred to the customer. Consideration received from customers may include trade-in printers, which are valued at the lower of cost or net realizable value.

We offer shipping and handling services to customers related to the sale of hardware. We have elected the practical expedient to account for shipping and handling activities performed after transferring control of goods to our customer as a cost to fulfill the contract. The cost of shipping and handling is accrued at the point in which control transfers to the customer and revenue is recognized.

Ink. We typically enter into contracts with our existing customer base of installed printers to purchase ink that is not bundled with other deliverables within the contract. The ink is accounted for as a single performance obligation and revenue is recognized at the point in time when control of the ink is transferred to the customer.

Licenses. Our software license arrangements provide the customer with the right to install and use functional intellectual property (as it exists at the point in time at which the license is granted) for the duration of the contract term. Revenue from distinct software licenses is recognized at the point in time when the software is made available to the customer for download.

Our software license arrangements are generally comprised of fixed license fees (“license fees”) that are payable upfront, annually, quarterly, or monthly based on negotiated customer payment terms. For software license arrangements in which a significant portion of the license fees are due more than 12 months after the software is delivered to the customer, a significant financing component may exist. The significant financing component is calculated as the difference between the stated value and present value of the software license fees and is recognized as interest income under the effective interest method over the contract term. The total software license fee net of the significant financing component is recognized as revenue at the point in time when the software is made available to the customer for download or when the software is shipped to the customer. In instances where the timing of revenue recognition and the timing of invoicing is one year or less, we follow the practical expedient and do not impute interest for these contracts.

Maintenance. Our software license arrangements typically include an initial (bundled) post contract customer support (maintenance or “PCS”) term. Our promise to those customers who elect to purchase PCS represents a distinct, stand-alone performance obligation. Contract consideration is allocated to the PCS based on its relative SSP and revenue is recognized over the PCS term.

Professional Services. We provide various professional services to customers, primarily project management, software implementation, non-recurring engineering design, and training. Revenues from arrangements to provide professional services are

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Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

(Continued)

generally distinct from the other promises in the contract(s). The majority of our professional services contracts are billed on a time and materials basis and revenue is recognized over time as the services are performed.

Software as a Service (“SaaS”). Our SaaS-based arrangements provide customers with continuous access to our software solutions in the form of a service hosted in the cloud. These arrangements may include initial implementation and setup and/or on-going support that represent a single promise (i.e. each individual promised component is not distinct) to provide continuous access to the software solution. Any setup fees associated with our SaaS arrangements are recognized ratably over the contract term plus expected renewal periods. As the customer simultaneously receives and consumes the benefits as access is provided, our performance obligation under our SaaS-based arrangements is comprised of a series of distinct components delivered over time. Our SaaS-based arrangements consideration is typically fixed.

Extended Service Plans (“ESP”). For our hardware arrangements, we enter into contracts with certain customers to provide services to maintain and repair the hardware for an extended period. ESPs are classified as service-type warranties under ASC 606 as they are sold separately and provide services which are incremental to the assurance that the product will perform to the agreed upon standards. The ESPs are accounted for as a separate performance obligation. Revenue from ESPs are recognized ratably over the contract period as the service is provided.

Note 2.     Earnings Per Share

Net income per basic common share is computed using the weighted average number of common shares outstanding during the period. Net income per diluted common share is computed using the weighted average number of common and dilutive potential common shares outstanding during the period. Potential common shares result from the assumed exercise of outstanding common stock options having a dilutive effect using the treasury stock method, non-vested shares of time-based restricted stock units ("RSUs") having a dilutive effect, non-vested performance-based restricted stock units ("PSUs") for which the performance criteria have been met, shares to be purchased under our Employee Stock Purchase Plan (“ESPP”) having a dilutive effect, the assumed release of shares for the expected satisfaction of contingent consideration based on achievement of specified performance criteria related to the acquisition of Corrugated Technologies, Inc. (“CTI”), the assumed conversion of our Notes having a dilutive effect using the treasury stock method when the stock price exceeds the conversion price of the Notes, as well as the dilutive effect of our warrants when the stock price exceeds the warrant strike price. Our stock price has not exceeded the conversion price of the Notes or the strike price of the warrants during any periods presented. Any potential shares that are anti-dilutive are excluded from the effect of dilutive securities.

PSUs and market-based restricted stock units that would be issuable if the end of the reporting period were the end of the vesting period, if the result would be dilutive, are assumed to be outstanding for purposes of determining net income per diluted common share as of the later of the beginning of the period or the grant date. Accordingly, PSUs, which vested on various dates during the three and nine months ended September 30, 2018 and 2017, based on achievement of specified performance criteria related to revenue, cash flows from operating activities, and non-GAAP operating income targets, are included in the determination of net income per diluted common share as of the beginning of each period.

Basic and diluted earnings per share are reconciled as follows (in thousands, except per share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Basic net income per share:
Net income available to common shareholders	$	1,920	$	3,454	$	2,093	$	11,000
Weighted average common shares outstanding	44,428		46,348		44,714		46,442
Basic net income per share	$	0.04	$	0.07	$	0.05	$	0.24
Diluted net income per share:
Net income available to common shareholders	$	1,920	$	3,454	$	2,093	$	11,000
Weighted average common shares outstanding	44,428		46,348		44,714		46,442
Dilutive stock options and non-vested RSUs and PSUs	926		589		674		660
Weighted average common shares outstanding for purposes of computing diluted net income per share	45,354		46,937		45,388		47,102
Diluted net income per share	$	0.04	$	0.07	$	0.05	$	0.23

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Notes to Condensed Consolidated Financial Statements

(Continued)

Potential shares of common stock that were not included in the determination of diluted net income per share because the impact of including them would have been anti-dilutive or performance conditions have not been met, consisted of the following (in thousands):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2018	2017	2018	2017
RSUs & PSUs	626	327	554	304
ESPP purchase rights	41	410	638	342
Total potential shares of common stock excluded from the computation of diluted earnings per share	667	737	1,192	646

The weighted-average number of common shares outstanding does not include the effect of the potential common shares from conversion of our Notes and exercise of our warrants because the effect would have been anti-dilutive since the conversion price of the Notes and the strike price of the warrants exceeded the average market price of our common stock. We have the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon conversion of the Notes. Our intent is to settle the principal amount of the Notes in cash upon conversion. As a result, only amounts payable in excess of the principal amount of the Notes are considered in diluted net income per share under the treasury stock method. The Note Hedges are not included in the calculation of diluted net income per share because the effect of any exercise of the Note Hedges would be anti-dilutive. Please refer to Note 9 – Convertible Senior Notes for additional information and definitions.

Note 3.     Segment and Geographic Information

Operating segment information is presented based on the internal reporting used by the chief operating decision making group (“CODM”) to allocate resources and evaluate operating segment performance. Our segments consist of Industrial Inkjet, Productivity Software, and Fiery.

Industrial Inkjet consists of our VUTEk super-wide and wide format display graphics, Nozomi corrugated packaging and display, Reggiani textile, and Cretaprint ceramic tile decoration and building material industrial digital inkjet printers; digital ultra-violet (“UV”) curable, light-emitting diode (“LED”) curable, ceramic, water-based, and thermoforming and specialty inks, as well as a variety of textile inks including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, water-based dispersed printing ink, supplies, and coatings; digital inkjet printer parts; and professional services. Printing surfaces include paper, vinyl, corrugated, textile, glass, plastic, aluminum composite, ceramic tile, wood, and many other flexible and rigid substrates.

Productivity Software consists of a complete software suite that enables efficient and automated end-to-end business and production workflows for the print and packaging industry. This Productivity Suite also provides tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry and consists of the: (i) Packaging Suite, with Radius at its core, for tag & label, cartons, and flexible packaging businesses; (ii) Corrugated Packaging Suite, with CTI at its core, for corrugated packaging businesses, including corrugated control capability using EFI Escada; (iii) Enterprise Commercial Print Suite, with Monarch at its core, for enterprise print businesses; (iv) Publication Print Suite, with Monarch or Technique at its core, for publication print businesses; (v) Midmarket Print Suite, with Pace at its core, for medium size print businesses; (vi) Quick Print Suite, with PrintSmith Vision and essential capabilities of Digital StoreFront at its core, for small printers and in-plant sites; and (vii) Value Added Products, available with the suite and standalone, such as web-to-print, e-commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and shipping to reduce costs, increase profits, and offer new products and services to their existing and future customers. We also market Optitex computer-aided fashion design (“fashion CAD”) software, which facilitates fast fashion and increased efficiency in the textile and fashion industries.

Fiery consists of Fiery and FreeFlow Print Server (“FFPS”), which was acquired from Xerox Corporation (“Xerox”), that transform digital copiers and printers into high performance networked printing devices for the office, commercial and industrial printing markets. This operating segment is comprised of (i) stand-alone DFEs connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our DFE solutions such as Fiery Central, and Graphics Arts Package, (iv) Fiery Self Serve, our self-service and payment solution, and (v) stand-alone software-based solutions such as our proofing, textile, and scanning solutions.

Operating income is not reported by operating segment because operating expenses include significant shared expenses and other costs that are managed outside of the operating segments. Such operating expenses include various corporate expenses such as stock-based compensation, corporate sales and marketing, research and development, amortization of identified intangibles, various non-recurring charges, and other separately managed general and administrative expenses.

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Notes to Condensed Consolidated Financial Statements

(Continued)

Our revenue and gross profit (i.e., gross profit excluding stock-based compensation expense) by operating segment are summarized as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Industrial Inkjet
Revenue	$	154,902		$	142,930		$	453,545		$	407,886
Gross profit	53,661			53,392			158,351			154,972
Gross profit percentages	34.6		%	37.4		%	34.9		%	38.0		%
Productivity Software
Revenue	$	40,452		$	37,171		$	125,839		$	111,292
Gross profit	28,394			26,667			88,988			81,431
Gross profit percentages	70.2		%	71.7		%	70.7		%	73.2		%
Fiery
Revenue	$	61,780		$	68,258		$	178,688		$	204,919
Gross profit	44,368			47,884			128,590			143,821
Gross profit percentages	71.8		%	70.2		%	72.0		%	70.2		%

Operating segment profit is reconciled to our Condensed Consolidated Statements of Operations as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Segment gross profit	$	126,423		$	127,943		$	375,929		$	380,224
Stock-based compensation expense	(904		)	(486		)	(2,715		)	(1,985		)
Gross profit	$	125,519		$	127,457		$	373,214		$	378,239

Tangible and intangible assets, net of liabilities, are summarized by operating segment as follows (in thousands):

	Industrial Inkjet		Productivity Software			Fiery		Corporate and Unallocated Net Assets		Total
September 30, 2018
Goodwill	$	150,197	$	170,098		$	74,077	$	—	$	394,372
Identified intangible assets, net	45,688		24,903			15,655		—		86,246
Tangible assets, net of liabilities	251,948		(26,192		)	25,738		28,154		279,648
Net tangible and intangible assets	$	447,833	$	168,809		$	115,470	$	28,154	$	760,266

December 31, 2017
Goodwill	$	154,373	$	174,644		$	74,261	$	—	$	403,278
Identified intangible assets, net	66,547		36,379			20,082		—		123,008
Tangible assets, net of liabilities	221,933		(27,755		)	11,286		49,561		255,025
Net tangible and intangible assets	$	442,853	$	183,268		$	105,629	$	49,561	$	781,311

Corporate and unallocated net assets consist of cash and cash equivalents, short-term investments, restricted cash equivalents, corporate headquarters facility, convertible senior notes, imputed financing obligation related to build-to-suit lease, income taxes receivable, and income taxes payable.

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Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

(Continued)

Revenue by Geographic Region

We report revenue by geographic region based on ship-to destination which is summarized as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Americas	$	134,491	$	129,488	$	374,170	$	353,397
Europe, Middle East, and Africa (“EMEA”)	88,879		85,089		271,064		274,635
Asia Pacific (“APAC”)	33,764		33,782		112,838		96,065
Total revenue	$	257,134	$	248,359	$	758,072	$	724,097

Note 4.     Revenue

We derive our revenue primarily from product revenue, which includes industrial digital inkjet printers, ink, and parts; print production software; and DFEs. We receive service revenue from printer maintenance agreements, customer support, training, software development, and consulting.

Upon the adoption of ASC 606 and ASC 340-40, we recorded a net increase to our opening balance of retained earnings of $4.7 million as of January 1, 2018, after considering the income tax impact, due to the cumulative effect of adoption. The adoption impact primarily related to capitalizing customer contract acquisition costs consisting of sales commissions, partially offset by an increase in deferred revenue to reflect the deferral of a significant financing component that will be recognized as interest income as payments are received over the contractual terms, and deferral of upfront setup fees that will be recognized ratably over the expected contractual terms.

The cumulative effect of applying ASC 606 and ASC 340-40 to active contracts as of the adoption date resulted in the following adjustments to the Condensed Consolidated Balance Sheet as of January 1, 2018 (in thousands):

	Reported as of December 31, 2017		ASC 606 Adjustments			As Adjusted January 1, 2018
Assets
Accounts receivable, net	$	244,416	$	102		$	244,518
Other current assets	41,799		(1,628		)	40,171
Deferred tax assets	45,083		(1,466		)	43,617
Other assets	15,504		8,062			23,566
Liabilities
Deferred revenue	55,833		(95		)	55,738
Noncurrent contingent and other liabilities	28,801		491			29,292
Stockholders’ equity:
Retained earnings	402,544		4,674			407,218

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Notes to Condensed Consolidated Financial Statements

(Continued)

The impact of adopting ASC 606 and ASC 340-40 on our Condensed Consolidated Statement of Operations is summarized as follows (in thousands):

	Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
	Amounts in Accordance with ASC 606			Amounts in Accordance with ASC 605			Effect of change higher (lower)			Amounts in Accordance with ASC 606		Amounts in Accordance with ASC 605			Effect of change higher (lower)
Revenue	$	257,134		$	255,746		$	1,388		$	758,072	$	754,348		$	3,724
Cost of revenue	131,615			131,067			548			384,858		384,509			349
Gross profit	125,519			124,679			840			373,214		369,839			3,375
Operating expenses	123,404			123,316			88			359,520		359,418			102
Income from operations	2,115			1,363			752			13,694		10,421			3,273
Interest income and other income, net	336			199			137			1,270		823			447
Income (loss) before income taxes	(2,345		)	(3,234		)	889			225		(3,495		)	3,720
Benefits from income taxes	4,265			4,465			(200		)	1,868		2,363			(495		)
Net income (loss)	1,920			1,231			689			2,093		(1,132		)	3,225

The impact of adopting ASC 606 and ASC 340-40 on our Condensed Consolidated Balance Sheet as of September 30, 2018 was as follows (in thousands):

	Amounts in Accordance with ASC 606		Amounts in Accordance with ASC 605		Effect of change higher (lower)
Assets
Accounts receivable, net	$	240,150	$	236,018	$	4,132
Other current assets	47,814		49,790		(1,976		)
Deferred tax assets	43,265		45,226		(1,961		)
Other assets	34,369		26,409		7,960
Liabilities
Deferred revenue	65,181		65,239		(58		)
Noncurrent contingent and other liabilities	17,307		16,993		314
Stockholders’ equity
Retained earnings	409,311		401,412		7,899

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Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

(Continued)

The following table presents our disaggregated revenue by source (in thousands). Sales and usage-based taxes are excluded from revenue:

	Three Months Ended September 30, 2018								Nine Months Ended September 30, 2018
	Industrial Inkjet		Productivity Software		Fiery		Total		Industrial Inkjet		Productivity Software		Fiery		Total
Major Products and Service Lines:
Industrial Inkjet
Printers and parts	$	97,846	$	—	$	—	$	97,846	$	283,819	$	—	$	—	$	283,819
Ink, supplies, and maintenance	57,056		—		—		57,056		169,726		—		—		169,726
Productivity Software
Licenses	—		10,774		—		10,774		—		34,086		—		34,086
Professional services	—		7,349		—		7,349		—		22,919		—		22,919
Maintenance and subscriptions	—		22,329		—		22,329		—		68,834		—		68,834
Fiery
Digital front ends and related  products	—		—		58,257		58,257		—		—		167,713		167,713
Maintenance and subscriptions	—		—		3,523		3,523		—		—		10,975		10,975
Total	$	154,902	$	40,452	$	61,780	$	257,134	$	453,545	$	125,839	$	178,688	$	758,072
Timing of Revenue Recognition:
Transferred at a Point in Time	$	149,521	$	10,774	$	58,257	$	218,552	$	437,780	$	34,086	$	167,713	$	639,579
Transferred Over Time	5,381		29,678		3,523		38,582		15,765		91,753		10,975		118,493
Total	$	154,902	$	40,452	$	61,780	$	257,134	$	453,545	$	125,839	$	178,688	$	758,072
Recurring/Non-Recurring:
Non-Recurring	$	97,846	$	18,123	$	58,257	$	174,226	$	283,819	$	57,005	$	167,713	$	508,537
Recurring	57,056		22,329		3,523		82,908		169,726		68,834		10,975		249,535
Total	$	154,902	$	40,452	$	61,780	$	257,134	$	453,545	$	125,839	$	178,688	$	758,072

Remaining Performance Obligations

Revenue allocated to remaining performance obligations includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods (“backlog”). Remaining performance obligations were $105.4 million as of September 30, 2018, of which we expect to recognize substantially all of the revenue over the next 12 months.

Contract Balances

Timing of revenue recognition may differ from timing of invoicing to customers. Payment terms and conditions vary by contract. Deferred revenue (contract liability) represents amounts received in advance, or invoiced in advance, for product support contracts, software customer support contracts, consulting and integration projects, SaaS arrangements, or product sales. We defer these amounts when we collect or invoice the customer and then generally recognize revenue either ratably over the support contract term, upon performing the related services, under the cost-to-cost method, or in accordance with our revenue recognition policy. Revenue recognized during the three and nine months ended September 30, 2018, which was included in deferred revenue as of December 31, 2017, was $7.6 and $45.3 million, respectively.

Unbilled accounts receivable represents contract assets for revenue that have been recognized in advance of billing the customer, which is common for long-term contracts. Billing requirements vary by contract but are generally structured around the completion of certain development milestones. Unbilled accounts receivable as of December 31, 2017, that were transferred to accounts receivable during the three and nine months ended September 30, 2018, were $2.7 and $24.6 million, respectively.

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Notes to Condensed Consolidated Financial Statements

(Continued)

The following table reflects the balances in unbilled accounts receivable and deferred revenue (in thousands):

	September 30, 2018		January 1, 2018
Unbilled accounts receivable – current	$	34,830	$	23,296
Unbilled accounts receivable – noncurrent	3,483		4,122
Deferred revenue – current	65,181		55,738
Deferred revenue – noncurrent	349		565

Note 5.     Supplemental Financial Statement Information

Supplemental Cash Flow Information

	Nine Months Ended September 30,
(in thousands)	2018		2017
Net cash paid for income taxes	$	12,765	$	15,724
Cash paid for interest expense	3,001		3,667
Property, equipment, and intellectual property received, but not paid	639		703

See also Note 10 – Commitments and Contingencies for information about the impact from the termination of our lease in Fremont, CA.

Inventories

Inventories are summarized as follows (in thousands):

	September 30, 2018		December 31, 2017
Raw materials	$	52,085	$	57,061
Work-in-process	13,584		9,792
Finished goods	55,621		58,960
Total	$	121,290	$	125,813

Deferred Contract Acquisition Costs

Certain of our sales incentive programs that meet the definition of an incremental cost of obtaining a customer contract are required to be capitalized under ASC 340-40. We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year.

Sales commissions for renewal of a contract may not be commensurate with the commissions paid for the acquisition of the initial contract because commissions are generally not paid on the renewal of a specifically anticipated contract. Sales commissions for initial contracts are deferred and then amortized generally on a straight-line basis over a period of benefit that we have determined to be three to four years. We determined the period of benefit by taking into consideration our customer contracts, our technology, and other factors.

Upon adoption of ASC 340-40 on January 1, 2018, we capitalized $8.1 million in contract acquisition costs related to contracts that were not completed. For contracts that have durations of less than one year, we follow the practical expedient and expense these costs when incurred.

During the three and nine months ended September 30, 2018, we amortized $1.1 and $3.3 million of deferred contract acquisition costs, respectively, and we recognized no impairment losses in relation to costs capitalized. During the three and nine months ended September 30, 2018, an additional $1.1 and $3.2 million of contract acquisition costs were capitalized, respectively. Deferred contract acquisition costs are included within other noncurrent assets in our Condensed Consolidated Balance Sheets.

Deferred Cost of Revenue

Deferred cost of revenue related to unrecognized revenue on shipments to customers was $1.3 and $3.5 million as of September 30, 2018 and December 31, 2017, respectively, and is included in other current assets in our Condensed Consolidated Balance Sheets.

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Notes to Condensed Consolidated Financial Statements

(Continued)

Product Warranty Reserves

Product warranty reserves are included in accrued and other liabilities on our Condensed Consolidated Balance Sheets. The changes in product warranty reserves are as follows (in thousands):

	Nine Months Ended September 30,
	2018			2017
Beginning balance	$	16,335		$	10,319
Liability assumed upon acquiring FFPS	—			9,368
Provisions, net of releases	8,154			9,284
Settlements	(11,245		)	(12,588		)
Ending balance	$	13,244		$	16,383

Equipment Leased to Customers Under Operating Leases, Net

Equipment leased to customers under operating leases was as follows (in thousands):

	September 30, 2018			December 31, 2017
Equipment leased to customers under operating leases	$	7,755		$	5,432
Accumulated depreciation	(3,297		)	(1,927		)
Equipment leased to customers under operating leases, net	$	4,458		$	3,505

Scheduled minimum future rental revenue on operating leases as of September 30, 2018 was as follows (in thousands):

Remainder of 2018	$	729
2019	2,134
2020	2,590
2021	384
2022	432
Total	$	6,269

Accumulated Other Comprehensive Income (Loss) (“AOCI”)

AOCI classified within stockholders’ equity on our Condensed Consolidated Balance Sheets was as follows (in thousands):

	September 30, 2018			December 31, 2017
Net unrealized investment losses	$	(941	)	$	(697	)
Currency translation gains (losses)	(6,055		)	8,794
Net unrealized gain on cash flow hedges	—			41
Total	$	(6,996	)	$	8,138

Amounts reclassified out of AOCI, net of tax, were immaterial for all periods presented, and consisted of unrealized gains and losses from investments in debt securities that are reported within interest income and other income, net, in our Condensed Consolidated Statements of Operations.

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Notes to Condensed Consolidated Financial Statements

(Continued)

Note 6.     Accounts Receivable

Financing Receivables

Our financing receivables consist of sales-type lease and trade receivables that have an original contractual maturity in excess of one year. Sales-type lease receivables are included within other current assets and other assets, while trade receivables are included in accounts receivable (net of allowances) and other assets. Our financing receivables are summarized as follows (in thousands):

	September 30, 2018		December 31, 2017
Sales-type lease receivables	$	30,196	$	16,558
Trade receivables	11,814		12,125
Total financing receivables	$	42,010	$	28,683
Scheduled to be received in excess of one year	$	23,727	$	15,191

The credit quality of financing receivables is evaluated on the same basis as trade receivables. An allowance for estimated uncollectible amounts is provided as needed.

Accounts Receivable Sales Arrangements

Trade receivables are derecognized from our Condensed Consolidated Balance Sheets when sold to third parties upon determining that such receivables are presumptively beyond the reach of creditors in a bankruptcy proceeding. Any recourse obligation is measured using market data from similar transactions and the servicing liability is determined based on the fair value that a third party would charge to service these receivables. These liabilities were determined to not be material as of September 30, 2018 and December 31, 2017.

We have facilities in the U.S. that enable us to sell to third parties, on an ongoing basis, certain trade receivables with recourse. Trade receivables sold with recourse are generally short-term receivables with payment due dates of less than 10 days from the date of sale. Trade receivables sold under these facilities were $3.1 and $13.1 million during the three and nine months ended September 30, 2018 respectively, and $21.4 million during the year ended December 31, 2017, which approximates the cash received.

We have facilities in Europe that enable us to sell to third parties, on an ongoing basis, certain trade receivables without recourse. Trade receivables sold without recourse are generally short-term receivables secured by letters of credit with payment due dates of less than one year. Trade receivables sold under these facilities were $1.1 and $6.8 million during the three and nine months ended September 30, 2018, respectively, and $5.9 million during the year ended December 31, 2017, which approximates the cash received.

We report collections from the sale of trade receivables to third parties as operating cash flows in the Condensed Consolidated Statements of Cash Flows.

Note 7.     Fair Value Measurements

We invest our excess cash on deposit with major banks in money market, United States (“U.S.”) Treasury and government-sponsored entity, corporate, municipal government, asset-backed, and mortgage-backed residential debt securities. By policy, we invest primarily in high-grade marketable securities. We are exposed to credit risk in the event of default by the financial institutions or issuers of these investments to the extent of the amounts recorded in our Condensed Consolidated Balance Sheets.

We consider all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Typically, the cost of these investments approximates fair value. Marketable investments with a maturity greater than three months are classified as available-for-sale short-term investments. Available-for-sale securities are stated at fair value with unrealized gains and losses reported as a separate component of AOCI, net of tax. The credit portion of any other-than-temporary impairment is included in net income. Realized gains and losses on sales or maturities of financial instruments are recognized upon sale of the investments using the specific identification method.

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Notes to Condensed Consolidated Financial Statements

(Continued)

Our available-for-sale short-term investments are summarized as follows (in thousands):

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
September 30, 2018
U.S. Government and sponsored entities	$	55,322	$	—	$	(714	)	$	54,608
Corporate debt securities	51,345		—		(495		)	50,850
Municipal securities	383		—		(4		)	379
Asset-backed securities	7,020		33		(61		)	6,992
Mortgage-backed securities – residential	158		—		(1		)	157
Total short-term investments	$	114,228	$	33	$	(1,275	)	$	112,986
December 31, 2017
U.S. Government and sponsored entities	$	59,824	$	—	$	(660	)	$	59,164
Corporate debt securities	79,356		—		(450		)	78,906
Municipal securities	382		—		(2		)	380
Asset-backed securities	9,808		44		(47		)	9,805
Mortgage-backed securities – residential	445		—		(3		)	442
Total short-term investments	$	149,815	$	44	$	(1,162	)	$	148,697

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss position below are as follows (in thousands):

	Less than 12 Months					More than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2018
U.S. Government and sponsored entities	$	—	$	—		$	54,608	$	(714	)	$	54,608	$	(714	)
Corporate debt securities	10,159		(90		)	40,691		(405		)	50,850		(495		)
Municipal securities	379		(4		)	—		—			379		(4		)
Asset-backed securities	—		—			6,934		(61		)	6,934		(61		)
Mortgage-backed securities – residential	18		—			86		(1		)	104		(1		)
Total	$	10,556	$	(94	)	$	102,319	$	(1,181	)	$	112,875	$	(1,275	)
December 31, 2017
U.S. Government and sponsored entities	$	23,023	$	(206	)	$	35,989	$	(454	)	$	59,012	$	(660	)
Corporate debt securities	45,857		(207		)	32,634		(243		)	78,491		(450		)
Municipal securities	378		(2		)	—		—			378		(2		)
Asset-backed securities	6,779		(31		)	2,947		(16		)	9,726		(47		)
Mortgage-backed securities – residential	162		(2		)	142		(1		)	304		(3		)
Total	$	76,199	$	(448	)	$	71,712	$	(714	)	$	147,911	$	(1,162	)

For fixed income securities that have unrealized losses as of September 30, 2018, we do not have the intent to sell any of these investments and it is not more likely than not that we will be required to sell any of these investments before recovery of the entire amortized cost basis. We have evaluated these fixed income securities and determined that no credit losses exist. Accordingly, management has determined that the unrealized losses on our fixed income securities as of September 30, 2018 were temporary in nature.

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(Continued)

Amortized cost and estimated fair value of investments as of September 30, 2018, are summarized as follows (in thousands):

	Amortized cost		Fair value
Mature in less than one year	$	75,459	$	74,864
Mature in one to three years	38,769		38,122
Total short-term investments	$	114,228	$	112,986

Net realized gains from sales of investments are recognized in interest income and other income, net, and were immaterial during the three and nine months ended September 30, 2018, and September 30, 2017, respectively. Net unrealized losses of $1.2 and $1.1 million were included in AOCI, net of tax effect, on the Condensed Consolidated Balance Sheets as of September 30, 2018, and December 31, 2017, respectively.

Fair Value Measurements

Our fair value hierarchy is defined as follows:

Level 1: Inputs that are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

Level 2: Inputs that are other than quoted prices included within Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date for the duration of the instrument’s anticipated life or by comparison to similar instruments; and

Level 3: Inputs that are unobservable or reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. These include management’s own judgments about market participant assumptions developed based on the best information available in the circumstances.

We utilize the market approach to measure the fair value of our fixed income securities. The market approach is a valuation technique that uses the prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The fair value of our fixed income securities is obtained using readily-available market prices from a variety of industry standard data providers, large financial institutions, and other third-party sources for the identical underlying securities. The fair value of our investments in certain money market funds is expected to maintain a net asset value of $1.00 per share and, as such, is priced at the expected market price.

We obtain the fair value of our Level 2 financial instruments from several third-party asset managers, custodian banks, and accounting service providers. Independently, these service providers use professional pricing services to gather pricing data, which may include quoted market prices for identical or comparable instruments or inputs other than quoted prices that are observable either directly or indirectly. As part of this process, we engaged a pricing service to assist management in its pricing analysis and assessment of other-than-temporary impairment. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we utilize a third-party pricing service, the impairment analysis and related valuations represent conclusions of management and not conclusions or statements of any third party.

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Notes to Condensed Consolidated Financial Statements

(Continued)

Our assets and liabilities measured at fair value by levels within the fair value hierarchy are summarized as follows (in thousands):

	September 30, 2018								December 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	18,524	$	—	$	—	$	18,524	$	9,897	$	—	$	—	$	9,897
U.S. Government and sponsored  entities	33,279		21,328		—		54,607		33,261		25,903		—		59,164
Corporate debt securities	—		50,850		—		50,850		—		78,906		—		78,906
Municipal securities	—		379		—		379		—		380		—		380
Asset-backed securities	—		6,934		59		6,993		—		9,754		51		9,805
Mortgage-backed securities  – residential	—		157		—		157		—		442		—		442
Total	$	51,803	$	79,648	$	59	$	131,510	$	43,158	$	115,385	$	51	$	158,594
Liabilities:
Contingent consideration,  current and noncurrent	$	—	$	—	$	20,323	$	20,323	$	—	$	—	$	35,702	$	35,702
Self-insurance	—		—		982		982		—		—		902		902
Total	$	—	$	—	$	21,305	$	21,305	$	—	$	—	$	36,604	$	36,604

Money market funds have been classified as cash equivalents as of September 30, 2018, and December 31, 2017, respectively.

Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. Investments in U.S. Treasury obligations and overnight money market mutual funds have been classified as Level 1 because these securities are valued based on quoted prices in active markets or are actively traded at $1.00 net asset value. There have been no transfers between Level 1 and 2 during the nine months ended September 30, 2018 and 2017.

Government agency investments and corporate debt instruments, including investments in asset-backed and mortgage-backed securities, have generally been classified as Level 2 because markets for these securities are less active or valuations for such securities utilize significant inputs, which are directly or indirectly observable. We hold asset-backed securities with income payments derived from and collateralized by a specified pool of underlying assets. Asset-backed securities in the portfolio are predominantly collateralized by credit cards and auto loans. We also hold mortgage-backed securities which have been fully reserved.

Liabilities for Contingent Consideration

Acquisition-related liabilities for contingent consideration (i.e., earnouts) as of September 30, 2018 are related to the 2017 acquisitions of Escada Innovations Limited and Escada Systems, Inc. (collectively, “Escada”) and Generation Digital Solutions, Inc. (“Generation Digital”); the 2016 acquisitions of Optitex Ltd. (“Optitex”) and Rialco Limited (“Rialco”); the 2015 acquisitions of Shuttleworth Business Systems Limited and CDM Solutions Limited (collectively, “Shuttleworth”), and CTI; and the 2013 acquisition of PrintLeader Software (“PrintLeader”).

The fair value of these earnouts is estimated to be $20.3 and $35.7 million as of September 30, 2018, and December 31, 2017, respectively, by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include risk-free discount rates between 0.6% and 5.0%, as well as probability-adjusted revenue, gross profit, and direct operating income using the Monte Carlo valuation method. Probability-adjusted revenue, gross profit, and direct operating income are significant inputs that are not observable in the market, and are therefore classified as Level 3 inputs. These contingent liabilities have been reflected in the Condensed Consolidated Balance Sheet as of September 30, 2018, as current and noncurrent liabilities of $8.5 and $11.8 million, respectively.

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(Continued)

Changes in the fair value of contingent consideration are summarized as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Liability for Contingent Consideration
Beginning balance	$	22,129		$	61,414		$	35,702		$	56,463
Fair value of Generation Digital contingent consideration at August 14, 2017	—			3,600			—			3,600
Changes in valuation	721			75			(12,054		)	974
Earnout accretion	91			336			194			1,213
Payments and settlements	(2,611		)	(10,265		)	(3,361		)	(11,559		)
Foreign currency adjustment	(7		)	(1,640		)	(158		)	2,829
Ending balance	$	20,323		$	53,520		$	20,323		53,520

The Optitex, Generation Digital, and Shuttleworth earnout liability valuations decreased, on a combined basis, during the three and nine months ended September 30, 2018 by $1.5 and $14.3 million, respectively, based on recent actual and updated forecasted financial performance data. The Escada earnout liability valuation increased $2.2 millionduring the three and nine months ended September 30, 2018. The Optitex, CTI, and Rialco earnout probabilities increased, while the Shuttleworth earnout performance probability decreased, during 2017. The earnout liability valuations increased during the three and nine months ended September 30, 2017 by $0.1 and $1.0 million, respectively. Changes in the fair value of contingent consideration subsequent to the acquisition date are reported in general and administrative expenses.

Earnout payments and settlements during the three and nine months ended September 30, 2018 of $2.6 and $3.4 million were primarily related to the Rialco, Generation Digital, and Shuttleworth contingent consideration liabilities. Earnout payments and settlements during the three and nine months ended September 30, 2017 of $10.3 and $11.6 million, respectively, were related to the Reggiani, Optitex, Rialco, and Shuttleworth contingent consideration liabilities.

The primary inputs to the fair value measurement of contingent consideration liability are the discount rate and probability-adjusted revenue or earnings targets specified in the acquisition agreements. Accordingly, we reviewed the sensitivity of the fair value measurement to changes in these inputs. We assessed the probability of achieving the revenue and profitability performance targets for contingent consideration associated with each acquisition at percentage levels between 50% and 100% as of each respective acquisition date based on an assessment of the historical performance of each acquired entity, our current expectations of future performance, and other relevant factors. A change in probability-adjusted revenue of five percentage points from the level assumed in the current valuations would result in an increase in the fair value of contingent consideration of $1.8 million or a decrease of $1.2 million. A change in the discount rate of one percentage point would result in an increase in the fair value of contingent consideration of $0.2 million or a decrease of $0.2 million. The potential undiscounted amount of contingent consideration that we could be required to pay related to our business acquisitions, assuming all remaining earnout payments were maximized, would be $11.4 million above amounts currently accrued as of September 30, 2018.

Fair Value of Derivative Instruments

We utilize the income approach to measure the fair value of our derivative assets and liabilities. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices, and are therefore classified as Level 2 measurements. The notional amount of our derivative assets and liabilities was $209.9 and $239.4 million as of September 30, 2018 and December 31, 2017, respectively.

Fair Value of Convertible Senior Notes

In September 2014, we issued $345 million aggregate principal amount of our Notes. The Notes are carried at their original issuance value, net of unamortized debt discount, and are not marked to market each period. The fair value of the Notes as of September 30, 2018 was approximately $340.7 million and was classified as a Level 2 fair value measurement. Fair value was estimated based upon actual quotations obtained at the end of the reporting period or the most recent date available. The market value of our Notes can be in excess of the outstanding principal amount due to the conversion premium.

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Notes to Condensed Consolidated Financial Statements

(Continued)

Note 8.     Derivatives and Hedging

We are exposed to market risk and foreign currency exchange risk from changes in foreign currency exchange rates, which could affect operating results, financial position, and cash flows. We manage our exposure to these risks through our regular operating and financing activities and, when appropriate, through use of derivative financial instruments. These derivative financial instruments are used to hedge monetary assets and liabilities, intercompany balances, trade receivables, anticipated cash flows, and to reduce earnings and cash flow volatility resulting from shifts in foreign currency exchange rates. Our objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting fair values of assets and liabilities. We do not have any leveraged derivatives, nor do we use derivative contracts for speculative purposes. We present the fair value of all open derivative instruments, including those embedded in other contracts, as assets or liabilities on our Condensed Consolidated Balance Sheets. The related cash flow impacts of our derivative contracts are reflected as cash flows from operating activities.

Our exposures are primarily related to non-U.S. dollar-denominated revenue in Europe, the U.K., Latin America, China, Israel, and Australia, and to non-U.S. dollar-denominated operating expenses in Europe, India, the U.K., China, Israel, Brazil, and Australia. From time to time we have hedged our operating expense cash flow exposure in Indian rupees. We hedge balance sheet remeasurement exposure associated with British pound sterling, Canadian dollar, Chinese renminbi, Brazilian real, Israeli shekel, Japanese yen, and Euro-denominated intercompany balances; Brazilian real, British pound sterling, Australian dollar, Chinese renminbi, Israeli shekel, and Euro-denominated trade receivables; and British pound sterling, Israeli shekel, Canadian dollar, and Euro-denominated net monetary assets.

By their nature, derivative instruments involve, to varying degrees, elements of market and credit risk. The market risk associated with these instruments resulting from currency exchange movement is expected to offset the market risk of the underlying transactions, assets, and liabilities being hedged. Under our master netting agreements with our foreign currency derivative counterparties, we are allowed to net transactions of the same currency with a single net amount payable by one party to the other. The derivatives held by us are not subject to any credit contingent features negotiated with these counterparties. We are not required to pledge cash collateral related to these foreign currency derivative contracts. We do not believe there is significant risk of loss from non-performance by the counterparty associated with these instruments because, by policy, we only deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

Cash Flow Hedges

We did not have any foreign currency derivative contracts designated as cash flow hedges as of September 30, 2018 nor during the nine months ended September 30, 2018. Our foreign currency derivative contracts designated as cash flow hedges for our Indian rupee operating expenses were in the notional amount of $3.9 million as of December 31, 2017. The fair value of the net assets (liabilities) related to these cash flow hedges were not material. The changes in fair value of these contracts are reported as a component of AOCI and reclassified to operating expense in the periods of payment of the hedged operating expenses. The amount of ineffectiveness that was recorded in the Condensed Consolidated Statements of Operations for these designated cash flow hedges was immaterial. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

Balance Sheet Hedges

Our forward contracts are not designated for hedge accounting treatment since there is a natural offset for the remeasurement of the underlying foreign currency denominated asset or liability. We recognize changes in the fair value of non-designated derivative instruments in earnings in the period of change. Gains and losses on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest income and other income, net, in the same period as the remeasurement gain or loss of the related foreign currency denominated assets and liabilities. Our forward contracts not designated for hedge accounting treatment consisted of hedges of Australian dollar, British pound sterling, Brazilian real, Canadian dollar, Chinese renminbi, Euro, Israeli shekeland Japanese yen.

These balance sheet hedges cover currency exposures in the following line items in the notional amounts indicated (in thousands):

Balance sheet categories	September 30, 2018		December 31, 2017
Accounts Receivable	$	46,574	$	44,427
Other assets and liabilities, net	38,185		46,550
Intercompany balances	125,189		144,477
Total	$	209,948	$	235,454

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Notes to Condensed Consolidated Financial Statements

(Continued)

Note 9.     Convertible Senior Notes

0.75% Convertible Senior Notes Due 2019

In September 2014, we completed a private placement of $345 million principal amount of 0.75% Convertible Senior Notes due September 1, 2019. The net proceeds from this offering were approximately $336.3 million, after deducting the initial purchasers’ commissions and the offering expenses paid by us. We used approximately $29.4 million of the net proceeds to purchase the Note Hedges described below, net of the proceeds from the Warrant transactions also described below.

The Notes are senior unsecured obligations of EFI with interest payable semiannually in arrears on March 1 and September 1 of each year. The Notes are not callable and will mature on September 1, 2019, unless previously purchased or converted in accordance with their terms prior to such date. Holders of the Notes who convert in connection with a “fundamental change,” as defined in the indenture governing the Notes (“Indenture”), may require us to purchase for cash all or any portion of their Notes at a purchase price equal to 100 percent of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.

The initial conversion rate is 18.9667 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $52.72 per share of common stock. Upon conversion of the Notes, holders will receive cash, shares of common stock or a combination thereof, at our election. Our intent is to settle the principal amount of the Notes in cash upon conversion. If the conversion value exceeds the principal amount, we would deliver shares of our common stock for our conversion obligation in excess of the aggregate principal amount. As of September 30, 2018, none of the conditions allowing holders of the Notes to convert had been met.

We separated the Notes into liability and equity components. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes using the effective interest method with an effective interest rate of 4.98% per annum (5.46% inclusive of debt issuance costs). The equity component is not remeasured if it continues to meet the conditions for equity classification.

We allocated the total transaction costs incurred by the issuance of the Notes to the liability and equity components based on their relative values. Issuance costs of $7.0 million attributable to the $281.4 million liability component are being amortized to expense over the term of the Notes, and issuance costs of $1.6 million attributable to the $63.6 million equity component were offset against the equity component in stockholders’ equity. Additionally, we recorded a deferred tax liability of $23.7 million on the debt discount, which is not deductible for tax purposes.

The Notes consisted of the following (in thousands):

	September 30, 2018			December 31, 2017
Liability component	$	345,000		$	345,000
Debt discount, net of amortization	(12,975		)	(23,178		)
Debt issuance costs, net of amortization	(1,658		)	(2,865		)
Net carrying amount	$	330,367		$	318,957
Equity component	$	63,643		$	63,643
Less: debt issuance costs allocated to equity	(1,582		)	(1,582		)
Net carrying amount	$	62,061		$	62,061

Interest expense recognized on the Notes was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
0.75% coupon	$	647	$	647	$	1,948	$	1,933
Amortization of debt discount	3,448		3,265		10,203		9,627
Amortization of debt issuance costs	407		388		1,207		1,144
Total	$	4,502	$	4,300	$	13,358	$	12,704

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Notes to Condensed Consolidated Financial Statements

(Continued)

Note Hedges

We paid an aggregate of $63.9 million in convertible note hedge transactions with respect to our common stock (“Note Hedges”) in September 2014. The Note Hedges will expire upon maturity of the Notes. The Note Hedges are intended to offset the potential dilution upon conversion and/or offset any cash payments we are required to make in excess of the principal amount upon conversion of the Notes in the event that the market value per share of our common stock, as measured under the terms of the Note Hedges, is greater than the strike price of the Note Hedges. The strike price of the Note Hedges initially corresponded to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion price of the Notes. The Note Hedges are separate transactions and are not part of the Notes. Holders of the Notes will not have any rights with respect to the Note Hedges.

Warrants

Concurrently with entering into the Note Hedges, we separately sold Warrants to acquire shares of our common stock at a strike price of $68.86 per share (the "Warrants"). We received aggregate proceeds of $34.5 million from the sale of the Warrants. If the average market value per share of our common stock for the reporting period, as measured under the Warrants, exceeds the strike price of the Warrants, the Warrants will have a dilutive effect on our earnings per share. The Warrants are separate transactions and are not part of the Notes or the Note Hedges and are accounted for as a component of additional paid-in capital. Holders of the Notes and Note Hedges will not have any rights with respect to the Warrants.

Note 10.     Commitments and Contingencies

Contingent Consideration

We are required to make payments to the former stockholders of acquired companies based on the achievement of specified performance targets as explained in Note 7 – Fair Value Measurements.

Lease Commitments and Contractual Obligations

As of September 30, 2018, we have leased certain of our current facilities and vehicles under noncancelable operating lease agreements. We are required to pay property taxes, insurance, and nominal maintenance costs for certain of these facilities and vehicles, and any increases over the base year of these expenses on the remainder of these leases.

Lease Termination

On July 27, 2018, we executed an agreement (the “Termination Agreement”) to terminate the lease agreement dated April 19, 2013 between John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee and the Company, pursuant to which the Company had leased a portion of an approximately 108,000 square foot, two-story building located at 6700 Dumbarton Circle, Fremont, CA, adjacent to the Company’s headquarters. The Termination Agreement was effective July 31, 2018. The Company moved its operations and personnel from the formerly leased facility into our headquarters building in July 2018. Prior to executing the Termination Agreement, the underlying lease had a remaining term of ten years and minimum noncancelable lease payments of $16.0 million. For accounting purposes, we were considered the owner of the building and had recorded the asset at a net book value of $13.7 million in property and equipment, net, on our Condensed Consolidated Balance Sheet prior to the termination. As of July 31, 2018, we derecognized the lease asset and removed the corresponding liability of $14.5 million, which represented the present value of the lease obligation, from our Condensed Consolidated Balance Sheet. The Termination Agreement required us to pay total penalties of $0.8 million. The net loss from this lease termination of $0.1 million was charged to restructuring expense during the three months ended September 30, 2018.

Assets Held for Sale

During the fourth quarter of 2017, our management approved a plan to sell approximately 31.5 acres of land and two manufacturing buildings located at One Vutek Place and 189 Waukewan Street, Meredith, New Hampshire, consisting of 163,000 total square feet. These assets, which were previously recorded within property and equipment, net at a net book value of $5.1 million, were reclassified as assets held for sale upon the approval of the plan. We recognized an impairment charge of $0.9 million in the fourth quarter of 2017, and reported the assets at $4.2 million on our Condensed Consolidated Balance Sheet as of December 31, 2017. During the three months ended September 30, 2018, we sold the 189 Waukewan Street land and building for net proceeds of $1.1 million and recognized a gain of $0.1 million. The One Vutek Place land and building remained in assets held for sale at a total value of $3.1 million as of September 30, 2018 on the Condensed Consolidated Balance Sheet and are actively being marketed.

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Notes to Condensed Consolidated Financial Statements

(Continued)

Off-Balance Sheet Financing – Lease Arrangements

On August 26, 2016, we entered into a lease agreement with a lease term of 48.5 years, inclusive of two renewal options of 5.0 and 3.5 years, with the City of Manchester, NH to lease 16.9 acres adjacent to the Manchester Regional Airport. The land is subleased to MUFG Americas Capital Leasing & Finance, LLC (“MUFG”), formerly Bank of Tokyo – Mitsubishi UFJ Leasing & Finance LLC, during the term of the lease related to the manufacturing facility that was constructed on the site, which is described below. Minimum lease payments are $13.3 million during the entire 48.5-year term of the land lease, excluding six months of the land lease that were financed into the manufacturing facility lease.

On August 26, 2016, we entered into a six-year lease with MUFG whereby a 225,000-square foot manufacturing and warehouse facility was constructed for our Industrial Inkjet operating segment at a cost of $39.8 million. Construction was completed in April 2018. Minimum lease payments during the initial six-year term are $1.8 million. Upon completion of the initial six-year term, we have the option to renew the lease, purchase the facility, or return the facility to MUFG subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment. We have assessed our exposure in relation to the residual value guarantee and believe that there is no deficiency to the guaranteed value as of September 30, 2018.

During the construction period, we were required to maintain restricted cash equivalents or restricted investments equal to the amount expended to date on the construction of the building as collateral. The funds were deposited with a third-party trustee and were restricted during the construction period. Upon completion of construction, $39.8 million was deposited with MUFG and is restricted as collateral until the end of the underlying building lease period.

Legal Proceedings

From time to time, we are involved in a variety of claims, lawsuits, investigations, or proceedings relating to contractual disputes, securities laws, intellectual property rights, employment, or other matters that may arise in the normal course of business. We assess our potential liability in each of these matters by using the information available to us. We develop our views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and various combinations of appropriate litigation and settlement strategies. We accrue estimated losses from contingencies if a loss is deemed probable and can be reasonably estimated.

As of September 30, 2018, we are subject to the matters described below:

Matan Digital Printing (“MDG”) Matter. EFI acquired Matan Digital Printers (“Matan”) in 2015 from sellers (the “2015 Sellers”) that had acquired Matan Digital Printing Ltd. from other sellers in 2001 (the “2001 Sellers”). The 2001 Sellers have asserted a claim against the 2015 Sellers and Matan asserting that they are entitled to a portion of the 2015 Sellers’ proceeds from EFI’s acquisition. The 2015 Sellers dispute this claim and have agreed to indemnify EFI against the 2001 Sellers’ claim.

We do not believe that it is probable that we will incur a loss in the resolution of this matter. It is reasonably possible, however, that our financial statements could be materially affected by an unfavorable resolution and we could incur a material loss in this matter. We estimate the range of loss to be between one dollar and $10.1 million. If we incur a loss in this matter, it will be offset by a receivable of an equal amount representing a claim for indemnification against the escrow account established in connection with the Matan acquisition.

Purported Class Action Lawsuit.On August 10, 2017, a putative class action was filed against the Company and its two named executive officers in the United States District Court for the District of New Jersey, captioned Pipitone v. Electronics For Imaging, Inc., No. 2:17-cv-5992 (D.N.J.). A First Amended Complaint was filed on February 20, 2018. The plaintiffs allege, among other things, that statements by the Company and its officers about the Company’s financial reporting, revenue recognition, internal controls, and disclosure controls and procedures were false or misleading. The complaint seeks an unspecified amount of damages, interest, attorneys’ fees, and other costs, on behalf of a putative class of individuals and entities that purchased or otherwise acquired EFI securities from February 22, 2017 through August 3, 2017. EFI filed a motion to dismiss on April 23, 2018. The plaintiffs filed an opposition on May 23, 2018, and EFI filed its reply brief on June 13, 2018. A hearing on EFI’s motion to dismiss has not yet been scheduled.

At this time, we do not believe it is probable that we will incur a material loss in this matter. However, it is reasonably possible that our financial statements could be materially affected by an unfavorable resolution of this matter. Since this matter is in the preliminary stages, we are not yet in a position to estimate the amount or range of reasonably possible loss that may be incurred.

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Notes to Condensed Consolidated Financial Statements

(Continued)

Purported Derivative Shareholder Lawsuits.On August 22, 2017, a purported derivative shareholder complaint was filed in the Superior Court of the State of California for the County of Alameda captioned Schiffmiller v. Gecht, No. RG17873197. A First Amended Complaint was filed on April 13, 2018. The complaint makes claims derivatively and on behalf of the Company as nominal defendant against the Company’s named executive officers and directors for alleged breaches of fiduciary duties and unjust enrichment, and alleges, among other things, that statements by the Company and its officers about the Company’s financial reporting, revenue recognition, internal controls, and disclosure controls and procedures were false or misleading. The complaint alleges the Company has suffered damage as a result of the individual defendants’ alleged actions, and seeks an unspecified amount of damages, restitution, and declaratory and other relief. The derivative action has been stayed pending the resolution of the Pipitone class action described above.

At this time, we do not believe it is probable that we will incur a material loss in this matter. However, it is reasonably possible that our financial statements could be materially affected by an unfavorable resolution of this matter. Because this matter has been stayed pending resolution of the Pipitone class action described above, we are not yet in a position to estimate the amount or range of reasonably possible loss that may be incurred.

Other Matters.As of September 30, 2018, we were subject to various other claims, lawsuits, investigations, and proceedings in addition to the matters discussed above. There is at least a reasonable possibility that additional losses may be incurred in excess of the amounts that we have accrued. However, we believe that these claims are not material to our financial statements or the range of reasonably possible losses is not reasonably estimable. Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

Note 11.     Stock Repurchase Program

On September 11, 2017, the board of directors approved the repurchase of an additional $125 million for our share repurchase program commencing September 11, 2017 and expiring on December 31, 2018. The board of directors had previously authorized $150 million under the program in November 2015. Under this publicly announced program, we repurchased 1,614,166 and 1,019,544 shares for an aggregate purchase price of $50.5 and $47.0 million during the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, $58.9 million remained authorized for repurchases under this program.

Our employees have the option to surrender shares of common stock to satisfy their tax withholding obligations that arise on the vesting of RSUs, the exercise price of certain stock options, and any tax withholding obligations incurred from exercise of stock options. Employees surrendered 63,107 and 233,159 shares at an aggregate value of $2.0 and $10.0 million during the nine months ended September 30, 2018 and 2017, respectively.

Note 12.     Stock-based Compensation

Stock-based compensation expense related to ESPP purchase rights and RSUs is summarized as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Stock-based compensation expense by type of awards
RSUs	$	10,587		$	3,545		$	25,793		$	18,875
ESPP purchase rights	1,336			1,103			4,685			3,666
Total stock-based compensation expense	11,923			4,648			30,478			22,541
Income tax benefit	(1,747		)	(1,525		)	(4,437		)	(6,929		)
Stock-based compensation expense, net of tax	$	10,176		$	3,123		$	26,041		$	15,612

Valuation Assumptions for ESPP Purchase Rights and Stock Options

We use the Black-Scholes-Merton (“BSM”) option pricing model to value stock-based compensation for all equity awards, except market-based awards, which are valued using the Monte Carlo valuation model. We value RSUs at the closing market price on the date of grant.

28

Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

(Continued)

The estimated weighted average fair value per share and underlying assumptions of ESPP purchase rights issued were as follows:

	Nine Months Ended September 30,
	2018				2017
Weighted average fair value per share	$13.91				$12.09
Expected volatility	37	%	—	80%	24	%	—	28%
Risk-free interest rate	2.2	%	—	2.7%	0.7	%	—	1.3%
Expected term (in years)	0.5		—	2.0	0.5		—	2.0

No stock options were granted during the nine months ended September 30, 2018 and 2017. As of September 30, 2018, 100,000 shares underlying stock options are outstanding and exercisable. They are time-based options with an aggregate intrinsic value of $1.8 million, a weighted average exercise price of $16.00 per share, and remaining contractual term of 0.7 years. Aggregate intrinsic value for stock options represents the difference between the closing price per share of our common stock on the last trading day of the period and the option exercise price, multiplied by the number of in-the-money stock options outstanding, vested and expected to vest, and exercisable as of September 30, 2018.

Non-vested RSUs

Non-vested RSUs were awarded to employees under our equity incentive plans. Non-vested RSUs do not have the voting rights of common stock and the shares underlying non-vested RSUs are not considered issued and outstanding. Non-vested RSUs generally vest over a service period of one to four years. The compensation expense incurred for these service-based awards is based on the closing market price of our stock on the date of grant and is amortized on a graded vesting basis over the requisite service period.

Non-vested RSU activity during the nine months ended September 30, 2018 is summarized below (shares in thousands):

	Time-based				Performance-based				Market-based			Total
	Shares		Weighted average grant date fair value		Shares		Weighted average grant date fair value		Shares	Weighted average grant date fair value		Shares		Weighted average grant date fair value
Non-vested at January 1, 2018	1,048		$	35.76	1,209		$	42.18	23	$	35.15	2,280		$	39.16
Granted	985		31.31		829		30.92		—	—		1,814		31.13
Vested	(287	)	40.04		(20	)	44.84		—	—		(307	)	40.36
Forfeited	(96	)	34.90		(614	)	44.65		—	—		(710	)	43.33
Non-vested at September 30, 2018	1,650		32.41		1,404		34.42		23	35.15		3,077		33.35

Vested RSUs

The grant date fair value of RSUs vested during the nine months ended September 30, 2018 was $12.4 million. The aggregate intrinsic value of RSUs vested and expected to vest as of September 30, 2018 was $57.7 million and the remaining weighted average vesting period was 1.08 years. Aggregate intrinsic value for RSUs vested and expected to vest represents the closing market price per share of our common stock on the last trading day of the period, multiplied by the number of RSUs vested and expected to vest as of September 30, 2018. RSUs expected to vest represent time-based RSUs unvested and outstanding as of September 30, 2018, and performance-based RSUs for which the requisite service period has not been rendered, but are expected to vest based on the achievement of performance conditions. Performance-based RSUs that vested based on certain financial results achieved are expensed in the period that the performance and related service criteria were met.

29

Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

(Continued)

Valuation Assumptions for Performance-based and Market-based RSUs

Performance-based stock options, market-based RSUs, and market-based stock options were not granted during the nine months ended September 30, 2018. We use the BSM option pricing model to value performance-based RSUs. The weighted average grant date fair value per share of performance-based RSUs granted and the assumptions used to estimate grant date fair value are as follows:

	Short-term		Long-term
Nine Months Ended September 30, 2018
Grant date fair value per share	$	28.26	$	34.56
Service period (years)	1.0		3.0
Nine Months Ended September 30, 2017
Grant date fair value per share	$	47.23	$	45.96
Service period (years)	1.0		2.0		–	3.0

Our performance-based RSUs generally vest when specified performance criteria are met based on bookings, revenue, cash provided by operating activities, non-GAAP operating income, non-GAAP earnings per share, revenue growth compared to market comparables, non-GAAP earnings per share growth compared to cash flow from operating activities growth, or other targets during the service period; otherwise, they are forfeited. Non-GAAP operating income is operating income determined in accordance with GAAP, adjusted to remove the impact of certain items and the related tax effects. Non-GAAP earnings per share is net income determined in accordance with GAAP, adjusted to remove the impact of certain items, and the related tax effects, divided by the weighted average number of common shares and dilutive potential common shares outstanding during the period.

The grant date fair value per share determined in accordance with the BSM valuation model is being amortized over the service period of the performance-based awards. The probability of achieving the performance criteria was determined based on review of the actual results achieved thus far by each business unit compared with the operating plan during the service period as well as the overall expectations of the business unit. Stock-based compensation expense was adjusted based on the updated fair value resulting from this probability assessment. As actual results are achieved during the service period, the probability assessment is updated and stock-based compensation expense is adjusted accordingly.

Market-based awards that were granted in prior periods vest when our average closing stock price exceeds defined multiples of the closing stock price for 90 consecutive trading days. If these multiples are not achieved by the expiration date, the awards are forfeited. The grant date fair value is amortized over the average derived service period of the awards. The average derived service period and total fair value were determined using a Monte Carlo valuation model based on our assumptions, which include a risk-free interest rate and implied volatility.

Note 13.     Restructuring and Other

During the nine months ended September 30, 2018 and 2017, we continued to analyze and re-align our cost structure following our business acquisitions. These charges primarily relate to integrating recently acquired businesses, consolidating facilities, eliminating redundancies, and lowering our operating expense run rate. Restructuring and other consists primarily of restructuring, severance, short-term retention costs, facility downsizing and relocation, and acquisition integration expenses.

Restructuring and other costs were $2.8 and $10.5 million during the three and nine months ended September 30, 2018, respectively, and were $0.8 and $5.4 million during the three and nine months ended September 30, 2017, respectively. Restructuring and other costs include severance charges of $1.6 and $5.9 million related to reductions in head count of 30 and 113 during the three and nine months ended September 30, 2018, respectively; and $0.3 and $3.8 million related to reductions in head count of 15 and 128 during the three and nine months ended September 30, 2017, respectively. Severance costs include severance payments, retention payments, related employee benefits, outplacement fees, recruiting, and employee relocation costs.

Facilities relocation and downsizing expenses were $0.4 and $1.4 million during the three and nine months ended September 30, 2018, respectively; and were $0.4 and $0.6 million during the three and nine months ended September 30, 2017, respectively. These expenses were primarily related to the relocation of certain manufacturing and administrative locations due to reduced space requirements. Integration expenses of $0.9 and $3.2 million during the three and nine months ended September 30, 2018, respectively, and $0.2 and $1.0 million during the three and nine months ended September 30, 2017, respectively, were incurred for the integration of our business acquisitions.

30

Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

(Continued)

Restructuring and other reserve activities are summarized as follows (in thousands):

	Nine Months Ended September 30,
	2018			2017
Beginning reserve balance	$	2,452		$	1,824
Restructuring charges	6,289			4,101
Other charges	4,188			1,321
Non-cash restructuring and other	(686		)	(182		)
Payments	(9,751		)	(4,720		)
Ending reserve balance	$	2,492		$	2,344

Note 14.     Income Taxes

We recognized tax benefits of $4.3 and $1.9 million on pretax loss of $2.3 and pretax income of $0.2 million during the three and nine months ended September 30, 2018, respectively; and tax provisions of $0.8 and $0.8 million on pretax net income of $4.2 and $11.8 million during the three and nine months ended September 30, 2017, respectively. The benefit from (provision for) income taxes before discrete items reflected in the table below was a benefit of $0.9 and a provision of $0.1 million during the three and nine months ended September 30, 2018, respectively, and provisions of $2.0 and $4.5 million during the three and nine months ended September 30, 2017, respectively. The decrease in the provision for income taxes before discrete items for the three and nine months ended September 30, 2018, compared with the same periods in the prior year, was primarily due to decreased profitability before income taxes.

Primary differences between our provision for income taxes before discrete items and the income tax provision at the U.S. statutory rate include taxes on permanently reinvested foreign earnings, the tax effects of stock-based compensation expense which are non-deductible for tax purposes, and the U.S. Research and Development Credit.

Our tax benefit from (provision for) income taxes before discrete items is reconciled to our recorded benefit from (provision for) income taxes, as follows (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017			2018			2017
Benefit from (provision for) income taxes before discrete items	$	932	$	(1,973	)	$	(105	)	$	(4,517	)
Interest related to unrecognized tax benefits	71		—			(154		)	(121		)
Benefit from (provision for) stock-based compensation, including ESPP dispositions	112		(363		)	86			1,934
Benefit from reversals of uncertain tax positions	2,333		1,845			2,528			1,825
Benefit from (provision for) reassessment of taxes upon filing tax returns	135		(300		)	213			(396		)
Benefit from (provision for) reassessment of taxes upon tax law change	—		—			(160		)	480
Benefit from (provision for) deemed repatriation transition tax	682		—			(540		)	—
Benefit from (provision for) income taxes	$	4,265	$	(791	)	$	1,868		$	(795	)

On December 22, 2017, the 2017 Tax Act was enacted by the U.S. government. The 2017 Tax Act made broad and complex changes to the U.S. tax code that impact the nine months ended September 30, 2018 and year ended December 31, 2017, including, but not limited to, lowering the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, imposing a one-time deemed repatriation transition tax, and the remeasurement of U.S. deferred tax assets and liabilities.

The SEC issued SAB 118, which allows us to record a provisional estimate of the income tax effects of the 2017 Tax Act in the period in which we can make a reasonable estimate of its effects. We recorded a $27.5 million tax charge in the year ended December 31, 2017 as a provisional estimate. This provisional estimate included an estimated charge of $17.0 million related to the deemed repatriation transition tax, which is comprised of a gross transition tax of $27.0 million offset by foreign tax credits of $10.0 million. In addition, we recorded a $10.5 million charge related to the remeasurement of U.S. deferred tax assets and liabilities in the year ended December 31, 2017. While we have calculated a reasonable estimate of the impact of the U.S. tax rate reduction and the amount of the deemed repatriation transition tax, we are gathering additional information to refine and finalize our calculation of the impacts of the 2017 Tax Act on our U.S. deferred tax assets and liabilities, the deemed repatriation transition tax, and other provisions associated with the 2017 Tax Act. As an adjustment to our December 2017 provisional estimate, we recorded a benefit of $0.7 million

31

Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

(Continued)

and a provision of $0.5 million for federal and state taxes related to the deemed repatriation transition tax during the three and nine months ended September 30, 2018, respectively. As we obtain additional information, we will finalize the calculation of the income tax effects of the 2017 Tax Act in the fourth quarter of 2018.

The 2017 Tax Act also created a global intangible low-tax income (“GILTI”) provision, which is a minimum tax on certain foreign earnings, commencing in the year ending December 31, 2018. The amount of future U.S. inclusions in taxable income related to GILTI depends on our current structure, estimated future results of global operations, and our intent and ability to modify our structure and/or our business. We are not yet able to provide a reasonable estimate of the effect of this provision of the 2017 Tax Act. Therefore, we have not made any adjustments related to the potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred taxes associated with GILTI. Any subsequent adjustment to the deferred tax amounts related to GILTI (or other computations) will be recorded as a tax expense in the fourth quarter of 2018 when our analysis is complete.

As of September 30, 2018, and December 31, 2017, gross unrecognized benefits that would impact the effective tax rate if recognized were $30.8 and $33.9 million, respectively. Over the next twelve months, our existing tax positions will continue to generate increased liabilities for unrecognized tax benefits. It is reasonably possible that our gross unrecognized tax benefits will decrease up to $6.9 million in the next twelve months. These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits in our Condensed Consolidated Statements of Operations. $15.5 million of gross unrecognized tax benefits were offset against deferred tax assets as of September 30, 2018, and the remaining $15.3 million has been recorded as noncurrent income taxes payable.

We are open to assessment by the Internal Revenue Service (“IRS”) for the 2015-2017 tax years, state tax jurisdictions for the 2013-2017 tax years, the Netherlands tax authority for the 2014-2016 tax years, the Spanish tax authority for the 2014-2017 tax years, the Israel tax authority for the 2014-2016 tax years, and the Italian tax authority for the 2013-2016 tax years.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

This Quarterly Report on Form 10-Q (“Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “address,” “anticipate,” “believe,” “consider,” “continue,” “develop,” “estimate,” “expect,” “further,” “goal,” “intend,” “may,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will,” variations of such words, and similar expressions are intended to identify such forward-looking statements. Such statements reflect the current views of the Company and its management with respect to future events and are subject to certain risks, uncertainties, and assumptions. Potential risks and uncertainties include, but are not necessarily limited to, intense competition in each of our businesses, including competition from products developed by EFI’s customers; our ability to remediate the material weaknesses identified in EFI’s internal control over financial reporting; the uncertainty of the outcome of the pending securities lawsuits against EFI; 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; the 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; any potential impact from our recent change in Chief Executive Officer ; and any other risk factors that may be included from time to time in the Company’s SEC reports.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company’s actual results, performance, or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Report under the section entitled “Risk Factors” in Item 1A of Part II of this report and Item 1A of Part I of our 2017 Form 10-K and elsewhere and in other reports the Company files with the SEC. The following discussion should be read in conjunction with our 2017 Form 10-K and with the condensed consolidated financial statements and notes thereto included elsewhere in this Report. The

32

Company assumes no obligation to revise or update these forward-looking statements to reflect actual results, events, or changes in factors or assumptions affecting such forward-looking statements

Business Overview

We are a world leader in customer-centric digital printing innovation focused on the transformation of the printing, packaging, ceramic tile decoration, and textile industries from the use of traditional analog based printing to digital on-demand printing.

Our products include industrial super-wide and wide format display graphics, corrugated packaging and display, textile, and ceramic tile decoration digital inkjet printers that utilize our digital ink, industrial digital inkjet printer parts, and professional services; print production workflow, web-to-print, cross-media marketing, fashion design, and business process automation solutions; and color printing DFEs creating an on-demand digital printing ecosystem. Our ink includes digital UV curable, LED curable, ceramic, water-based, and thermoforming and specialty ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, water-based dispersed printing ink, and coatings. Our award-winning business process automation solutions are integrated from creation to print and are vertically integrated with our industrial digital inkjet printers and products produced by the leading production digital color page printer manufacturers that are driven by our Fiery DFEs.

Our product portfolio includes industrial digital inkjet products (“Industrial Inkjet”) including VUTEk display graphics super-wide and wide format, Nozomi corrugated packaging, Reggiani textile, Cretaprint ceramic tile decoration and building material printers and ink; print production workflow, web-to-print, cross-media marketing, Optitex textile two-dimensional and three-dimensional fashion computer-aided design applications, and business process automation software (“Productivity Software”), which provides corporate printing, packaging, publishing, and mailing and fulfillment solutions for the printing and packaging industry; and Fiery DFEs (“Fiery”). Our integrated solutions and award-winning technologies are designed to automate print and business processes, streamline workflow, provide profitable value-added services, and produce accurate digital output.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. Management believes there have been no significant changes during the three and nine months ended September 30, 2018 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2017 Form 10-K, with the exception of the following:

Revenue Recognition

Effective January 1, 2018, we adopted ASC 606 and ASC 340-40 using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018. As a result of the adoption, we use significant judgments in applying the new revenue standards as further outlined in Notes 1 and 4 to the Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements

See Note 1 – Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements including the respective expected dates of adoption.

33

Results of Operations

Overview

	Three Months Ended September 30,											Nine Months Ended September 30,
	2018			2017			Change					2018			2017			Change
							Amount			Percent								Amount			Percent
Revenue	$	257,134		$	248,359		$	8,775		4	%	$	758,072		$	724,097		$	33,975		5	%
Cost of revenue	131,615			120,902			10,713			9		384,858			345,858			39,000			11
Gross profit	125,519			127,457			(1,938		)	(2	)	373,214			378,239			(5,025		)	(1	)
Operating expenses:
Research and development	40,341			39,585			756			2		119,701			118,201			1,500			1
Sales and marketing	44,661			42,269			2,392			6		137,448			129,018			8,430			7
General and administrative	24,466			25,075			(609		)	(2	)	57,093			67,239			(10,146		)	(15	)
Amortization of identified intangibles	11,137			12,299			(1,162		)	(9	)	34,801			34,829			(28		)	—
Restructuring and other	2,799			832			1,967			*		10,477			5,421			5,056			93
Total operating expenses	123,404			120,060			3,344			3		359,520			354,708			4,812			1
Income from operations	2,115			7,397			(5,282		)	(71	)	13,694			23,531			(9,837		)	(42	)
Interest expense	(4,796		)	(4,912		)	116			(2	)	(14,739		)	(14,538		)	(201		)	1
Interest income and other income, net	336			1,760			(1,424		)	(81	)	1,270			2,802			(1,532		)	(55	)
Income (loss) before income taxes	(2,345		)	4,245			(6,590		)	*		225			11,795			(11,570		)	(98	)
Benefit from (provision for) income taxes	4,265			(791		)	5,056			*		1,868			(795		)	2,663			*
Net income	$	1,920		$	3,454		$	(1,534	)	(44	)%	$	2,093		$	11,000		$	(8,907	)	(81	)%

___________

* Percentage not meaningful.

Key financial results during the three and nine months ended September 30, 2018 and 2017 were as follows:

• Our consolidated revenue increased by $8.8 million, or 4%, and $34.0 million, or 5%, during the three and nine months ended September 30, 2018, respectively, compared to the same periods in the prior year. The increase in the three-month period was driven by a $12.0 million increase in Industrial Inkjet revenue and a $3.3 million increase in Productivity Software revenue, partially offset by a $6.5 million decrease in Fiery revenue. The increase in the nine-month period was driven by a $45.7 millionincrease in Industrial Inkjet revenue and an $14.5 millionincrease in Productivity Software revenue, partially offset by a $26.2 milliondecrease in Fiery revenue.

• Gross profit decreased by $1.9 million or 2%during the three months ended September 30, 2018, and by $5.0 million or 1%during the nine months ended September 30, 2018, compared to the same periods in the prior year. Gross profit percentage declined to 48.8% from 51.3%during the three months ended September 30, 2018 and to 49.2% from 52.2%during the nine months ended September 30, 2018, compared to the same periods in the prior year.These reductions were primarily due to changes in product mix from proportionately lower Fiery sales and proportionately higher Industrial Inkjet sales. In addition, Industrial Inkjet gross margins in the 2018 periods are lower than historical levels due to the ramp-up of production on new products.

• Operating expenses increased by $3.3 million or 3% and by $4.8 million or 1%during the three and nine months ended September 30, 2018, respectively, compared to the same periods in the prior year. The increase in operating expenses for the three months ended September 30, 2018 was primarily due to increased sales and marketing expense of $2.4 million and increased restructuring and other expense of $2.0 million, partially offset by a decrease in amortization of identified intangibles of $1.2 million in the third quarter of 2018. The increase in operating expenses for the nine months ended September 30, 2018 was primarily due to increased sales and marketing expense of $8.4 million, increased restructuring and other expense of $5.1 million, and increased research and development ("R&D") expense of $1.5 million, partially offset by a $10.1 milliondecrease in general and administrative ("G&A") expenses driven by a $14.0 million reduction in estimated fair value of contingent consideration on acquisitions.

• Interest income and other income, netdecreased by $1.4 and $1.5 millionin the three and nine months ended September 30, 2018, compared to the same periods last year. The decrease for the three-month period was primarily attributable to

34

higher foreign currency losses of $0.9 million. The decrease for the nine-month period was primarily due to a $1.0 million decline in interest income.

• Provision for income taxes decreased by $5.1 million and $2.7 million, respectively, during the three and nine months ended September 30, 2018, compared to the same period last year, primarily due to decreased profitability before income taxes and the impacts of discrete income tax items during the current year periods.

The following table presents items on our Condensed Consolidated Statements of Operations as percentages of total revenue:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Gross profit	48.8		51.3		49.2		52.2
Operating expenses:
Research and development	15.7		15.9		15.8		16.3
Sales and marketing	17.4		17.0		18.1		17.8
General and administrative	9.5		10.1		7.5		9.3
Amortization of identified intangibles	4.3		5.0		4.6		4.8
Restructuring and other	1.1		0.3		1.4		0.8
Total operating expenses	48.0		48.3		47.4		49.0
Income from operations	0.8		3.0		1.8		3.2
Interest expense	(1.9	)	(2.0	)	(1.9	)	(2.0	)
Interest income and other income, net	0.1		0.7		0.2		0.4
Income (loss) before income taxes	(1.0	)	1.7		0.1		1.6
Benefit from (provision for) income taxes	1.7		(0.3	)	0.2		(0.1	)
Net income	0.7	%	1.4	%	0.3	%	1.5	%

Revenue

We classify our revenue, gross profit, assets, and liabilities in accordance with our three operating segments; Industrial Inkjet, Productivity Software, and Fiery, as described in Note 3 – Segment and Geographic Information of our Notes to Condensed Consolidated Financial Statements.

Ex-Currency. To better understand trends in our business, we believe it is helpful to adjust our Condensed Consolidated Statements 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, gross profit, and operating expenses by using historical exchange rates in effect during the comparable prior period and removing the balance sheet currency remeasurement impact from interest income and other income, net, including removal of any hedging gains and losses. We refer to these adjustments as “ex-currency.” The year-over-year currency impact can be determined as the difference between year-over-year actual fluctuations and year-over-year ex-currency fluctuations.

Management believes the ex-currency measures provide investors with an additional perspective on year-over-year financial trends and enable investors to analyze our operating results in the same way management does. A reconciliation of the ex-currency adjustments to GAAP results for the three and nine months ended September 30, 2018 and 2017 is included under “Non-GAAP Financial Information” below.

Revenue by Operating Segment

Our revenue by operating segment was as follows (in thousands):

	Three Months Ended September 30,								Change
	2018		% of total		2017		% of total		Amount			Percent
Industrial Inkjet	$	154,902	60	%	$	142,930	58	%	$	11,972		8	%
Productivity Software	40,452		16		37,171		15		3,281			9
Fiery	61,780		24		68,258		27		(6,478		)	(9	)
Total revenue	$	257,134	100	%	$	248,359	100	%	$	8,775		4	%

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Our consolidated revenue increased by $8.8 million or 4% (4% ex-currency) during the three months ended September 30, 2018 compared to the same period in 2017, primarily due to increased Industrial Inkjet and Productivity Software revenue, partially offset by decreased Fiery revenue.

	Nine Months Ended September 30,								Change
	2018		% of total		2017		% of total		Amount			Percent
Industrial Inkjet	$	453,545	60	%	$	407,886	56	%	$	45,659		11	%
Productivity Software	125,839		17		111,292		16		14,547			13
Fiery	178,688		23		204,919		28		(26,231		)	(13	)
Total revenue	$	758,072	100	%	$	724,097	100	%	$	33,975		5	%

Our consolidated revenue increased by $34.0 million or 5% (2% ex-currency) during the nine months ended September 30, 2018 compared to the same period in 2017, primarily due to increased Industrial Inkjet and Productivity Software revenue, partially offset by decreased Fiery revenue. Also, adoption of the new revenue recognition guidance increased reported revenue by $3.7 million in the nine-month period, primarily in the Productivity Software segment, compared to the previous revenue recognition guidance. In addition, we recorded out-of-period adjustments related to certain bill and hold transactions in the nine months ended September 30, 2017, which decreased the prior year revenue by $3.4 million.

Industrial Inkjet

Industrial Inkjet revenue increased by $12.0 million, or 8% (9% ex-currency), during the three months ended September 30, 2018 compared with the same period in 2017, primarily due to increased sales of Nozomi corrugated printers. Ink volume was up modestly in the three months ended September 30, 2018 compared to the same period in 2017. We experienced supply issues during the current quarter, primarily in China, where we saw changes in tariff structure, price increases in ink components, and short supplies of ink components due to reduced production levels at a number of suppliers, which limited the amount of ink we could manufacture. The company is working to increase purchases from new sources for ink components but we could still experience some negative impact on ink volume growth in the short term.

Industrial Inkjet revenue increased by $45.7 million, or 11% (8% ex-currency), during the nine months ended September 30, 2018 compared with the same period in 2017, primarily due to increased sales of Nozomi corrugated printers. In addition, we recorded out-of-period adjustments related to certain bill and hold transactions in the nine months ended September 30, 2017, which decreased the prior year revenue by $3.4 million.

Productivity Software

Productivity Software revenue increased by $3.3 million, or 9% (9% ex-currency), during the three months ended September 30, 2018 compared with the same period in 2017, primarily due to sales of our Escada corrugated systems. We acquired Escada in the fourth quarter of 2017. License revenue also increased by $1.5 million during the quarter compared to the same quarter in 2017.

Productivity Software revenue increased by $14.5 million, or 13% (11% ex-currency), during the nine months ended September 30, 2018 compared with the same period in 2017. Productivity software revenue increased primarily due to:

• increased license revenue of $5.0 million, including the $3.6 million impact from adoption of the new revenue recognition guidance,

• increased maintenance and services revenue of $3.2 million, and

• sales of our Escada corrugated systems.

Fiery

Fiery revenue decreased by $6.5 million, or 9% (9% ex-currency) during the three months ended September 30, 2018 compared with the same period in 2017. Fiery revenue decreased by $26.2 million, or 13% (13% ex-currency) during the nine months ended September 30, 2018 compared with the same period in 2017. Although end customer and reseller preference for Fiery products drives demand, most Fiery revenue relies on printer manufacturers to design, develop, and integrate Fiery technology into their print engines. Certain of our customers have reduced purchases of Fiery controllers and software options during 2018 compared to 2017 due to their reduced sales of printers to which Fiery is attached.

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Revenue by Geographic Area

We report revenue by geographic region based on ship-to destination, summarized as follows (in thousands):

	Three Months Ended September 30,								Change
	2018		% of total		2017		% of total		Amount			Percent
Americas	$	134,491	52	%	$	129,488	52	%	$	5,003		4	%
EMEA	88,879		35		85,089		34		3,790			4
APAC	33,764		13		33,782		14		(18		)	—
Total revenue	$	257,134	100	%	$	248,359	100	%	$	8,775		4	%

Americas. Revenue increased by $5.0 million, or 4% (4% ex-currency), during the three months ended September 30, 2018 compared with the same period in 2017, driven primarily by increased sales of Nozomi corrugated printers.

EMEA. Revenue increased by $3.8 million, or 4% (5% ex-currency), during the three months ended September 30, 2018 compared with the same period in 2017, driven primarily by increased sales of Nozomi corrugated printers.

APAC. Revenue remained flat during the three months ended September 30, 2018 compared with the same period in 2017.

	Nine Months Ended September 30,								Change
	2018		% of total		2017		% of total		Amount			Percent
Americas	$	374,170	49	%	$	353,397	49	%	$	20,773		6	%
EMEA	271,064		36		274,635		38		(3,571		)	(1	)
APAC	112,838		15		96,065		13		16,773			17
Total revenue	$	758,072	100	%	$	724,097	100	%	$	33,975		5	%

Americas. Revenue increased by $20.8 million, or 6% (6% ex-currency), during the nine months ended September 30, 2018 compared with the same period in 2017, primarily due to increased sales of Nozomi corrugated printers.

EMEA. Revenue decreased by $3.6 million, or 1% (6% ex-currency), during the nine months ended September 30, 2018 compared with the same period in 2017, primarily due to lower sales of Fiery products.

APAC. Revenue increased by $16.8 million, or 17% (15% ex-currency), during the nine months ended September 30, 2018 compared with the same period in 2017, primarily due to increased sales of Reggiani textile printers.

Revenue Concentration

A substantial portion of our revenue has been attributable to sales of products through the leading printer manufacturers and independent distributor channels. We have a direct relationship with several leading printer manufacturers and work closely to design, develop, and integrate Fiery technology into their print engines. A significant portion of our revenue is, and has been, generated by sales of our Fiery DFE products to a relatively small number of leading printer manufacturers. During the nine months ended September 30, 2018 and 2017, no customer individually accounted for 10% or more of our consolidated revenue. We expect that if we continue to increase our revenue in the Industrial Inkjet and Productivity Software operating segments in the future, the percentage of our revenue from the leading printer manufacturer customers will continue to decrease over time.

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Gross Profit

Gross profit by operating segment, excluding stock-based compensation expense, was as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Industrial Inkjet
Revenue	$	154,902		$	142,930		$	453,545		$	407,886
Gross profit	53,661			53,392			158,351			154,972
Gross profit percentages	34.6		%	37.4		%	34.9		%	38.0		%
Productivity Software
Revenue	$	40,452		$	37,171		$	125,839		$	111,292
Gross profit	28,394			26,667			88,988			81,431
Gross profit percentages	70.2		%	71.7		%	70.7		%	73.2		%
Fiery
Revenue	$	61,780		$	68,258		$	178,688		$	204,919
Gross profit	44,368			47,884			128,590			143,821
Gross profit percentages	71.8		%	70.2		%	72.0		%	70.2		%

A reconciliation of our segment gross profit to our Condensed Consolidated Statements of Operations is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Segment gross profit	$	126,423		$	127,943		$	375,929		$	380,224
Stock-based compensation expense	(904		)	(486		)	(2,715		)	(1,985		)
Gross profit	$	125,519		$	127,457		$	373,214		$	378,239
Consolidated gross profit percentage	48.8		%	51.3		%	49.2		%	52.2		%

Our gross profit percentage decreased to 48.8% and 49.2%during the three and nine months ended September 30, 2018, respectively, from 51.3% and 52.2% during the same periods in 2017. The decreased gross profit percentage was primarily due tothe greater proportion of Industrial Inkjet revenues than Productivity Software and Fiery revenues in the three and nine months ended September 30, 2018 and 2017 compared to the same periods in the prior year. The Productivity Software and Fiery segments produce higher average gross profit percentages than our Industrial Inkjet segment. In addition, as more fully explained below, the gross profit percentage in the Industrial Inkjet segment was lower in the three and nine months ended September 30, 2018 than in the comparable prior year periods.

Industrial Inkjet Gross Profit

The Industrial Inkjet gross profit percentage decreased to 34.6% (34.8% ex-currency) and 34.9% (34.4% ex-currency) during the three and nine months ended September 30, 2018, respectively, from 37.4% and 38.0% during the same periods in 2017.Gross profit percentages decreased due to a higher proportion of corrugated printer sales, which are currently at a relatively lower gross profit percentage due to the ramping up of production and sales of our new Nozomi single-pass industrial digital inkjet platform. In addition, other new product introductions are currently producing reduced gross profit percentages as those products undergo a similar ramp up phase.

Productivity Software Gross Profit

The Productivity Software gross profit percentages decreased to 70.2 (70.1% ex-currency) and 70.7 (70.9% ex-currency) during the three and nine months ended September 30, 2018, respectively, from 71.7% and 73.2% during the same periods in 2017. The decrease in gross profit percentages is primarily attributable to changes in product mix.

Fiery Gross Profit

The Fiery gross profit percentage increased to 71.8% (71.8% ex-currency) and 72.0% (71.9% ex-currency) during the three and nine months ended September 30, 2018, respectively, from 70.2% and 70.2% during the same periods in 2017, reflecting changes in product mix and the impacts from cost reduction initiatives the Company has implemented.

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Operating Expenses

Operating expenses were as follows (in thousands):

	Three Months Ended September 30,									Nine Months Ended September 30,
					Change									Change
	2018		2017		Amount			Percent		2018		2017		Amount			Percent
Research and development	$	40,341	$	39,585	$	756		2	%	$	119,701	$	118,201	$	1,500		1	%
Sales and marketing	44,661		42,269		2,392			6		137,448		129,018		8,430			7
General and administrative	24,466		25,075		(609		)	(2	)	57,093		67,239		(10,146		)	(15	)
Amortization of identified intangibles	11,137		12,299		(1,162		)	(9	)	34,801		34,829		(28		)	—
Restructuring and other	2,799		832		1,967			*		10,477		5,421		5,056			93
Total operating expenses	$	123,404	$	120,060	$	3,344		3	%	$	359,520	$	354,708	$	4,812		1	%

* Percentage not meaningful.

Operating expenses increased by $3.3 million, or 3% (3% ex-currency) during the three months ended September 30, 2018 compared to the same period in 2017.The increase in operating expenses was primarily due toincreased sales and marketing expense of $2.4 million and increased restructuring and other expense of $2.0 million, partially offset by a decrease in amortization of identified intangibles of $1.2 million in the third quarter of 2018.

Operating expenses increased by $4.8 million, or 1% (down 1% ex-currency) during the nine months ended September 30, 2018 compared to the same period in 2017. The increase in operating expenses was primarily due to an $8.4 millionincrease in sales and marketing expense, a $5.1 millionincrease in restructuring and other expense, and a $1.5 millionincrease in R&D expense, partially offset by a $10.1 milliondecrease in G&A expense. The decrease in G&A expense was driven by a $14.0 million reduction in estimated fair value of contingent consideration on acquisitions, partially offset by an increase in stock-based compensation expenses of $3.7 million.

Movement in foreign currency exchange rates did not have a material effect on operating expenses in the three months ended September 30, 2018, but increased operating expenses by $7.0 million in the nine months ended September 30, 2018, compared to the same periods in 2017. We expect our operating expenses will continue to fluctuate as a result of movements in U.S. dollar exchange rates versus the Euro, British pound sterling, Brazilian real, Israeli shekel, Chinese renminbi, Indian rupee and other currencies.

Research and Development

R&D expenses include personnel, consulting, travel, research and development facilities, prototype materials, testing and development equipment, and non-recurring engineering expenses.

R&D expense during the three months ended September 30, 2018 was $40.3 million, or 15.7% of revenue, compared to $39.6 million, or 15.9% of revenue, during the same period in 2017. The increase of $0.8 million, or 2% (3% ex-currency), was primarily driven by an increase in stock-based compensation expense of $2.0 million, partially offset by a reduction in prototypes and supplies.

R&D expense during the nine months ended September 30, 2018 was $119.7 million, or 15.8% of revenue, compared to $118.2 million, or 16.3% of revenue, during the same period in 2017. The increase of $1.5 million, or 1% (flat ex-currency), was primarily driven by increases in stock-based compensation expenses of $2.0 million and non-recurring engineering expenses of $1.0 million, partially offset by reduced expenses for consulting and temporary labor.

Sales and Marketing

Sales and marketing expenses include personnel, trade shows, marketing programs and promotional materials, sales commissions, travel and entertainment, depreciation, and worldwide sales office expenses.

Sales and marketing expense during the three months ended September 30, 2018 was $44.7 million, or 17.4% of revenue, compared to $42.3 million, or 17.0% of revenue, during the same period in 2017. The increase of $2.4 million, or 6% (6% ex-currency) was primarily driven byan increase of $1.2 million in stock-based compensation and higher personnel-related expenses of $0.8 million.

Sales and marketing expenses during the nine months ended September 30, 2018 were $137.4 million, or 18.1% of revenue, compared to $129.0 million, or 17.8% of revenue, during the same period in 2017. The increase of $8.4 million, or 7% (4% ex-

39

currency) was primarily driven byhigher personnel-related expenses of $5.9 million and increased stock-based compensation of $1.6 million.

General and Administrative

G&A expenses consist primarily of finance, human resources, legal, bad debts, and litigation expenses, as well as changes in the estimated fair value of earnout liabilities.

G&A expenses during the three months ended September 30, 2018 were $24.5 million, or 9.5% of revenue, compared to $25.1 million, or 10.1% of revenue, during the same period in 2017. The decrease of $0.6 million, or 2% (2% ex-currency) was primarily due to a reduction in audit, legal, and consulting service fees of $4.3 million, partially offset by an increase in stock-based compensation of $3.6 million.

G&A expenses during the nine months ended September 30, 2018 were $57.1 million, or 7.5% of revenue, compared to $67.2 million, or 9.3% of revenue, during the same period in 2017. The decrease of $10.1 million, or 15% (17% % ex-currency) was primarily due toa $14.0 million reduction in the fair value of estimated contingent consideration, partially offset by an increase in stock-based compensation expense of $3.7 million.

Stock-based Compensation

We amortize stock-based compensation cost on a graded vesting basis over the vesting period, after assessing the probability of achieving requisite performance criteria with respect to performance-based and market-based awards. Stock-based compensation cost is recognized over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. This results in greater stock-based compensation expense during the initial years of the vesting period.

Stock-based compensation expense was $11.9 and $4.6 millionduring the three months ended September 30, 2018 and 2017, respectively, an increase of $7.3 million. Stock-based compensation expense increased primarily due to the timing of the annual equity grants and increased vesting probabilities of certain performance-based awards compared to the prior year.

Stock-based compensation expense was $30.5 and $22.5 millionduring the nine months ended September 30, 2018 and 2017, respectively, an increase of $7.9 million. Stock-based compensation expense increased primarily due to an increase in new grants, increased ESPP expenses, timing of new grants, and increased vesting probabilities of certain performance-based awards compared to the prior year.

Amortization of Identified Intangibles

Amortization of identified intangibles during the three months ended September 30, 2018 was $11.1 million compared to $12.3 million during the same period in 2017, a decrease of $1.2 million, or 9%, due to certain intangible assets from prior year acquisitions becoming fully amortized. Amortization of identified intangibles during the nine months ended September 30, 2018 was $34.8 million, flat compared to the same period in 2017.

Restructuring and Other

Restructuring and other costs were $2.8 million and $0.8 millionduring the three months ended September 30, 2018 and 2017, respectively. Restructuring and other costs included severance charges of $1.6 and $0.3 million related to reductions in head count of 30 and 15during the three months ended September 30, 2018 and 2017, respectively. Costs of integration of acquired businesses were $0.9 million and $0.2 millionduring the three months ended September 30, 2018 and 2017. Restructuring and other costs were $10.5 and $5.4 millionduring the nine months ended September 30, 2018 and 2017, respectively. Restructuring and other costs included severance charges of $5.9 and $3.8 million related to reductions in head count of 113 and 128during the nine months ended September 30, 2018 and 2017, respectively. Costs of integration of acquired businesses were $3.2 million and $1.0 millionduring the nine months ended September 30, 2018 and 2017. Severance costs include severance payments, related employee benefits, outplacement fees, recruiting, and employee relocation costs.

Facilities relocation and downsizing expenses were $0.4 millionduring the three months ended September 30, 2018 and 2017. Facilities relocation and downsizing expenses were $1.4 and $0.6 millionduring the nine months ended September 30, 2018 and 2017, respectively. The increase in the 2018 nine-month period is primarily related to the relocation of our previous facilities in Meredith, NH to our new facility in Manchester, NH in the second quarter of 2018.

Interest Expense

Interest expense during the three and nine months ended September 30, 2018 was $4.8 and $14.7 million, respectively, compared to $4.9 million and $14.5 million, respectively, during the same periods in 2017.

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Interest Income and Other Income, Net

Interest income and other income, net, includes interest income on our cash equivalents and short-term investments, gains and losses from sales of our cash equivalents and short-term investments, imputed interest income on revenue contracts with a significant financing component, and net foreign currency exchange gains and losses.

Interest income and other income, net was $0.3 millionduring the three months ended September 30, 2018, compared to income of $1.8 million during the same period in 2017. The change was primarily due to increased foreign currency exchange losses.

Interest income and other income, net was $1.3 million and $2.8 millionduring the nine months ended September 30, 2018 and 2017, respectively. The decrease was primarily due to a $1.0 million decline in interest income.

Income (Loss) Before Income Taxes

The geographic mix of income (loss) before income taxes was as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
U.S.	$	(12,094	)	$	(804	)	$	(42,166	)	$	(2,795	)
Foreign	9,749			5,049			42,391			14,590
Total	$	(2,345	)	$	4,245		$	225		$	11,795

During the three months ended September 30, 2018, pretax loss of $2.3 million consisted of U.S. pretax loss of $12.1 million and foreign pretax income of $9.7 million, respectively. Pretax loss attributable to U.S. operations included stock-based compensation expense of $11.9 million, interest expense of $3.5 million, amortization of identified intangible assets of $2.9 million, and restructuring and other of $1.9 million. Pretax income attributable to foreign operations included amortization of identified intangible assets of $8.2 million, restructuring and other of $0.9 million, and a change in the estimated fair value of contingent consideration on acquisitions of $2.2 million.The exclusion of these items from pretax loss would have resulted in U.S. and foreign pretax income of $8.1 and $21.1 million, respectively, during the three months ended September 30, 2018.

During the nine months ended September 30, 2018, pretax income of $0.2 million consisted of U.S. pretax loss of $42.2 million and foreign pretax income of $42.4 million, respectively. Pretax loss attributable to U.S. operations included stock-based compensation expense of $30.5 million, interest expense of $10.3 million, amortization of identified intangible assets of $9.0 million, restructuring and other of $7.1 million, and the favorable impact of a change in estimated fair value of contingent consideration on acquisitions of $2.6 million. Pretax income attributable to foreign operations included amortization of identified intangible assets of $25.8 million, restructuring and other of $3.3 million, and a favorable impact of a change in the fair value of estimated contingent consideration of $9.5 million. The exclusion of these items from pretax income would have resulted in U.S. and foreign pretax income of $12.0 and $62.1 million, respectively, during the nine months ended September 30, 2018.

During the three months ended September 30, 2017, pretax income of $4.2 million consisted of U.S. pretax loss of $0.8 million and foreign pretax income of $5.0 million, respectively. Pretax loss attributable to U.S. operations included amortization of identified intangible assets of $3.4 million, stock-based compensation of $4.6 million, restructuring and other of $0.7 million, acquisition-related costs of $0.6 million, legal and accounting fees related to the revenue recognition review and assessment of $4.7 million, and interest expense related to our Notes of $4.3 million. Pretax income attributable to foreign operations included amortization of identified intangible assets of $8.9 million, restructuring and other of $0.2 million, and earnout interest accretion of $0.3 million. The exclusion of these items from pretax income would result in U.S. and foreign pretax income of $17.5 and $14.4 million, respectively, during the three months ended September 30, 2017.

During the nine months ended September 30, 2017, pretax income of $11.8 million consisted of U.S. pretax loss of $2.8 million and foreign pretax income of $14.6 million, respectively. Pretax loss attributable to U.S. operations included amortization of identified intangible assets of $10.2 million, stock-based compensation of $22.5 million, restructuring and other of $4.1 million, legal and accounting fees related to the revenue recognition review and assessment of $4.7 million, acquisition-related costs of $1.9 million, cost of revenue resulting from the fair value adjustment of FFPS inventory of $0.5 million, change in fair value of contingent consideration of $0.7 million, and interest expense related to our Notes of $12.7 million. Pretax income attributable to foreign operations included amortization of identified intangible assets of $24.7 million, restructuring and other of $1.3 million, cost of revenue resulting from the fair value adjustment of FFPS inventory of $0.7 million, and earnout interest accretion of $1.2 million. The exclusion of these items from pretax income would result in U.S. and foreign pretax income of $54.8 and $42.8 million, respectively, during the nine months ended September 30, 2017.

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Benefit from (Provision for) Income Taxes

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018		2017
Income (loss) before income taxes	$	(2,345	)	$	4,245		$	225	$	11,795
Benefit from (provision for) income taxes	4,265			(791		)	1,868		(795		)
Effective income tax rate	*			18.6		%	*		6.7		%

___________

* Percentage not meaningful.

Our tax provision has decreased in the three and nine months ended September 30, 2018 and 2017 compared to the same periods in 2017, primarily due to decreased profitability before income taxes and the impacts of discrete income tax items.

The 2017 Tax Act has wide-ranging impacts including, but not limited to, lowering the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, imposing a one-time deemed repatriation transition tax, and the revaluation of U.S. deferred tax assets and liabilities. The 2017 Tax Act also created a minimum tax on certain foreign earnings, also known as the GILTI provision, commencing in the year ending December 31, 2018. The SEC issued SAB 118 which allows us to record a provisional estimate of the income tax effects of the 2017 Tax Act in the period in which we can make a reasonable estimate of its effects. As an adjustment to our December 2017 provisional estimates, we have recorded a benefit of $0.7 million and a provision of $0.5 million for federal and state taxes related to the deemed repatriation transition tax during the three and nine months ended September 30, 2018. As we obtain additional information, we will finalize the calculation of the income tax effects of the 2017 Tax Act in the fourth quarter of 2018.

We earn a significant amount of our operating income outside the U.S., which is deemed to be permanently reinvested in foreign jurisdictions. Of the income generated in jurisdictions with tax rates materially lower than the statutory U.S. tax rate of 21%, most is earned in the Cayman Islands. In 2017, we realigned the ownership of certain intellectual property to augment operational synergies and parallel both our worldwide intellectual property ownership and our worldwide supply chain. Our effective tax rate could fluctuate significantly and be adversely impacted if anticipated earnings in the foreign jurisdictions are significantly different than current projections.

While we currently do not foresee a need to repatriate the earnings of foreign operations, should we require more capital in the U.S. than our cash and cash equivalents and short-term investments located in the U.S., along with cash generated by our U.S. operations, we may elect to repatriate funds held in our foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. These alternatives could result in higher effective tax rates, the cash payments of taxes and/or increased interest expense, and foreign income and withholding taxes. Due to the enactment of the 2017 Tax Act, we are not subject to U.S. federal income tax on dividends received from our foreign subsidiaries commencing January 1, 2018. We are evaluating the potential foreign and U.S. state income tax liabilities that would result from future repatriations, if any, and how the 2017 Tax Act will impact our current permanent reinvestment assertion. We expect to complete this analysis and the impact, if any, which the 2017 Tax Act may have on our indefinite reinvestment assertion in the fourth quarter of 2018.

In Altera Corp. v. Commissioner, the U.S. Court of Appeals for the Ninth Circuit, reversing a prior decision of the Tax Court, initially issued an opinion on July 24, 2018 to require U.S. corporations to share stock-based compensation expenses with their foreign affiliates in accordance with U.S. Department of Treasury regulations. The Ninth Circuit subsequently withdrew this initial decision on August 7, 2018 to create a reconstituted panel to review its initial conclusion. These actions do not impact our condensed consolidated financial statements through September 30, 2018 because no benefit had been recorded as a result of the prior Tax Court decision. We will continue to monitor ongoing developments and potential impacts to our Condensed Consolidated Financial Statements.

We assess the likelihood that our deferred tax assets will be recovered from future taxable income by considering both positive and negative evidence relating to their recoverability. If we believe that recovery of these deferred tax assets is not more likely than not, we establish a valuation allowance. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we considered all available evidence, including recent operating results, projections of future taxable income, our ability to utilize loss and credit carryforwards, and the feasibility of tax planning strategies. Other than valuation allowances on deferred tax assets related to California, Luxembourg, Israel, Netherlands, and Turkey deferred tax assets that will not likely be realized based on the size of the net operating loss and research and development credits being generated, we have determined that is more likely than not that we will realize the benefit related to all other deferred tax assets. To the extent we increase a valuation allowance, we include an expense in the Condensed Consolidated Statement of Operations in the period in which such determination is made.

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Non-GAAP Financial Information

Use of Non-GAAP Ex-Currency Financial Information

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, gross profit, and operating expenses by using historical exchange rates in effect during the comparable prior year period and removing the balance sheet currency re-measurement impact from interest income and other income, 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 enable 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.

Our non-GAAP ex-currency 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, revenue, gross profit, or operating expenses prepared in accordance with GAAP.

RECONCILIATION OF GAAP REVENUE BY OPERATING SEGMENT TO

NON-GAAP EX-CURRENCY

(unaudited)

	Three Months Ended September 30,
(in millions)	GAAP				Ex-Currency							GAAP									Ex-Currency
	2018		%		Ex-Currency Adjustments			2018		%		GAAP		%		Change from 2017 GAAP					Change from 2017 GAAP
			of total							of total		2017		of total		$			%		$			%
Industrial Inkjet	$	154.9	60	%	$	0.7		$	155.6	60	%	$	142.9	58	%	$	12.0		8	%	$	12.7		9	%
Productivity Software	40.4		16		0.2			40.6		16		37.2		15		3.2			9		3.4			9
Fiery	61.8		24		—			61.8		24		68.3		27		(6.5		)	(9	)	(6.5		)	(9	)
Total revenue	$	257.1	100	%	$	0.9		$	258.0	100	%	$	248.4	100	%	$	8.7		4	%	$	9.6		4	%
	Nine Months Ended September 30,
(in millions)	GAAP				Ex-Currency							GAAP									Ex-Currency
	2018		%		Ex-Currency Adjustments			2018		%		GAAP		%		Change from 2017 GAAP					Change from 2017 GAAP
			of total							of total		2017		of total		$			%		$			%
Industrial Inkjet	$	453.6	60	%	$	(13.6	)	$	440.0	59	%	$	407.9	56	%	$	45.7		11	%	$	32.1		8	%
Productivity Software	125.8		17		(2.0		)	123.8		17		111.3		16		14.5			13		12.5			11
Fiery	178.7		23		(0.3		)	178.4		24		204.9		28		(26.2		)	(13	)	(26.5		)	(13	)
Total revenue	$	758.1	100	%	$	(15.9	)	$	742.2	100	%	$	724.1	100	%	$	34.0		5	%	$	18.1		2	%

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RECONCILIATION OF GAAP REVENUE BY GEOGRAPHIC AREA TO

NON-GAAP EX-CURRENCY

(unaudited)

	Three Months Ended September 30,
(in millions)	GAAP				Ex-Currency							GAAP									Ex-Currency
	2018		%		Ex-Currency Adjustments			2018		%		GAAP		%		Change from 2017 GAAP					Change from 2017 GAAP
			of total							of total		2017		of total		$			%		$			%
Americas	$	134.5	52	%	$	0.1		$	134.6	52	%	$	129.5	52	%	$	5.0		4	%	$	5.1		4	%
EMEA	88.9		35		0.3			89.2		35		85.1		34		3.8			4		4.1			5
APAC	33.7		13		0.5			34.2		13		33.8		14		(0.1		)	—		0.4			1
Total revenue	$	257.1	100	%	$	0.9		$	258.0	100	%	$	248.4	100	%	$	8.7		4	%	$	9.6		4	%
	Nine Months Ended September 30,
(in millions)	GAAP				Ex-Currency							GAAP									Ex-Currency
	2018		%		Ex-Currency Adjustments			2018		%		GAAP		%		Change from 2017 GAAP					Change from 2017 GAAP
			of total							of total		2017		of total		$			%		$			%
Americas	$	374.2	49	%	$	(0.4	)	$	373.8	50	%	$	353.4	49	%	$	20.8		6	%	$	20.4		6	%
EMEA	271.1		36		(12.9)			258.2		35		274.6		38		(3.6		)	(1	)	(16.5		)	(6	)
APAC	112.8		15		(2.6)			110.2		15		96.1		13		16.8			17		14.2			15
Total revenue	$	758.1	100	%	$	(15.9	)	$	742.2	100	%	$	724.1	100	%	$	34.0		5	%	$	18.1		2	%

RECONCILIATION OF GROSS PROFIT BY OPERATING SEGMENT TO

NON-GAAP EX-CURRENCY

(unaudited)

	Three Months Ended September 30,											Nine Months Ended September 30,
	GAAP			Ex-Currency Adjustments		Ex-Currency			GAAP			GAAP			Ex-Currency Adjustments			Ex-Currency			GAAP
(in millions)	2018					2018			2017			2018						2018			2017
Industrial Inkjet
Revenue	$	154.9		$	0.7	$	155.6		$	142.9		$	453.6		$	(13.6	)	$	440.0		$	407.9
Gross profit	53.7			0.5		54.2			53.4			158.4			(6.9		)	151.5			155.0
Gross profit percentages	34.6		%			34.8		%	37.4		%	34.9		%				34.4		%	38.0		%
Productivity Software
Revenue	$	40.4		$	0.2	$	40.6		$	37.2		$	125.8		$	(2.0	)	$	123.8		$	111.3
Gross profit	28.4			0.1		28.5			26.7			89.0			(1.2		)	87.8			81.4
Gross profit percentages	70.2		%			70.1		%	71.7		%	70.7		%				70.9		%	73.2		%
Fiery
Revenue	$	61.8		$	—	$	61.8		$	68.3		$	178.7		$	(0.2	)	$	178.5		$	204.9
Gross profit	44.4			—		44.4			47.9			128.6			(0.2		)	128.4			143.8
Gross profit percentages	71.8		%			71.8		%	70.2		%	72.0		%				71.9		%	70.2		%

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Operating segment gross profit is reconciled to our Condensed Consolidated Statements of Operations during the periods presented below as follows:

	Three Months Ended September 30,											Nine Months Ended September 30,
	GAAP			Ex-Currency Adjustments		Ex-Currency			GAAP			GAAP			Ex-Currency Adjustments			Ex-Currency			GAAP
(in millions)	2018					2018			2017			2018						2018			2017
Segment gross profit	$	126.4		$	0.6	$	127.0		$	127.9		$	375.9		$	(8.3	)	$	367.6		$	380.2
Stock-based compensation expense	(0.9		)	—		(0.9		)	(0.5		)	(2.7		)	—			(2.7		)	(2.0		)
Gross profit	$	125.5		$	0.6	$	126.1		$	127.5		$	373.2		$	(8.3	)	$	364.9		$	378.2

RECONCILIATION OF GAAP OPERATING EXPENSES TO

NON-GAAP EX-CURRENCY

(unaudited)

	Three Months Ended September 30,
			Ex-Currency					GAAP							Ex-Currency
	GAAP		Ex-Currency Adjustments			2018		GAAP		Change from 2017 GAAP					Change from 2017 GAAP
(in millions)	2018							2017		$			%		$			%
Research and development	$	40.3	$	0.4		$	40.7	$	39.6	$	0.8		2	%	$	1.2		3	%
Sales and marketing	44.7		0.2			44.9		42.3		2.4			6		2.6			6
General and administrative	24.5		0.1			24.6		25.1		(0.6		)	(2	)	(0.5		)	(2	)
Amortization of identified intangibles	11.1		0.1			11.2		12.3		(1.2		)	(9	)	(1.1		)	(9	)
Restructuring and other	2.8		—			2.8		0.8		2.0			236		2.0			236
Total operating expenses	$	123.4	$	0.8		$	124.2	$	120.1	$	3.3		3	%	$	4.1		3	%
	Nine Months Ended September 30,
			Ex-Currency					GAAP							Ex-Currency
	GAAP		Ex-Currency Adjustments			2018		GAAP		Change from 2017 GAAP					Change from 2017 GAAP
(in millions)	2018							2017		$			%		$			%
Research and development	$	119.7	$	(1.2	)	$	118.5	$	118.2	$	1.5		1	%	$	0.3		—	%
Sales and marketing	137.4		(3.4		)	134.0		129.0		8.4			7		5.0			4
General and administrative	57.1		(1.0		)	56.1		67.2		(10.1		)	(15	)	(11.1		)	(17	)
Amortization of identified intangibles	34.8		(1.2		)	33.6		34.8		—			—		(1.2		)	(4	)
Restructuring and other	10.5		(0.2		)	10.3		5.4		5.1			93		4.9			90
Total operating expenses	$	359.5	$	(7.0	)	$	352.5	$	354.7	$	4.8		1	%	$	(2.2	)	(1	)%

Liquidity and Capital Resources

Overview

Cash, cash equivalents, restricted cash equivalents, and short-term investments decreased by $17.8 million to $333.7 million as of September 30, 2018, from $351.6 million as of December 31, 2017. The decrease was primarily due to expenditures under our stock repurchase program, payments of acquisition-related debt, purchases of property and equipment, and contingent consideration payments related to businesses acquired, partially offset by cash flow from operating activities and proceeds from issuance of common stock.

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(in thousands)	September 30, 2018		December 31, 2017		Change
Cash and cash equivalents	$	180,942	$	170,345	$	10,597
Restricted cash equivalents	39,809		32,531		7,278
Short term investments	112,986		148,697		(35,711		)
Total cash, cash equivalents, restricted cash equivalents, and short-term investments	$	333,737	$	351,573	$	(17,836	)

Cash flow activities are summarized as follows:

	Nine Months Ended September 30,
(in thousands)	2018			2017			Change
Net cash provided by operating activities	$	50,155		$	42,441		$	7,714
Net cash provided by investing activities*	27,177			36,097			(8,920		)
Net cash used for financing activities	(57,407		)	(65,505		)	8,098
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash equivalents	(2,050		)	4,168			(6,218		)
Increase in cash, cash equivalents, and restricted cash equivalents*	$	17,875		$	17,201		$	674

* Certain prior period amounts have been revised due to the implementation of ASU 2016-18. See Note 1 for details.

Cash, cash equivalents, restricted cash equivalents, and short-term investments held outside of the U.S. in various foreign subsidiaries were $132.8 and $88.4 million as of September 30, 2018, and December 31, 2017, respectively. Management anticipates using these foreign funds for local operations and to finance international acquisitions.

Based on past performance and current expectations, we believe that our cash, cash equivalents, short-term investments, and cash generated from operating activities will satisfy our working capital, capital expenditure, investment, stock repurchase, commitments (see Note 10 – Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements), and other liquidity requirements associated with our existing operations through at least the next twelve months. We believe that the most strategic uses of our cash resources include business acquisitions, strategic investments to gain access to new technologies, repurchase of shares of our common stock, and working capital.

Operating Activities

During the nine months ended September 30, 2018, our cash provided by operating activities was $50.2 million. Net cash provided by operating activities in the nine months ended September 30, 2018 consisted primarily of net income of $2.1 million, non-cash expenses including $50.1 million of depreciation and amortization, $30.5 million of stock-based compensation, and $11.3 million of non-cash accretion of interest expenses on Notes and imputed financing obligations, partially offset by the change in fair value of contingent consideration of $11.9 million, net change in derivative assets and liabilities of $2.4 million, and net change in operating assets and liabilities of $36.3 million. The net change in operating assets and liabilities of $36.3 million consisted primarily of an increase in other current assets of $21.7 million, an increase in income taxes receivable of $7.2 million, and a decrease in income taxes payable of $6.8 million.

Accounts Receivable

Our primary source of operating cash flow is the collection of accounts receivable from our customers. One measure of the effectiveness of our collection efforts is average days sales outstanding for accounts receivable (“DSO”). DSOs were 86 and 84 days as of September 30, 2018 and December 31, 2017, respectively. We calculate DSO by dividing net accounts receivable at the end of the quarter by revenue recognized during the quarter, multiplied by the total days in the quarter.

DSOs increased slightly during the nine months ended September 30, 2018, compared with December 31, 2017, primarily due to a greater portion of our revenue coming from our Industrial Inkjet and Productivity Software segments which have substantially longer average payment terms than our Fiery segment. We expect DSOs to vary from period to period because of changes in the mix of business between direct customers and leading printer manufacturers, the effectiveness of our collection efforts both domestically and overseas, and variations in the linearity of our sales. As the percentage of Industrial Inkjet and Productivity Software related revenue increases, we expect DSOs may trend higher.

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We have facilities in the U.S. that enable us to sell to third parties, on an ongoing basis, certain trade receivables with recourse. Trade receivables sold with recourse are generally short-term receivables with payment due dates of less than 10 days from date of sale. We also have facilities in Europe that enable us to sell to third parties, on an ongoing basis, certain trade receivables without recourse. Trade receivables sold without recourse are generally short-term receivables secured by international letters of credit with payment due dates of less than one year.

Trade receivables sold cumulatively under these facilities were $13.1 and $6.8 million during the nine months ended September 30, 2018 on a recourse and nonrecourse basis, respectively, which approximates the cash received. The receivables that were sold to third parties were removed from the Condensed Consolidated Balance Sheets and were reflected as cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows.

Allowances for doubtful accounts are summarized as follows (in thousands):

	September 30, 2018		December 31, 2017
Allowance for trade receivables	$	21,345	$	20,278
Allowance for trade-in sales	7,765		10,176
Allowance for sales rebates	1,064		1,782
Total allowances for doubtful accounts	$	30,174	$	32,236

Inventories

Our inventories are procured primarily in support of the Industrial Inkjet and Fiery operating segments. The majority of our Industrial Inkjet products are manufactured internally, while Fiery production is primarily outsourced. The result is lower inventory turnover for Industrial Inkjet inventories compared with Fiery inventories.

Our inventories decreased by $4.5 million to $121.3 million as of September 30, 2018 from $125.8 million as of December 31, 2017, primarily due to a decrease in Industrial Inkjet inventories. Inventory turnover was 4.3 turns for the quarter ended September 30, 2018 compared with 4.4 turns during the quarter ended December 31, 2017 and 3.6 turns in the quarter ended September 30, 2017. We calculate inventory turnover by dividing annualized current quarter cost of revenue by ending inventories.

Investing Activities

Acquisitions

In the nine months ended September 30, 2018, we received cash from an escrow settlement of $1.0 million in relation to the acquisition of CTI and paid $0.3 million as a working capital purchase price adjustment on the acquisition of Escada. We received a net working capital adjustment of $0.2 million related to the Optitex acquisition during the first quarter of 2017, which was recorded as a purchase price adjustment.

On August 14, 2017, we acquired Generation Digital for cash consideration of $3.2 million, net of cash acquired, plus an additional potential future cash earnout, which is contingent on achieving certain revenue and operating profit performance targets. Generation Digital provides software to textile and fashion designers for the creation and design of prints and patterns, color matching, and color palette creation and management within our Fiery operating segment.

On May 8, 2017, we acquired CRC Information Systems, Inc. (“CRC”) from Reynolds for cash consideration of $7.6 million. CRC provides business process automation software for commercial label and packaging printers included in the Midmarket Print Suite within our Productivity Software operating segment.

On January 31, 2017, we purchased the FFPS business from Xerox for cash consideration of $5.9 million, plus $18.0 million of future cash payments, of which $9.0 million was paid in July 2017 and $9.0 million was paid in July 2018. These two subsequent payments are included in our cash flows from financing activities as repayment of acquisition-related debt in our Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017, respectively. The FFPS business manufactures and markets the FFPS DFE, which previously competed with our Fiery DFE.

Investments

Proceeds from sales and maturities of marketable securities, net of purchases, were $35.1 million and $77.4 millionduring the nine months ended September 30, 2018 and 2017, respectively. We have classified our investment portfolio as “available for sale.” Our investments are made with a policy of capital preservation and liquidity as primary objectives. We may hold investments in fixed income debt securities to maturity; however, we may sell an investment at any time if the quality rating of the investment declines, the yield on the investment is no longer attractive, or we have better uses for the cash. Since we invest primarily in investment securities

47

that are highly liquid with a ready market, we believe the purchase, maturity, or sale of our investments has no material impact on our overall liquidity.

Property and Equipment, Net

Our property and equipment additions have historically been funded with cash flows from operating activities. Net cash payments for purchases of property and equipment were $9.8 million and $8.7 millionduring the nine months ended September 30, 2018 and 2017, respectively. See also Note 5–Supplemental Financial Statement Information of the Notes to Condensed Consolidated Financial Statements for additional information about purchases of property and equipment.

Proceeds from sale of held-for-sale Building and Land

During the three months ended September 30, 2018 we sold one of our buildings and the related land in our former Meredith, NH facility for $1.1 million in cash. This property was previously included in assets held for sale on the Consolidated Balance Sheet as of December 31, 2017. We are actively marketing the remaining building and land at this formerly facility.

Restricted Cash Equivalents and Investments

We have restricted cash equivalents and investments that are required to be maintained by the lease related to our Manchester, NH facility, which is described more fully in Note 10–Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements. The funds were invested with a third-party trustee during the construction period and upon completion of construction in April 2018, were deposited with MUFG where they are restricted as collateral until the end of the underlying building lease period in 2024. This restricted cash and cash equivalents was $39.8 and $32.5 million as of September 30, 2018 and December 31, 2017, respectively.

Financing Activities

Proceeds from Issuance of Common Stock

Historically, our recurring cash flows provided by financing activities have included receipt of cash from the issuance of common stock through the exercise of stock options and employee purchases of ESPP shares. We received proceeds from the exercise of stock options of zero and $1.7 million and employee purchases of ESPP shares of $10.2 million and $10.0 million during the nine months ended September 30, 2018 and 2017, respectively. While we may continue to receive proceeds from these plans in future periods, the timing and amount of such proceeds are difficult to predict and are contingent on certain factors including the price of our common stock, the timing and number of stock options exercised by employees that had participated in these plans, net settlement options, employee participation in our ESPP, and general market conditions.

Treasury Stock Purchases

During the nine months ended September 30, 2018 and 2017 we expended $52.5 million and $56.9 million, respectively, to repurchase outstanding shares of our common stock. Such repurchases included $2.0 and $10.0 million used for net settlement of shares for the exercise price of certain stock options and any tax withholding obligations incurred connected with such exercises and tax withholding obligations that arose on the vesting of RSUs during the nine months ended September 30, 2018 and 2017, respectively.

On September 11, 2017, the board of directors approved an additional $125 million for our share repurchase program commencing September 11, 2017. At that time, $28.8 million remained available for repurchase under the 2015 authorization for this program. The 2017 authorization thereby increased the repurchase authorization to $153.8 million of our common stock. This authorization expires December 31, 2018. Under this publicly announced plan, we repurchased 1,614,166 and 1,019,544 shares for an aggregate purchase price of $50.5 million and $47.0 millionduring the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, $58.9 million remained authorized for repurchases under this program.

Repayment of Acquisition-Related Debt

We paid $12.0 million and $10.8 million of acquisition-related debt during the nine months ended September 30, 2018 and 2017, respectively. These payments included $9.0 million in each nine-month period related to the acquisition of FFPS.

Earnout Payments

Earnout payments during the nine months ended September 30, 2018 were $3.1 million, consisting of payments related to previously accrued contingent consideration liabilities for Rialco, General Digital, and Shuttleworth. Earnout payments during the nine months ended September 30, 2017 were $9.5 million, primarily related to previously accrued contingent consideration liabilities for Reggiani, Rialco, and Shuttleworth.

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Convertible Senior Notes

Our $345 million principal amount Notes are due on September 1, 2019, unless previously purchased or converted in accordance with their terms prior to such date. The Company is currently evaluating alternatives for refinancing all or a portion of the Notes prior to their maturity date.

Other Commitments

We are reliant on several sole source suppliers for certain key components and could experience a significant negative impact on our financial condition and results of operations if such supplies were reduced or not available. From time to time we may find it necessary to purchase higher than normal levels of such supplies to provide safety stocks in case of supply disruptions. We may also be required to compensate our subcontract manufacturers for components purchased for orders subsequently canceled by us. We periodically review the potential liability for these purchase commitments and the adequacy of the related accruals.

Off-Balance Sheet Financing

Please refer to Note 10 – Commitments and Contingencies of our Notes to Condensed Consolidated Financial Statements for discussion of our six-year lease with MUFG for a 225,000 square foot manufacturing and warehouse facility in Manchester, NH. Minimum lease payments during the initial six-year term for the building are $1.8 million and minimum lease payments are $13.1 million during the 48.5-year term of the related land lease, excluding six months of the land lease that was financed into the manufacturing facility lease. Upon completion of the initial six-year building lease term, we have the option to renew the lease, purchase the facility, or return the facility to MUFG subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment. We have assessed our exposure in relation to the residual value guarantee and believe that there is no deficiency to the guaranteed value as of September 30, 2018.

Contractual Obligations

Please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Contractual Obligations” presented in our 2017 Form 10-K. There were no material changes during the nine months ended September 30, 2018.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Market Risk

We are exposed to various market risks. Market risk is the potential loss arising from adverse changes in market rates and prices, general credit, foreign currency exchange rate fluctuations, liquidity, and interest rate risks, which may be exacerbated by a tight global credit market and increase in economic uncertainty that have affected various sectors of the financial market from time to time. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We may enter into financial instrument contracts to manage and reduce the impact of changes in foreign currency exchange rates on earnings and cash flows. The counterparties to such contracts are major financial institutions.

Europe represents a significant portion of our revenue and cash flows. Since Europe is composed of varied countries and regional economies, our European risk profile is somewhat more diversified due to the varying economic conditions among the countries. Approximately 20% of our receivables were with European customers as of September 30, 2018. Of this amount, 11% of our European receivables (2% of consolidated receivables) were in the higher risk southern European countries (mostly Italy, Spain, and Portugal), which management believes are adequately reserved.

Marketable Securities

We maintain an investment portfolio of short-term fixed income debt securities of various holdings, types, and maturities. These short-term investments are generally classified as available-for-sale and, consequently, are recorded on our Condensed Consolidated Balance Sheets at fair value with unrealized gains and losses reported as a separate component of AOCI. We attempt to limit our exposure to interest rate risk by investing in securities with maturities of less than three years; however, we may be unable to successfully limit our risk to interest rate fluctuations. At any time, a sharp change in interest rates could have a material impact on the fair value of our investment portfolio. Increases or decreases in interest rates could also have a material impact on future interest income related to new investments. We do not currently hedge these interest rate exposures.

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Interest Rate Risk

Hypothetical changes in the fair values of financial instruments held by us as of September 30, 2018 that are sensitive to changes in interest rates are presented below. The modeling technique measures the change in fair value arising from selected potential changes in interest rates. Market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 100 basis points over a twelve-month time horizon (in thousands):

Valuation of securities given an interest rate decrease of 100 basis points		No change in interest rates		Valuation of securities given an interest rate increase of 100 basis points
$	132,491	$	131,510	$	130,527

We have no European sovereign debt investments. Our European debt and investments consisted of non-sovereign corporate debt securities of $4.5 million, which represented 9% of our corporate debt instruments (4% of our short-term investments) as of September 30, 2018. European debt investments are with corporations domiciled in the northern and central European countries of Sweden, Netherlands, and France. We believe that we do not have significant exposure with respect to our money market and corporate debt investments in Europe.

As of September 30, 2018, we have $345 million principal amount of Notes outstanding. We carry these instruments at face value less unamortized discount on our Condensed Consolidated Balance Sheets. Since these instruments bear interest at fixed rates, we have no financial statement risk associated with changes in interest rates. Although the fair value of these instruments fluctuates when interest rates change, the market value of our Notes is also influenced by the conversion premium. Please refer to Note 7 – Fair Value Measurements and Note 9 – Convertible Senior Notes of the Notes to Condensed Consolidated Financial Statements for further information.

Foreign Currency Exchange Risk

A large portion of our business is conducted in countries other than the U.S. We are primarily exposed to changes in exchange rates for the Euro, British pound sterling, Indian rupee, Canadian dollar, Japanese yen, Brazilian real, Chinese renminbi, Israeli shekel, and Australian dollar. Although the majority of our receivables are invoiced and collected in U.S. dollars, we have exposure from non-U.S. dollar-denominated sales (consisting of the Euro, British pound sterling, Brazilian real, Chinese renminbi, Israeli shekel, Australian dollar, and Canadian dollar) and operating expenses (primarily the Euro, British pound sterling, Brazilian real, Chinese renminbi, Israeli shekel, Japanese yen, Indian rupee, and Australian dollar) in foreign countries. Accordingly, we can benefit from a stronger U.S. dollar due to the corresponding reduction in our foreign operating expenses translated in U.S. dollars and at the same time we can be adversely affected by a stronger U.S. dollar due to the corresponding reduction in foreign revenue translated in U.S. dollars.

We hedge balance sheet remeasurement exposures using forward contracts not designated for hedge accounting treatment with notional amounts of $209.9 million as of September 30, 2018. Please refer to Note 8 – Derivatives and Hedging of our Notes to Condensed Consolidated Financial Statements for further information.

The impact of hypothetical changes in foreign exchanges rates on revenue and income from operations are presented below. The modeling technique measures the change in revenue and income from operations resulting from changes in selected foreign exchange rates with respect to the Euro, British pound sterling, and Chinese renminbi of plus or minus one percent during the nine months ended September 30, 2018 as follows (in thousands):

	Impact of a foreign exchange rate decrease of one percent		No change in foreign exchange rates		Impact of a foreign exchange rate increase of one percent
Revenue	$	759,876	$	758,072	$	756,268
Income from operations	13,919		13,694		13,469

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, which are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2018, the end of the period covered by this interim report.

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Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2018, due to material weaknesses in our internal control over financial reporting. Our internal control over financial reporting is the process designed by and under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America.

As described in “Item 9A. Controls and Procedures” of our 2017 Form 10-K, management performed its assessment of the effectiveness of our internal control over financial reporting as of December 31, 2017, and concluded that our internal control over financial reporting as of that date was not effective because of the material weaknesses described below.

Our management determined that, as of December 31, 2017, the following material weaknesses existed in our internal control over financial reporting.

1. Our internal controls were not designed effectively to ensure that operational changes, which may impact revenue recognition, were appropriately and timely evaluated to determine the accounting impact.

2. We did not sufficiently staff, with appropriate levels of experience and training, to allow for the adequate monitoring and timely communication of operational changes, including those which may impact revenue recognition on an ongoing basis.

3. Our internal control over excess and obsolete finished goods printer inventory reserves at our Italian manufacturing subsidiary was not designed effectively to conduct a sufficiently precise evaluation of the classification, condition, and saleability of each printer and the cost accounting department was not staffed sufficiently to mitigate limitations relating to these reserves in the ERP system used solely at this subsidiary.

Items #1 and #2 resulted in management not timely identifying and evaluating the appropriate period of recognition for certain revenue transactions related to printers distributed from a single location, which should have been evaluated in accordance with the bill and hold revenue recognition guidance. Item #3 resulted in management not timely evaluating the appropriate period of de-recognition of certain printer inventory manufactured at our Italian manufacturing subsidiary, which should have been subject to an excess and obsolescence impairment or reclassification and depreciation.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected in a timely basis. Because the deficiencies identified could result in a misstatement of revenue, inventory, and related accounts and associated disclosures that could be material to the annual or interim consolidated financial statements, such deficiencies represent material weaknesses in our internal control over financial reporting. Management concluded that its internal control over financial reporting as of December 31, 2017 and September 30, 2018 was not effective due to the material weaknesses described above.

Material Weakness Discussion and Remediation

Notwithstanding the material weaknesses in our internal control over financial reporting, we concluded that our previously issued consolidated financial statements and other financial information included in our filings fairly present in all material respects our financial condition, results of operations, and cash flows as of, and for, the periods presented. The foregoing has been approved by our management, including our Chief Executive Officer and Chief Financial Officer, who have been involved with the reassessment and analysis of our internal control over financial reporting.

The material weaknesses did not result in a material misstatement in the financial statements included in our 2017 Form 10-K, or previously issued financial statements; however, we concluded that, as of December 31, 2017, there was a reasonable possibility that material misstatements could occur in the consolidated financial statements.

Plan for Remediation of Material Weaknesses

Following the identification of the foregoing material weaknesses, management commenced implementation of a remediation plan, which is ongoing. Management believes that the plan, once complete, will remediate the material weaknesses described above. The following steps of the remediation plan are currently in process, and management may determine to enhance existing controls and/or implement additional controls as the implementation progresses:

• Design and implement controls to properly identify, evaluate, and monitor operational changes, which may impact revenue recognition;

• Evaluate the sufficiency, experience, and training of our internal personnel and hire additional personnel or use external resources;

• Design and implement controls related to the approval and accounting for any bill and hold transactions;

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• Design and implement controls to evaluate excess and obsolete inventory reserves at our Italian subsidiary; and

• Direct our internal auditors to perform additional testing of revenue transactions to ensure the sufficiency of our remediation efforts.

We are in the process of further reviewing, documenting, and testing our internal controls over financial reporting, and we may from time to time make changes aimed at enhancing existing controls and/or implementing additional controls. Because the implementation of our remediation plan was ongoing as of September 30, 2018, management concluded that the material weaknesses described in our 2017 Form 10-K, remained unremediated as of September 30, 2018.

Important Considerations

The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.

Evaluation of Changes in Internal Control over Financial Reporting

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated changes in our internal control over financial reporting that occurred during the third quarter of 2018. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer did not identify any change in our internal control over financial reporting during the third quarter of 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II     OTHER INFORMATION

Item 1: Legal Proceedings

We may be involved, from time to time, in a variety of claims, lawsuits, investigations, or proceedings relating to contractual disputes, securities laws, intellectual property rights, employment, or other matters that may arise in the normal course of business. We assess our potential liability in each of these matters by using the information available to us. We develop our views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and various combinations of appropriate litigation and settlement strategies. We accrue estimated losses from contingencies if a loss is deemed probable and can be reasonably estimated.

For a description of our significant pending legal proceedings, please see Note 10 – Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements.

Item 1A: Risk Factors

You should carefully consider the risk factors discussed in Part I, Item 1A, and Part II, Items 7 and 7A, of the 2017 Form 10-K, which could materially affect our business, financial condition, or future results. The risks described in the 2017 Form 10-K and below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.

In addition to the risk factors disclosed in our 2017 Form 10-K, we have identified the following material changes to our risk factors.

We may experience a potential impact to our business from the transition of our Chief Executive Officer.

We recently announced that William Muir was appointed CEO of the Company effective October 15, 2018. Guy Gecht, who had served as our CEO since January 2000, stepped down as our CEO effective on that date. Mr. Gecht and our other senior executives have been instrumental in setting our strategic direction, operating business, identifying, recruiting and training key personnel and identifying business opportunities, and our business depends on the efforts, abilities and expertise of these senior executives, including the CEO.  We cannot assure you that our business will not experience a potential impact from Mr. Gecht’s departure and transition to our new CEO Mr. Muir, especially since Mr. Gecht had directed the operations of our business for approximately 18 years.

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Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Our stock repurchases during the three months ended September 30, 2018 were as follows (in thousands, except for per share amounts):

	Total number of shares purchased (1)	Average price paid per share		Total number of shares purchased as part of publicly announced program (1)	Approximate dollar value of shares that may yet be purchased under the program (2)
July 2018	176	$	34.01	176	$	75,142
August 2018	219	31.18		200	68,333
September 2018	297	35.92		278	58,921
Totals	692			654

_________________

⁽¹⁾  The difference between total number of shares purchased and total number of shares purchased as part of publicly announced program is the shares withheld by us to satisfy any tax withholding obligations incurred in connection with the vesting of RSUs.

⁽²⁾  On September 11, 2017, the board of directors approved the repurchase of an additional $125 million for our share repurchase program commencing September 11, 2017 and expiring on December 31, 2018. The board of directors had previously authorized $150 million under the program in November 2015. Under this publicly announced program, we repurchased 654,380 shares for an aggregate purchase price of $22.2 million during the three months ended September 30, 2018.

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Item 6:        Exhibits

No.	Description
3.1	Amended and Restated Certificate of Incorporation(1)
3.2	Amended and Restated Bylaws of Electronics For Imaging, Inc. (as amended August 12, 2009)(2)
4.1	First Supplemental Indenture Dated as of November 5, 2018 to Indenture Dated as of September 9, 2014 by and between Electronics For Imaging, Inc., as Issuer, and U.S. National Bank Association, as Trustee
10.1	Termination Agreement dated July 27, 2018 by and between Electronics for Imaging, Inc. and between John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee
10.2*	Executive Employment Agreement Dated as of October 4, 2018 by and between Electronics For Imaging, Inc. and William D. Muir, Jr.
10.3*	Amendment Dated October 15, 2018 to Employment Agreement Dated as of April 22, 2015 by and between Electronics For Imaging, Inc. and Marc Olin
10.4*	Transition Agreement Dated October 15, 2018 by and between Electronics For Imaging, Inc. and Guy Gecht
10.5*	Amendment Dated November 5, 2018 to Transition Agreement Dated October 12, 2018 by and between Electronics for Imaging, Inc. and Guy Gecht
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

______________

⁽¹⁾  Filed as an exhibit to the Company’s Annual Report on Form 10-K filed on February 22, 2017 (File No. 000-18805) and incorporated herein by reference.

⁽²⁾  Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2009 (File No. 000-18805) and incorporated herein by reference.

* Management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ELECTRONICS FOR IMAGING, INC.
Date: November 5, 2018	/s/ William Muir
	William Muir
	Chief Executive Officer (Principal Executive Officer)
Date: November 5, 2018	/s/ Marc Olin
	Marc Olin
	Chief Financial Officer (Principal Financial and Accounting Officer)

EX-4.1

ELECTRONICS FOR IMAGING, INC.,

as Issuer

- AND -

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

____________________________________________________

FIRST SUPPLEMENTAL INDENTURE

Dated as of November 5, 2018

to

INDENTURE

Dated as of September 9, 2014

____________________________________________________

0.75% Convertible Senior Notes due 2019

FIRST SUPPLEMENTAL INDENTURE, dated as of November 5, 2018 (the “Supplemental Indenture”), between ELECTRONICS FOR IMAGING, INC., a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), having its principal executive office located at 6750 Dumbarton Circle, Fremont, California 94555, and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee (the “Trustee”).

RECITALS

WHEREAS, the Company has executed and delivered to the Trustee, the Indenture, dated as of September 9, 2014 (the “Base Indenture”), to provide for the issuance of the Company’s 0.75% Convertible Senior Notes due 2019 (the “Notes”);

WHEREAS, this Supplemental Indenture is being entered into pursuant to the provisions of Sections 10.01(j) and 10.03 of the Base Indenture;

WHEREAS, Section 10.01(j) of the Base Indenture provides that without the notice to or consent of any Holders of the Notes, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental to the Base Indenture to amend or supplement any provision contained in the Base Indenture to conform the provisions of the Base Indenture or the Notes to the “Description of Notes” section of the Offering Memorandum (as defined in the Base Indenture);

WHEREAS, the Company desires to amend Section 1.01of the Base Indenture as described in this Supplemental Indenture and the Company, pursuant to the foregoing authority, proposes in and by this Supplemental Indenture to amend the Base Indenture as hereinafter provided;

WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental Indenture; and

WHEREAS, the Company has duly authorized the execution and delivery of this Supplemental Indenture. All things necessary to make this Supplemental Indenture a legally valid and binding agreement of the Company, in accordance with its terms, have been done.

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes (except as otherwise provided in the Base Indenture) as follows:

ARTICLE ONE

DEFINITIONS

Section 1.01.    (a)    For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires:

(1)terms used herein in capitalized form and defined in the Base Indenture shall have the meanings specified in the Base Indenture;

(2)the words “herein,” “hereof” and “hereto” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision of this Supplemental Indenture; and

1

(3)the terms defined in the Recitals or in Article Two herein shall have the meanings specified therein.

(b)For all purposes of the Base Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(1)the terms defined in this Article One and in Article Two herein shall have the meanings assigned to them in this Article One and in Article Two herein, and include the plural, as well as the singular; and

(2)“First Supplemental Indenture” or “this Supplemental Indenture” means this instrument as originally executed or, if amended or supplemented pursuant to the applicable provisions of the Base Indenture, as amended or supplemented. 

ARTICLE TWO

MODIFICATIONS

Section 2.01.Amendment to Section 1.01 of the Base Indenture. Section 1.01 of the Base Indenture is hereby amended by replacing the definition of “Daily Measurement Value” with the following new definition thereto:

“Daily Measurement Value” means the Specified Dollar Amount (if any), divided by 60.”

ARTICLE THREE

MISCELLANEOUS PROVISIONS

Section 3.01.Effectiveness of Amendments. The Base Indenture shall be, and be deemed to be, modified and amended in accordance herewith and the respective rights, limitation of rights, obligations, duties and immunities under the Base Indenture of the Trustee, the Company and the Holders shall thereafter be determined, exercised and enforced thereunder subject in all respects to such modifications and amendments and all the terms and conditions of this Supplemental Indenture shall be and be deemed to be part of the terms and conditions of the Base Indenture for any and all purposes.

Section 3.02.Governing Law; Jurisdiction. THIS INDENTURE AND EACH NOTE, AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS INDENTURE AND EACH NOTE, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

The Company irrevocably consents and agrees, for the benefit of the Holders from time to time of the Notes and the Trustee, that any legal action, suit or proceeding against it with respect to obligations, liabilities or any other matter arising out of or in connection with this Supplemental Indenture or the Notes may be brought in the courts of the State of New York or the courts of the United States located in the Borough of Manhattan, New York City, New York and, until amounts due and to become due in respect of the Notes have been paid, hereby irrevocably consents and submits to the non-exclusive jurisdiction of each such court in personam, generally and unconditionally with respect to any action, suit or proceeding for itself in respect of its properties, assets and revenues.

2

The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions, suits or proceedings arising out of or in connection with this Supplemental Indenture brought in the courts of the State of New York or the courts of the United States located in the Borough of Manhattan, New York City, New York and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

Section 3.03.Waiver of Jury Trial. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 3.04.Severability Clause. In the event any provision of this Supplemental Indenture or in the Notes shall be invalid, illegal or unenforceable, then (to the extent permitted by law) the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired.

Section 3.05.Ratification of Indenture. The Base Indenture, as supplemented by this Supplemental Indenture, is in all respects ratified and confirmed, and this Supplemental Indenture shall be deemed part of the Base Indenture in the manner and to the extent herein and therein provided.

Section 3.06.Trustee’s Disclaimer. The Trustee accepts the amendments of the Base Indenture effected by this Supplemental Indenture, but on the terms and conditions set forth in the Base Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee.The recitals contained herein shall be taken as the statements of the Company and the Trustee does not assume any responsibility for their correctness. Without limiting the generality of the foregoing, the Trustee makes no representations as to the due execution hereof by the Company; provided that the Trustee represents that it is duly authorized to execute and deliver this Supplemental Indenture.

Section 3.07.Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

Section 3.08. Continued Effect of Base Indenture. Except as amended or supplemented by this Supplemental Indenture, the terms, conditions, covenants and agreements set forth in the Base Indenture shall continue in full force and effect.

[Remainder of Page Intentionally Left Blank]

3

IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, all as of the day and year first above written.

ELECTRONICS FOR IMAGING, INC. as Issuer
By:	/s/ Mark Olin
	Name: Mark Olin Title: Chief Financial Officer

[Signature Page to First Supplemental Indenture]

U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:	/s/ David Jason
	Name: DAVID JASON Title: VICE PRESIDENT

[Signature Page to First Supplemental Indenture]

EX-10.1

AMENDMENT NO. 1

TO LEASE

THIS AMENDMENT NO. 1 dated July 25, 2018 (Amendment No. 1) to Lease dated April 19, 2013 (Lease) by and between JOHN ARRILLAGA, Trustee, or his Successor Trustee UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) as amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, collectively as LANDLORD, and ELECTRONICS FOR IMAGING, INC., a Delaware corporation, as TENANT, is made and entered into as of the last date written below.

RECITALS

A. WHEREAS, by Lease Agreement dated April 19, 2013 Landlord leased to Tenant approximately 58,560+ square feet of that certain 108,166+ square foot building (the Building) located at 6700 Dumbarton Circle, Suite 200, Fremont, California (the Premises), the details of which are more particularly set forth in said Lease, and

B. WHEREAS, said Lease was amended by the Letter dated August 30, 2013 which changed the Premises address from 6700 Dumbarton Circle, Fremont, California 94555 to 6700 Dumbarton Circle, Suite 200, Fremont, California 94555, and

C. WHEREAS, said Lease was amended by the Commencement Letter dated September 17, 2013 which confirmed the Commencement Date as September 1, 2013, and confirmed the Termination Date as August 31, 2028, and

D. WHEREAS, it is now the desire of the parties hereto to further amend the Lease to (i) terminate said Lease prior to the scheduled Termination Date and amend the scheduled Termination Date from August 31, 2028 to the revised early termination date of July 31, 2018, (ii) establish a Termination Fee for the early termination of the Lease, (iii) reference Landlord retaining Tenant’s Security Deposit in lieu of Tenant paying the unamortized portion of the Lease Commission as required in Lease Paragraph 45 (Brokers), (iv) modify Tenant’s surrender obligations, (v) amend the Aggregate Basic Rent of the Lease due to the early termination of the Lease, (vi) delete Lease Paragraphs 47 (Option to Extend Lease for Five (5) or Ten (10) Years) and 48 (Right of First Refusal to Lease) and 49 (Right of First Refusal to Purchase the Leased Property) and (vii) require Tenant to execute a Quitclaim Deed which Landlord will record to remove from record the Memorandum of Lease as hereinafter set forth (the Lease Agreement, Letter dated August 30, 2013, Commencement Letter and this Amendment No. 1 hereinafter are referred to collectively as the Lease).

AGREEMENT

NOW THEREFORE, for valuable consideration, receipt of which is hereby acknowledged, and in consideration of the hereinafter mutual promises, the parties hereto do agree as follows:

1.     EARLY TERMINATION OF LEASE: Subject to the terms and conditions stated herein,

Landlord and Tenant hereby agree to the early termination of the Lease; therefore, the scheduled Termination Date shall be changed from August 31, 2028 to July 31, 2018 (the Revised Termination Date). Tenant shall be responsible for paying all Basic Rent and Additional Rent and fulfilling all Lease obligations as contained in said Lease through the Revised Termination Date as modified herein. Notwithstanding the above, and except as may be otherwise provided in this Amendment No. 1, Tenant's obligations that occur and/or accrue during the Term of the Lease as stated in Lease Paragraphs 13 (Taxes), 18 (Indemnification), 19 (Compliance) and 44 (Hazardous Materials) shall survive the termination of the Lease.

Page 1    Initial: __________    

2.     EARLY TERMINATION CONSIDERATION. As a material part of the consideration for Landlord's consent to the early termination of the Lease, Tenant agrees to pay to Landlord FOUR HUNDRED FIFTY-EIGHT THOUSAND TWO HUNDRED SEVENTY AND 80/100 DOLLARS ($458,270.80) as calculated pursuant to Exhibit A attached hereto (Termination Fee). Said Termination Fee shall be paid by Tenant to Landlord concurrently with the delivery of this executed Amendment No. 1.

3.     LANDLORD RETENTION OF SECURITY DEPOSIT. The parties hereto agree that in lieu of Tenant paying the THREE HUNDRED FIFTY-TWO THOUSAND SEVEN HUNDRED SIXTY AND 51/100 DOLLARS ($352,760.51) unamortized Lease Commission as required in Lease Paragraph 45 (Brokers), Landlord shall apply Tenant’s Security Deposit of TWO HUNDRED NINETY-EIGHT THOUSAND FIVE HUNDRED TWENTY-FOUR AND 40/100 DOLLARS ($298,524.40) to the amount due and Landlord, as an accommodation to Tenant, shall forgive the net amount of FIFTY-FOUR THOUSAND TWO HUNDRED THIRTY-SIX AND 11/100 DOLLARS ($54,236.11) balance due.

4.     TENANT’S SURRENDER OBLIGATIONS.

A.     Surrender of Premises. The parties hereto agree Tenant shall surrender the Premises in the current interior configuration as shown on Exhibit B attached hereto and Tenant shall leave the cubicles installed in the Premises as of the Revised Termination Date. Tenant shall be responsible for otherwise relinquishing the Premises in the condition required under Lease Paragraph 5 (Acceptance and Surrender of Premises).

B.     Hazardous Materials. Tenant represents and warrants to Landlord that, to the best of Tenant’s knowledge, no Hazardous Materials were used, stored and/or disposed of in, on or about, the Premises during the Term of the Lease by Tenant or its subtenants (if any), other than customary household and office supplies used in compliance with Environmental Laws.

5.     REAL PROPERTY INSURANCE. Notwithstanding Tenant’s obligations related to payment of Additional Rent as set forth in Paragraph 1 (Early Termination of Lease) above, Tenant acknowledges that Tenant has prepaid real property insurance premiums due through March 13, 2019, and that Tenant will not receive any rebate of said prepaid premiums related to the Premises accruing after the Revised Termination Date of July 31, 2018.

6.     AGGREGATE BASIC RENT. As a result of the Revised Termination Date, the Aggregate Basic Rent due under Lease Paragraph 4.A (Rent: Basic Rent) is decreased by FIFTEEN MILLION NINE HUNDRED EIGHTY-EIGHT THOUSAND THREE HUNDRED THIRTY-FOUR AND 41/100 DOLLARS ($15,988,334.41), or from EIGHTEEN MILLION FIVE HUNDRED TWENTY-SIX THOUSAND TWO HUNDRED FORTY-FIVE AND 48/100 DOLLARS ($18,526,245.48) to TWO

MILLION FIVE HUNDRED THIRTY-SEVEN THOUSAND NINE HUNDRED ELEVEN AND 07/100 DOLLARS ($2,537,911.07).

7. DELETION OF LEASE PARAGRAPH 47 (OPTION TO EXTEND LEASE FOR FIVE (5) OR TEN (10) YEARS). Lease Paragraph 47 (Option to Extend Lease for Five (5) or Ten (10) Years) is hereby deleted in its entirety and is of no further force or effect.

8. DELETION OF LEASE PARAGRAPH 48 (RIGHT OF FIRST REFUSAL TO LEASE). Lease Paragraph 48 (First Right of Refusal to Lease) is hereby deleted in its entirety and is of no further force or effect.

9. DELETION OF LEASE PARAGRAPH 49 (RIGHT OF FIRST REFUSAL TO PURCHASE THE PROPERTY LEASED HEREIN). Lease Paragraph 49 (Right of First Refusal to Purchase the Property Leased Herein) is hereby deleted in its entirety and is of no further force or effect.

10. QUITCLAIM DEED. Tenant shall execute, and Landlord shall record, a Quitclaim Deed in the form attached hereto as Exhibit C to remove from record the Memorandum of Lease.

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11. AUTHORITY TO EXECUTE. Each party executing this Amendment hereby warrants and represents that (a) the individual executing on behalf of such party is properly authorized to execute this Amendment and bind such party on behalf of whom each individual executes this Amendment and to all of the terms, covenants and conditions of this Amendment as they relate to the respective party hereto, and (b) neither entry into nor performance under this Agreement by such party violates any judgment, order, decree, conveyance or contract by which such party is bound.

12. ENTIRE AGREEMENT. This Amendment constitutes the parties’ entire agreement and understanding with respect to all matters referred to in this Amendment. This Amendment may not be amended, modified or otherwise changed or any provision waived in any respect unless in writing and signed by both parties hereto.

13. CHOICE OF LAW/VENUE; SEVERABILITY. This Amendment shall in all respects be governed by and construed in accordance with the laws of the County of Alameda in the State of California and each party specifically stipulates to venue in Alameda County. If any provisions of this Amendment shall be invalid, unenforceable, or ineffective for any reason whatsoever, all other provisions hereof shall be and remain in full force and effect.

14.     EXAMINATION OF AMENDMENT. This Amendment No. 1 shall not be effective until its execution by both Landlord and Tenant.

EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions of the Lease shall remain in full force and effect.

[SIGNATURES ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment No. 1 to Lease as of the day and year last written below.

LANDLORD:	TENANT:
JOHN ARRILLAGA SURVIVOR'S TRUST	ELECTRONICS FOR IMAGING, INC.,
	a Delaware corporation
By__________________________	By__________________________
John Arrillaga, Trustee	______________________________
Date: _______________________	Print or Type Name
RICHARD T. PEERY SEPARATE	Title: _________________________
PROPERTY TRUST
By__________________________	Date: __________________________
Richard T. Peery, Trustee
Date: ________________________

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EX-10.2

EXECUTIVE EMPLOYMENT AGREEMENT

On October 4, 2018 (“the Effective Date”), William D. Muir, Jr., an individual (“Executive”), and Electronics For Imaging, Inc., (“the Company”), hereby enter into an Executive Employment Agreement (the “Agreement”).

1.Position.

Executive will be employed as Chief Executive Officer, effective October 15, 2018. Executive and the Company may mutually agree to change Executive’s position(s) or title(s), and the Company may from time to time alter (so long as any such change is consistent with Executive’s position) Executive’s duties, responsibilities or functions. Effective October 15, 2018, Executive shall be appointed to the Company’s Board of Directors.

2.Primary Duties.

Executive will perform such duties and functions as are generally associated with the position of Chief Executive Officer as well as such other specific duties and functions that are reasonably assigned to him from time to time by the Company’s Board of Directors.

3.Base Salary.

Beginning on the Effective Date, Executive will receive an annual base salary of $620,000, which will be paid in accordance with the Company’s regular payroll practices, and which will be subject to withholding required by law. Thereafter, Executive’s annual base salary will be reviewed periodically to determine whether, in the Company’s sole discretion, Executive’s base salary should be changed but in no event shall it be decreased below $620,000.

4.Management Bonus Program.

Beginning on the Effective Date, Executive will be eligible to participate in the Company’s annual management bonus program for executives under which he will be eligible to receive a bonus based on a percentage of his annual base salary and the achievement of performance targets established by the Company at the beginning of the year. The award and payment of the executive bonus will be governed by the terms of the applicable management bonus program. The Company shall have the sole discretion to change or eliminate its management bonus program applicable to each year, to determine whether Executive is entitled to any such bonus and to determine the amount of any such bonus (which determination will be consistent with any performance targets and the terms of the management bonus program as in effect for that year). Except as provided in Section 10.a, if Executive’s employment terminates for any reason prior to the end of the calendar year, Executive’s entitlement to any portion of

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the executive bonus or commission for that year will be determined pursuant to the then applicable management bonus program.

5.Executive Benefits.

Executive will be eligible to participate in any employee benefit plans or programs as in effect from time to time, including but not limited to group medical benefits and 401(k) plan, maintained or established by the Company to the same extent as other employees at Executive’s level within the Company, subject to the generally applicable terms and conditions of the plan or program in question and the determination of any person or committee administering such plan or program.

If Executive becomes entitled to any Severance Pay or Change of Control Severance Pay (as defined in section 10.a), the Company shall (i) continue to fully subsidize Executive’s health insurance coverage under Part 6 of Title I of ERISA (“COBRA”) for the lesser of (x) the period of COBRA continuation coverage applicable to the Executive, or (y) the duration of the Severance Pay or Change of Control Severance Pay and (ii) provide outplacement services to the Executive for a minimum of one (1) week of onsite counseling and ninety (90) days of counseling follow-ups (subject to a maximum of $35,000).

The Company will pay or reimburse Executive for his reasonable costs to maintain or lease an automobile for the first six (6) months of his employment with the Company.

6.Equity.

Executive may periodically be granted equity awards based on his performance.

7.Hire-On Compensation

Executive will have the hire-on compensation incentives set forth on Exhibit A to this Agreement, incorporated herein by this reference.

8.Other Obligations.

Executive will be subject to and agrees to adhere to all policies and procedures of the Company, as amended from time to time, applicable to Executive’s position or level within the Company. Executive’s employment agreement is conditioned upon Executive’s faithful observance of the Company’s Employment, Confidential Information and Invention Assignment Agreement (the “Confidential Information Agreement”), a copy of which is attached.

9.At-Will Employment.

Executive’s employment with the Company is for no specified duration and is at-will. Either Executive or the Company may terminate Executive’s employment or the terms of his employment at any time and for any reason, with or without cause and with or without notice. The at-will nature of Executive’s employment with the Company may be altered only in writing expressly so stating signed by the Company’s Board. However, as described in this Agreement, Executive may be entitled to severance benefits or other entitlements depending upon the circumstances of the termination of Executive’s employment.

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10.Termination of Employment.

a. Termination Before and After a Change of Control Without Cause or By Executive for Good Reason or for Good Reason Outside of a Change of Control.

(i) Termination Before or More than 24 Months After a Change of Control by the Company Without Cause or by the Executive for Good Reason Outside of a Change of Control. If, before a Change of Control (as defined in section 10(f)) or more than 24 months after a Change of Control, the Company terminates Executive’s employment Without Cause (as defined in section 10.d) or Executive voluntarily terminates his employment for Good Reason Outside of a Change of Control (as defined in section 10(f)), upon the date the termination of Executive’s employment constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h) (a “Separation from Service”), the Executive shall be entitled to the following: (i) an amount equal to (A) twenty-four (24) months of his then-existing base salary (but in all events if Executive has resigned for Good Reason Outside of a Change of Control, no less than the base salary immediately prior to the reduction giving rise to the right to resign for such Good Reason with $620,000 being at all times the minimum base salary for purposes of this Section 10.a(i)), plus (B) to the extent unpaid as of the date of termination, the Relocation Bonus, plus (C) an amount equal to the bonus the Executive would have earned had he been employed by the Company at the end of the calendar year in which such Separation from Service occurred with such amount determined in accordance with the management bonus plan as in effect for that year and taking into account Executive’s target bonus opportunity for that year and the amount of the bonus that would have been payable based on actual Company performance for that year (and if the Company settles such bonuses in equity but Executive has not been awarded such equity, taking into account the amount the cash bonus that would have been payable before conversion into equity) multiplied by a fraction (x) the numerator of which is the number of completed months in that year through the date of such Separation from Service, and (y) the denominator of which is twelve (12) (the “Current Bonus,”) (in total, the “Severance Pay”), (ii) unless the applicable award agreement provides more favorable vesting terms, the equity acceleration or extension of vesting benefits, as the case may be, described below in this Section 10.a(i).

In such circumstances, in addition to Executive’s equity awards (such as Restricted Stock Awards, Restricted Stock Units and the like) and stock options that were granted by the Company and vested immediately prior to such termination, the vesting of any portions of the “One-Year Award” and the “Three-Year Award” (as described in Exhibit A hereto) granted by the Company to Executive as part of his Hire-On Compensation that are outstanding and otherwise unvested immediately prior to such termination shall accelerate and become fully vested and nonforfeitable as of the date of termination. Vesting of the Share Price Performance-based Award (as described on Exhibit A hereto) for any portion of the award as to which the applicable per-share closing price condition was

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satisfied while Executive was employed by the Company and prior to the First Vesting Date as set forth on Exhibit A.

In addition, the vesting of any other equity awards and options that were granted by the Company to Executive and are outstanding and otherwise unvested immediately prior to such termination and are subject to only time-based (as opposed to performance-based) vesting conditions shall accelerate and become immediately vested and exercisable by the Executive or the Executive’s estate, as follows: (i) as to any vesting date applicable to any such award that is scheduled to occur on or before the date that is six (6) months following such termination, the portion of the award scheduled to vest on that vesting date shall accelerate and become fully vested and nonforfeitable as of the date of termination; and (ii) as to the first vesting date (if any) applicable to any such award that is scheduled to occur after the date that is six (6) months following such termination, a pro-rata portion (determined as described in the following sentence) of the portion of the award scheduled to vest on that vesting date shall accelerate and become fully vested and nonforfeitable as of the date of termination. For purposes of clause (ii) of the preceding sentence, the pro-rata portion shall be a fraction (not greater than one) where the numerator is the portion of the applicable vesting period (measured commencing with immediately preceding vesting date under the award or, if none, the date of grant of the award, through and including the applicable scheduled vesting date in question) that Executive would have been employed with the Company had his date of termination been six (6) months after his actual date of termination, and the denominator of which is the total number of months in the applicable vesting period (as so measured).

In addition, as to any equity awards and options that were granted by the Company to Executive and are outstanding and otherwise unvested immediately prior such termination and are subject to performance-based vesting conditions measured by the average per-share closing price of the Company’s common stock, vesting of such awards shall be extended and the share price shall continue to be measured as if the Executive had remained continuously employed for a period of six (6) months following such termination (with any time-based vesting requirement deemed fully-satisfied as to any such stock price-based vesting condition that is satisfied on or before the end of such six (6) month period).

In addition, as to any other equity awards and options that were granted by the Company to Executive and are outstanding and otherwise unvested immediately prior to such termination and are subject to any other performance-based vesting conditions, such awards shall continue to remain outstanding and unvested through the Determination Date or equivalent, as the case may be, and shall vest and become exercisable by the Executive or the Executive’s estate upon the review of the performance goals and confirmation that the vesting conditions have been satisfied (the “Determination Date”) by the Company or authorized committee, as the case may be, with the number of shares underlying such award or options vesting as determined by the Company or such committee, multiplied

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by a fraction (x) the numerator of which is the number of completed months in that year through the date of such Separation from Service plus six (6) but under no circumstances shall the numerator exceed twelve (12), and (y) the denominator of which is twelve (12); provided, however,that any options vested on such Determination Date shall remain exercisable for the earlier of the period prescribed in the Executive’s applicable stock option agreement or the expiration of its term; provided further, that should the term of any option occur prior to the Determination Date, such option shall terminate according to its term; and provided further that in the event of a Change of Control (as defined in section 10.f hereto) occurring between the date of termination of employment and the Determination Date, the Company or its successor shall have the right to terminate such equity awards and options provided that they are accelerated or settled in connection with such event in accordance with the applicable award agreement and Company equity incentive plan under which they were granted.

The Severance Pay other than the Current Bonus amount will be paid in a lump sum payment on the date that is sixty (60) days following the Executive’s Separation from Service, and the Current Bonus portion of Executive’s Severance Pay, if any, shall be payable following the Company’s determination with regard to whether the performance targets in respect of such bonus have been attained and in any event no later than two and one half (2-1/2) months following the calendar year in which Executive terminates employment. The Company is not obligated to pay the Severance Pay and accelerate the vesting of Executive’s options and other equity awards unless the Executive signs and delivers to the Company’s Chief Executive Officer or President (within twenty-one (21) days after the date of Executive’s termination of employment) a “Separation Agreement and Full Release Of All Claims” in the form attached hereto as Exhibit B (with such changes to such form as may be made by the Company and communicated to Executive based on changes in applicable law) and the release becomes irrevocable.

(ii) Termination On or After Change of Control by the Company Without Cause or by the Executive for Good Reason. If on, or within twenty-four (24) months following, a Change of Control (as defined in section 10.f), Executive’s employment with the Company is terminated by the Company Without Cause or is voluntarily terminated by Executive for Good Reason (as defined in section 10.e), upon the date that the termination of Executive’s employment constitutes a Separation from Service, Executive will receive the following: (i) an amount equal to (A) thirty-six (36) months of base salary (but in all events if Executive has resigned for Good Reason, no less than the base salary immediately prior to the reduction giving rise to the right to resign for such Good Reason), plus (B) to the extent unpaid as of the date of termination, the Relocation Bonus, plus (C) the bonus the Executive would have earned had he been employed by the Company at the end of the calendar year (and as if 100% of the performance targets, if any, were attained and based on his target bonus opportunity), with the amounts described in both (A) and (B) payable in a lump sum on the date that is sixty (60)

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days following the Executive’s Separation from Service, (ii) in addition to Executive’s stock options that were vested immediately prior to such termination, the vesting of additional options shall accelerate in full and become exercisable by the Executive or the Executive’s representative, as the case may be, and such Stock Options shall be exercisable until the earlier of either: (a) one (1) year from the termination date or (b) the date the stock options would have expired pursuant to their original terms on the date of grant or been terminated in connection with a Change of Control or similar event, and (iii) in addition to Executive’s equity awards other than options (such as Restricted Stock Awards, Restricted Stock Units and the like) that were vested immediately prior to such termination, all of the Executive’s other equity awards shall become fully vested and nonforfeitable as of the date of termination (assuming the maximum level of performance in the case of any such outstanding equity awards with performance-based vesting conditions). This obligation to pay Executive the Change of Control Severance Pay will be binding on the successor entity following the Change of Control, but shall remain an obligation of the Company if the successor entity fails to discharge it; provided, however, the Company is not obligated to pay the Change of Control Severance Pay and accelerate the vesting of Executive’s options and other equity awards in the event of a Change of Control unless the Executive signs and delivers to the Company’s Chief Executive Officer or President (within twenty-one (21) days after the date of Executive’s termination of employment) a “Separation Agreement and Full Release Of All Claims” in the form attached hereto as Exhibit B (with such changes to such form as may be made by the Company and communicated to Executive based on changes in applicable law) and the release becomes irrevocable.

(iii) Section 409A Delay. Notwithstanding any provision to the contrary in the Agreement, if Executive is deemed by the Company at the time of his Separation from Service to be a “specified employee” (within the meaning of Section 409A of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and regulations promulgated thereunder), to the extent delayed commencement of any portion of the termination benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s termination benefits shall not be provided to Executive prior to the earlier of (A) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company or (B) the date of Executive’s death. Upon the expiration of the applicable Code Section 409A(a)(2)(B)(i) deferral period, all payments deferred pursuant to this Section 10.a.iv shall be paid in a lump sum to Executive, and any remaining payments due under the Agreement shall be paid as otherwise provided herein.

b. All Terminations. For any termination of employment, Executive will (i) receive the base salary through the date of termination of employment (to the extent not theretofore paid), reimbursement of any unreimbursed relocation and/or business expenses (to the extent otherwise reimbursable pursuant to the terms hereof), and any otherwise accrued, vested

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and unpaid Company benefits as of the date of termination (to be paid in accordance with the terms of the applicable benefit plan), (ii) receive any equity awards that were vested on or before the date of termination (payable or exercisable in accordance with this Agreement and the applicable award agreement), (iii) for any termination other than for Cause, receive the earned but unpaid annual bonus for any performance period which has ended prior to the date of termination and (iv) except as otherwise expressly provided in this Agreement or any other agreement between the parties, Executive shall not be entitled to any other compensation or benefits (including, without limitation, accelerated vesting of stock options) from the Company except to the extent provided under the applicable stock option agreements(s) or as may be required by law (for example, “COBRA” coverage under Section 4980B of the Code). For clarity, Executive shall not be entitled to benefits under any severance plan or policy of the Company in circumstances that trigger severance benefits for Executive under this Agreement. Similarly, there is to be no duplication of benefits (for example, if 6 months of accelerated vesting of an equity award is provided for in the circumstances of a particular termination pursuant to this Agreement, and the applicable award agreement also provides for 6 months of accelerated vesting in those circumstances, Executive is entitled to the provision that results in the greatest benefit for him but not both provisions).

c. Cause. For all purposes under this Agreement, a termination for “Cause” shall mean a good faith determination by a majority of the disinterested directors of the Company’s Board of Directors that the Executive’s employment with the Company is terminated for any of the following reasons: (i) the Executive’s willful act of fraud, embezzlement, dishonesty or other misconduct; (ii) the Executive’s willful failure to perform his duties to the Company, failure to follow Company policies as set forth in writing from time to time, or failure to follow the legal directives of the Company (other than failure to meet performance goals, objectives or measures), that is not corrected within thirty (30) days following written notice thereof to the Executive by the Executive’s supervisor or the Company’s Chief Executive Officer, such notice to state with specificity the nature of the failure; (iii) the Executive’s material misappropriation of any material asset of the Company; (iv) the Executive conviction of, or a plea of “Guilty” or “No Contest” to a felony; (v) Executive’s use of alcohol or drugs so as to interfere with the performance of his duties; (vi) the Executive’s willful unauthorized use or disclosure of any proprietary information, customer lists or trade secrets of the Company or its affiliates or a breach by Executive of confidentiality agreement(s) with the Company; (vii) conduct which, in the Company’s determination, is a material violation of Executive’s fiduciary obligations to the Company; or (viii) intentional material damage to any property of the Company.

d. Without Cause. For all purposes under this Agreement, a termination of the Executive’s employment by the Company “Without Cause” shall mean a termination by the Company in the absence of “Cause”, as defined above.

e. Good Reason. For all purposes under this Agreement, “Good Reason” for the Executive’s resignation will exist if he provides notice to the Company, unless otherwise agreed to in writing by the Executive or at Executive’s direction, within 60 days after the initial occurrence of any of the following that is not corrected within thirty (30) days

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following written notice thereof to the Company by the Executive such notice to state with specificity the nature of the failure and the Executive resigns for such Good Reason event no later than 30 days after the end of the Company’s cure period: (i) any reduction in his Base Salary in effect immediately prior to the Change in Control or target bonus below 130% (excluding any voluntary reductions); (ii) any material reduction in his benefits, including the termination of this Agreement by the Company without the written consent of the Executive; (iii) a change in his position with the Company or successor company that materially reduces his duties and responsibilities, including without limitation, his removal as Chief Executive Officer, the Company’s failure (assuming the Executive is then able and willing to continue to serve on the Company’s Board of Directors) to nominate him for election as a member of the Company’s Board of Directors in connection with a scheduled expiration of his term in office as a member of the Company’s Board of Directors, his failure to report directly and solely to the Company’s Board of Directors, or his failure to be the senior-most executive officer of the Company (or any successor, including the ultimate parent); (iv) a material office relocation of more 30 miles further from the Executive’s primary residence; or (v) any other material breach by the Company of its obligations to the Executive under this Agreement.

f. Good Reason Outside of a Change of Control. For all purposes under this Agreement, “Good Reason Outside of a Change of Control” for the Executive’s resignation will exist if he provides notice to resigned from employment with the Company, unless otherwise agreed to in writing by the Executive or at his direction, within 60 days after the initial occurrence of any of the following that is not corrected within thirty (30) days following written notice thereof to the Company by the Executive such notice to state with specificity the nature of the failure and the Executive resigns for such Good Reason event no later than 30 days after the end of the Company’s cure period: (i) any reduction in his Base Salary below $620,000 (or its equivalent in local currency) or target bonus below 130% (excluding any voluntary reductions); (ii) a change in his position with the Company that materially reduces his duties and responsibilities, including without limitation, his removal as Chief Executive Officer, the Company’s failure (assuming the Executive is then able and willing to continue to serve on the Company’s Board of Directors) to nominate him for election as a member of the Company’s Board of Directors in connection with a scheduled expiration of his term in office as a member of the Company’s Board of Directors, his failure to report directly and solely to the Company’s Board of Directors, or his failure to be the senior-most executive officer of the Company; (iii) termination of this Agreement by the Company without the written consent of the Executive pursuant to Section 14 hereto (it being understood that the non-renewal of this Agreement (or its Term) by the Company under Section 14 below shall constitute a termination of this Agreement by the Company without the written consent of the Executive); (iv) a material office relocation of more 60 miles further from the Executive’s primary residence; or (vi) any other material breach by the Company of its obligations to the Executive under this Agreement.

g. Change of Control. For purposes of this Agreement, a “Change of Control” means the occurrence of any of the following events:

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(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (a) are directors of the Company as of the date hereof, or (b) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iii) (A) A merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (B) a plan of complete liquidation of the Company approved by the stockholders of the Company, or (C) the disposition by the Company (in a sale, transaction or other corporate event, or series of related sales, transactions or related corporate events) of all or substantially all of the Company’s assets (on a consolidated basis) unless, in the case of a transaction or event referred to in clause (C), immediately after such transaction the assets that are sold or otherwise disposed of are owned by an entity that is owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Company’s common stock immediately preceding such transaction or event.

11.Non-Solicitation.

During the Executive’s Employment Term, Executive, directly or indirectly, whether as an employee, owner, sole proprietor, partner, director, member, consultant, agent, founder, co-venture or otherwise, will not engage, participate or invest in any business activity anywhere in the world which develops, manufactures or markets products or performs services which are competitive with the products or services of the Company or products or services which the Company has under development or which are the subject of active planning. Executive is not prohibited from purchasing equities or derivatives in any publicly traded any company.

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For a period of twelve (12) months following the date the Executive ceases to be employed with the Company for any reason (the “Restricted Period”), the Executive will not (i) directly or indirectly through any other person induce or attempt to induce any employee or independent contractor of the Company or any affiliate of the Company to leave the employ or service, as applicable, of the Company or such affiliate, or in any way interfere with the relationship between the Company or any such affiliate, on the one hand, and any employee or independent contractor thereof, on the other hand, or (ii) directly or indirectly make any statement that disparages the Company or any of its affiliates or has the purpose or effect of harassing or disrupting the business of the Company or any of its affiliates.

During the Restricted Period, the Executive will not directly or indirectly through any other person solicit, influence or attempt to influence customers, vendors, suppliers, licensors, lessors, joint venturers, associates, consultants, agents, or partners of the Company or any affiliate of the Company to divert their business away from the Company or such affiliate, and the Executive will not otherwise interfere with, disrupt or attempt to disrupt the business relationships, contractual or otherwise, between the Company or any affiliate of the Company, on the one hand, and any of its or their customers, suppliers, vendors, lessors, licensors, joint venturers, associates, officers, employees, consultants, managers, partners, members or investors, on the other hand.

The Executive acknowledges that, in the course of his employment with the Company and/or its affiliates, he has become familiar, or will become familiar, with the trade secrets of the Company and its affiliates and with other confidential and proprietary information concerning the Company and its affiliates and that his services have been and will be of special, unique and extraordinary value to the Company and its affiliates. The Executive agrees that the foregoing nonsolicitation covenants are reasonable and necessary to protect the trade secrets and other confidential and proprietary information, good will, stable workforce, and customer relations of the Company and its affiliates.

12.Written Amendment or Modification; Waiver.

Except as provided in this paragraph, this Agreement may be altered, modified, or amended only by a writing signed by Executive and by an officer of the Company specifically authorized to do so by the Company’s Board of Directors (or Compensation Committee thereof) expressly acknowledging that it is altering, modifying or amending the Agreement. No modification, waiver or discharge of this Agreement will be effective unless in writing signed by the Executive and by an officer of the Company specifically authorized to do so by the Company’s Board of Directors (or Compensation Committee thereof). No waiver by either party of any condition or provision of this Agreement shall be considered a waiver of any other condition or provision or a waiver of the same condition or provision at another time.

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13.Successors and Assigns.

This Agreement shall be binding upon Executive’s heirs, executors, administrators and other legal representatives and will be for the benefit of the Company and, in connection with any sale of all or substantially all of its business or assets, its successors and assigns. The Company agrees to have any successor to all or substantially all of its business or assets expressly assume the Company’s obligations under this Agreement in writing as of the date of the closing of any such transaction. This Agreement is specific to Executive and may not be assigned or substituted for without the express written consent of the Company’s Board of Directors (or Compensation Committee thereof). Upon Executive’s death, if any benefit or entitlement is due to him under this Agreement, it shall be paid to his designated beneficiary or if there is no designated beneficiary, his estate.

14.Term.

The term of Executive’s employment by the Company pursuant to this Agreement (the “Term”) shall begin on the Effective Date and continue until the first anniversary of the Effective Date and will automatically be renewed for one (1) year periods thereafter unless terminated by either party upon sixty (60) days written notice prior to the expiration of the term as then in effect. Upon any notice of non-renewal of the Term under this Section 14, Executive’s employment shall terminate on the last day of the applicable Term then in effect. If Executive’s employment terminates pursuant to the preceding sentence as a result of a notice of non-renewal given by the Company pursuant to this Section 14, such termination of employment shall be treated as a termination of employment by the Company without Cause for purposes of Section 10.a(i) or 10.a(ii), as applicable. Notwithstanding the preceding provisions of this Section 14, in all cases the Term is subject to earlier termination pursuant to Sections 9 and 10 above.

15.Entire Agreement.

This Agreement, and the attached Confidential Information Agreement and the indemnification agreement referenced herein, sets forth the entire agreement and understanding between the Company and Executive relating to its subject matter, is fully integrated and supersedes all prior of contemporaneous discussions, representations, and agreements, whether oral or in writing, between the parties on that subject matter. As of October 15, 2018, the Company agrees to enter into an indemnification agreement with Executive in same form as the indemnification agreement it has entered into with other directors.

16.Governing Law; Consent to Personal Jurisdiction.

This Agreement shall be governed by the laws of the State of California, without regard to the choice of law provisions thereof. Executive hereby expressly consents to personal jurisdiction in the State and federal courts located in California for any lawsuit arising from or relating to this Agreement, without regard to his then-current residence or domicile.

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17.Severability.

The invalidity or unenforceability of one or more provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect to the maximum extent of the law.

18.Tax Matters.

a. Section 409A. All forms of compensation referred to in this Agreement are subject to applicable withholding and payroll taxes. It is intended that the terms of this Agreement and the compensation, including equity awards, and severance under this Agreement will not result in the imposition of any tax liability pursuant to Section 409A of the Code on Executive, and this Agreement shall be construed and interpreted consistent with that intent. With respect to any payment constituting nonqualified deferred compensation subject to Code Section 409A: (A) all expenses or other reimbursements provided herein shall be payable in accordance with the Company’s policies in effect from time to time, but in any event shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive; (B) no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year; and (C) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchanged for another benefit.

b. Section 280G - Best Net. Notwithstanding anything to the contrary contained in any agreement between Executive and the Company or any of its affiliates or any other document or agreement (whether written or oral), to the extent that any payments and benefits provided to Executive, or for Executive’s benefit, under any Company plan or agreement (such payments or benefits are collectively referred to as the “Benefits”) would be subject to the excise tax (the “Excise Tax”) imposed under Section 4999 of the Code, the Benefits shall be reduced (but not below zero) if and to the extent that a reduction in the Benefits would result in Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if Executive received all of the Benefits (such reduced amount is referred to hereinafter as the “Limited Benefit Amount”). Unless Executive shall have given prior written notice specifying a different order to the Company to effectuate the Limited Benefit Amount, any such notice consistent with the requirements of Section 409A of the Code to avoid the imputation of any tax, penalty or interest thereunder, the Company shall reduce or eliminate amounts which are payable first from any cash severance, then from any payment in respect of an equity award that is not covered by Treas. Reg. Section 1.280G-1 Q/A-24(b) or (c), then from any payment in respect of an equity award that is covered by Treas. Reg. Section 1.280G-1 Q/A-24(c), in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as defined below). Any notice given by Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing Executive’s rights and entitlements to any benefits or compensation. Any determination as to whether the Benefits shall be reduced to the

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Limited Benefit Amount pursuant to this Agreement (the “Determination”) and the amount of such Limited Benefit Amount shall be made by the Company’s independent public accountants or another certified public accounting firm or executive compensation consulting firm of national reputation designated by the Company at the Company’s expense.

19.Clawback Rules and Policy.

This Agreement and all forms of compensation referred to in this Agreement are subject to the “clawback” provisions of applicable law, rules and regulations as well as any Company clawback policy, as each may be adopted and in effect from time to time.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer.

ELECTRONICS FOR IMAGING, INC.
By:	/s/ Guy Gecht	Date:	10/4/2018
Title:	CEO
Executive:
/s/ William Muir		Date:	10/4/2018

___________________________________________________________________________________________________________________

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EXHIBIT A

Hire-On Compensation

• Relocation Bonus & Expenses: Executive agrees to relocate to the San Francisco Bay Area within 9 months of the Effective Date. In consideration of such agreement, the Company will pay Executive a one-time relocation bonus in the amount of $236,000, to be paid (less applicable withholdings) in a lump sum in a normal payroll cycle in December 2018 such that it is paid no later than December 31, 2018, provided that Executive is then employed by the Company except as otherwise provided in Section 10.a of the Agreement. Should Executive voluntarily terminate his employment with the Company at any time (other than for Good Reason, Good Reason Outside of a Change of Control, death or disability) within 12 months after the Effective Date and after such relocation bonus has been paid to Executive, Executive agrees to promptly reimburse the Company for the full amount of the bonus.

To assist Executive in his transition to the San Francisco Bay Area, the Company will work with Executive to help manage and will pay the reasonable costs of Executive’s relocation from Tampa, Florida to the San Francisco Bay Area. The Company will also reimburse Executive (or, pay directly) for the reasonable costs of housing in close proximity to the Company’s Fremont headquarters for up to 9 months while Executive looks for a permanent home here. Finally, the Company will reimburse Executive for a reasonable number of trips to and from Tampa during his first 9 months of employment with the Company. Notwithstanding anything to the contrary in this paragraph, any benefits pursuant to this paragraph are subject to Executive’s continued employment with the Company through the date that the related expense was incurred.

• EFI Annual Bonus: Starting in 2019 and continuing while Executive is employed with the Company, Executive’s annual target bonus opportunity for purposes of the management bonus program referenced in Section 4 of this Agreement is 130% of base salary (i.e., $806,000 if his base salary is $620,000), with any actual bonus based on the Company’s achievement of financial performance targets determined by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) at the time that the Compensation Committee approves the annual executive bonus program and subject to the terms and conditions of that program as it is established by the Compensation Committee for the applicable year.

Historically, there has also been an opportunity to earn up to two times the amount the bonus target (i.e., a total of 260% of Executive’s annual salary or $1,612,000) as part of the Company’s Accelerator Bonus Program, if the Company significantly overachieves the annual financial performance targets. The determination is made annually by the Compensation Committee whether to provide this opportunity to program participants.

• New Hire Equity Awards:  The Company will grant the following new hire equity awards, in the form of restricted stock units (“RSUs”), to Executive at the first meeting of the Compensation Committee following the Effective Date, provided that Executive is then employed by the Company. The aggregate grant date value (with grant date values for purposes

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of this Agreement as determined by the Company in accordance with its practices for determining the grant date value of employee equity awards) of such new hire equity awards will be $5,000,000, allocated as set forth below (the “New Hire Equity Award”).

◦ One-Year Award:An RSU award with a grant date value of $800,000, which will vest on the one-year anniversary of the grant date, subject to verification and certification by the Compensation Committee that Executive has relocated to the San Francisco Bay Area by October 22, 2019.

◦ Three-Year Award:A three-year, time-based RSU award with a grant date value of $1,200,000. This award will vest as follows:

▪ two-thirds on the second anniversary of the grant date, and

▪ one-third on the third anniversary of the grant date.

◦ Company Performance-based Award:A three-year, performance-based RSU award with a grant date value of $1,500,000. This award will be based on the same vesting criteria as the awards granted by the Company to its Section 16 officers in those individuals’ August 29, 2018 annual refresher awards.

◦ Share Price Performance-based Award:A performance-based RSU award with a grant date value of $1,500,000. This award will vest, if, within three years of the grant date, the average per-share closing price of the Company’s common stock for 60 consecutive trading days is equal to or greater than certain targets, as follows:

▪ one-third will vest if the average per-share closing price is equal to or greater than $38.00,

▪ one-third will vest if the average per-share closing price is equal to or greater than $42.50, and

▪ one-third will vest if the average per-share closing price is equal to or greater than $47.00.

No portion of the Share Price Performance-based Award will vest before the one-year anniversary of the grant date, but, if one or more of the performance metrics is achieved before the first anniversary of the award, then that portion(s) of the award will vest on the first anniversary of the grant date or upon Compensation Committee’s certification of the achievement of the metric, whichever is later (“First Vesting Date”) and if Executive’s employment is terminated without Cause by the Company or by Executive for Good Reason or Good Reason Outside of a Control of Control, he shall be entitled to vesting of the portion of the awards as to which the average per-share closing price condition was satisfied while he was employed by the Company and prior to the First Vesting Date.

Except as otherwise provided in Sections 10.a or 10.b, all of these awards will be subject to the terms and conditions of the Company’s 2017 Equity Incentive Plan or other equity incentive plan

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then-in place and the applicable award agreement. For clarity and notwithstanding anything to the contrary above, vesting of each award will, in accordance with the applicable award agreement, be subject to Executive’s continued employment with the Company through the vesting date otherwise referred to above except as otherwise set forth above or in Sections 10.a or 10.b of the Agreement (or, if more favorable, as otherwise provided in the applicable award agreement).

* * *

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EXHIBIT B

FORM OF SEPARATION AGREEMENT AND FULL RELEASE OF CLAIMS

This Separation Agreement and Full Release of Claims (this “Agreement”) is entered into by and between William D. Muir, Jr. (“Employee”) and Electronics For Imaging, Inc. (the “Company”).

WHEREAS, Employee was employed by the Company, and Employee’s employment with the Company terminated on [__________________________] (the “Separation Date”);

WHEREAS, Employee is a party to an Executive Employment Agreement with the Company dated [____________________] (the “Employment Agreement”), a Confidential Information Agreement with the Company dated [________________] (the “Confidentiality Agreement”), and an Indemnification Agreement with the Company dated [______________] (the “Indemnification Agreement”); and

WHEREAS, the parties desire to enter into this Agreement on the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the covenants undertaken and the releases contained in this Agreement, Employee and the Company agree as follows:

1.Resignation. Employee irrevocably resigned as an employee, director, member, manager and in each and every other capacity with the Company and each of its Affiliates (as such term is defined below) effective on the Separation Date. The Company confirms that such resignations are accepted. Employee agrees that he currently holds no such position. Except for the benefits provided for in Section 2 below and in Section 10.b of the Employment Agreement, Employee agrees that he has been paid all compensation and benefits due from the Company and each of its Affiliates (including, but not limited to, accrued vacation, salary, bonus, incentive, share of promote, and other wages). As used in this Agreement: (i) the term “Affiliate” means a person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company; (ii) the term “control,” including the correlative terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a person; and (iii) the term “person” shall be construed broadly and includes, without limitation, an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

2.Severance Payment. Provided that Employee signs this Agreement and does not revoke it, the Company shall pay or provide Employee the severance benefits and other entitlements provided for in Section 10.a [specify clause (i) or (ii), as applicable] of the Employment Agreement.

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3.Release of Claims. Employee, on his own behalf and on behalf of his descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them, hereby fully and forever releases the Company, its divisions, subsidiaries, parents, or affiliated corporations, past and present, and each of them, as well as its and their assignees, successors, directors, officers, stockholders, partners, representatives, attorneys, agents or employees, past or present, or any of them (individually and collectively, “Releasees”), from, and agrees not to sue concerning, or in any manner institute, prosecute or pursue, or cause to be instituted, prosecuted, or pursued, any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess against any of the Releasees arising from any acts or omissions that have occurred up until and including the date and time that Employee signs the Agreement (collectively, “Claims”), including, without limitation, (a) any and all Claims relating to or arising from Employee’s employment relationship with the Company and the termination of that relationship; (b) any and all Claims for violation of any federal, state or municipal law, constitution, regulation, ordinance or common law, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Americans with Disabilities Act of 1990; the Fair Labor Standards Act; the Employee Retirement Income Security Act of 1974; the federal Family Medical Leave Act; the California Business and Professions Code; the California Family Rights Act; the California Fair Employment and Housing Act; and the California Labor Code; and all amendments to each such law; (c) any and all Claims for any wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied (including but not limited to Claims arising out of the Offer Letter); breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; personal injury; invasion of privacy; false imprisonment; and conversion; (d) any and all Claims for wages, benefits, severance, vacation, bonuses, commissions, equity, expense reimbursements, or other compensation or benefits; and (e) any and all Claims for attorneys' fees, costs and/or penalties; provided, however, that the foregoing release does not apply to any obligation of the Company to Employee pursuant to any of the following: (1) this Agreement, the Indemnification Agreement or under Section 18 of the Employment Agreement; (2) any right to indemnification that Employee may have pursuant to the Company’s bylaws, its corporate charter or under any written indemnification agreement with the Company (or any corresponding provision of any subsidiary or affiliate of the Company) with respect to any loss, damages or expenses (including but not limited to attorneys’ fees to the extent otherwise provided) that Employee may in the future incur with respect to his service as an employee, officer or director of the Company or any of its subsidiaries or affiliates; (3) with respect to any rights that Employee may have to insurance coverage for such losses, damages or expenses under any Company (or subsidiary or affiliate) directors and officers liability insurance policy; or (4) any rights to continued medical and dental coverage that Employee may have under COBRA. In addition, this release does not cover any Claim that cannot be so released as a matter of applicable law. Notwithstanding anything to the contrary herein, nothing in this Agreement prohibits Employee from filing a charge with or participating in an investigation conducted by any state or federal government agencies. However, Employee does waive, to the maximum extent permitted by law, the right to receive any monetary or other recovery, should any agency or any other person pursue any claims on Employee’s behalf arising out of any claim released pursuant to this Agreement. For clarity, and as required by law, such waiver does not prevent Employee from accepting a whistleblower award from the Securities and Exchange Commission pursuant to Section 21F of the

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Securities Exchange Act of 1934, as amended. Employee acknowledges and agrees that he has received any and all leave and other benefits that he has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.

4.Waiver of Unknown Claims. This Agreement is intended to be effective as a general release of and bar to each and every Claim hereinabove specified. Accordingly, Employee hereby expressly waives any rights and benefits conferred by Section 1542 of the California Civil Code and any similar provision of any other applicable state law as to the Claims. Section 1542 of the California Civil Code provides:

“A GENERAL RELEASE DOES NOT EXTEND TO A CLAIM WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

Employee acknowledges that he later may discover claims, demands, causes of action or facts in addition to or different from those which Employee now knows or believes to exist with respect to the subject matter of this Agreement and which, if known or suspected at the time of executing this Agreement, may have materially affected its terms. Nevertheless, Employee hereby waives, as to the Claims, any claims, demands, and causes of action that might arise as a result of such different or additional claims, demands, causes of action or facts.

5.ADEA Waiver. Employee expressly acknowledges and agrees that by entering into this Agreement, he is waiving any and all rights or claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”), and that this waiver and release is knowing and voluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the date Employee signs this Agreement. Employee further expressly acknowledges and agrees that:

(a)In return for this Agreement, he will receive consideration beyond that which he was already entitled to receive before executing this Agreement;

(b)He is hereby advised in writing by this Agreement to consult with an attorney before signing this Agreement;

(c)He was given a copy of this Agreement on [_____________, and informed that he had twenty-one (21) days within which to consider this Agreement and that if he wished to execute this Agreement prior to the expiration of such 21-day period he will have done so voluntarily and with full knowledge that he is waiving his right to have twenty-one (21) days to consider this Agreement; and that such twenty-one (21) day period to consider this Agreement would not and will not be re-started or extended based on any changes, whether material or immaterial, that are or were made to this Agreement in such twenty-one (21) day period after he received it;

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(d)He was informed that he had seven (7) days following the date of execution of this Agreement by him in which to revoke this Agreement, and this Agreement will become null and void if Employee elects revocation during that time. Any revocation must be in writing and must be received by the Company during the seven-day revocation period. In the event that Employee exercises this revocation right, neither the Company nor Employee will have any obligation under this Agreement. Any notice of revocation should be sent by Employee in writing to the Company (attention Chief Executive Officer) to the address of the Company’s principal executive offices so that it is received within the seven-day period following execution of this Agreement by Employee.

(e)Nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law.

6.No Transferred Claims. Employee warrants and represents that he has not heretofore assigned or transferred to any person not a party to this Agreement any released matter or any part or portion thereof.

7.Confidentiality Agreement. Employee shall, and Employee hereby acknowledges that he will, comply with his continuing obligations under the terms of the Confidentiality Agreement.

8.Miscellaneous.

(a)Successors.

•This Agreement is personal to Employee and shall not be assignable by Employee.

•This Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, “successor” and “assignee” shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires ownership of the Company or to which the Company assigns this Agreement by operation of law or otherwise.

(b)Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be binding unless in writing and signed by the party asserted to have granted such waiver.

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(c)Modification. This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.

(d)Complete Agreement. This Agreement, together with the Confidentiality Agreement and the Indemnification Agreement, constitutes and contains the entire agreement and final understanding concerning Employee’s relationship with the Company and its Affiliates and the other subject matters addressed herein and supersedes and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matters hereof other than Section 18 and the last sentence of Section 13 of the Employment Agreement. Any representation, promise or agreement not specifically included in this Agreement or in the Confidentiality Agreement or the Indemnification Agreement shall not be binding upon or enforceable against either party. The Employee is not relying on any representation of the Company or any of the Releasees except as expressly set forth in this Agreement or in the Confidentiality Agreement or Indemnification Agreement. This Agreement, together with the Confidentiality Agreement and the Indemnification Agreement, constitutes an integrated agreement. Upon execution and delivery of this Agreement to the Company by Employee, the Company agrees to promptly execute and deliver this Agreement to Employee.

(e)Severability. In the event that any portion of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such portion to other persons or circumstances will be interpreted so as reasonable to effect the intent of the parties hereto.

(f)Governing Law. This Agreement shall be deemed to have been executed and delivered within the State of California, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the laws of the State of California without regard to principles of conflict of laws.

(g)Cooperation in Drafting. Each party has cooperated in the drafting, negotiation and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language.

(h)Counterparts. This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original. Photographic or PDF copies of such signed counterparts may be used in lieu of the originals for any purpose.

(i)No Wrongdoing. This Agreement constitutes a compromise and settlement of any and all potential disputed claims. No action taken by the Company hereto, either previously or in connection with this Agreement, shall be deemed or construed to be: (a) an admission of the truth or falsity of any potential claims; or (b) an acknowledgment or

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admission by the Company of any fault or liability whatsoever to Employee or to any third party.

(j)Voluntary Execution of Agreement. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the parties hereto, with the full intent of releasing all claims. The parties acknowledge that (a) they have read this Agreement; (b) they have had the opportunity to seek legal counsel of their own choice; (c) they understand the terms and consequences of this Agreement and of the releases it contains; and (d) they are fully aware of the legal and binding effect of this Agreement.

(k)Supplementary Documents. All parties agree to cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full force to the basic terms and intent of this Agreement and which are not inconsistent with its terms.

(l)Headings; Construction. The section and paragraph headings and titles contained in this Agreement are inserted for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation of this Agreement. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders and the neutral. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.

(m)Taxes. Except for amounts withheld by the Company, Employee shall be solely responsible for any taxes due as a result of any payments or benefits provided for in this Agreement.

I have read the foregoing Release Agreement and I accept and agree to the provisions it contains and hereby execute it voluntarily with full understanding of its consequences.

EXECUTED this [____] day of [__________] 20[__], at [_________] County, California.

“Employee”

______________________________

William D. Muir, Jr.

EXECUTED this [____] day of [__________] 20[__], at [_________] County, California.

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“Company”

ELECTRONICS FOR IMAGING, INC.

______________________________

By:

Its:

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EX-10.3

October 15, 2018

Marc Olin

Re: Executive Employment Agreement

Dear Marc:

This letter confirms our agreement, as set forth below, with respect to the amendment of your existing Executive Employment Agreement (your “Employment Agreement”), dated April 22, 2015, with Electronics For Imaging, Inc. (the “Company”).

If, on or before December 31, 2020, your employment terminates in the circumstances described in Section 9.a(i) of your Employment Agreement, then in addition to any severance benefits provided for in Section 9.a(i) of your Employment Agreement the Company will also offer you a consulting arrangement to take effect concurrently with the termination of your employment with the Company such that you will have the opportunity to provide consulting services to the Company through the date that is 12 months (or, if such a termination of your employment occurs on or before December 31, 2019, 18 months) following the date of such termination of employment. The consideration for such consulting services would be continued vesting of any equity awards granted to you by the Company prior to such termination of employment that, by their terms, provide for continued vesting while you provide consulting services to the Company. The other terms and conditions of the consulting arrangement would be on customary terms as set forth in a consulting agreement that would be provided by the Company.

This letter agreement shall be governed by the laws of the State of California, without regard to the choice of law provisions thereof. This letter agreement constitutes the entire agreement between us with respect to the amendment of your Employment Agreement as set forth above.

ELECTRONICS FOR IMAGING, INC.
By:	/s/ William Muir
	Bill Muir Chief Executive Officer

ACCEPTED AND AGREED:

/s/ Marc Olin

Marc Olin

6750 Dumbarton Circle

Fremont, CA 94555

www.efi.com

EX-10.4

TRANSITION AGREEMENT

This Transition Agreement (this “Agreement”) is made and entered into this 15^th day of October 2018 (the “Effective Date”), by and between Electronics For Imaging, Inc., a Delaware corporation (the “Company”), and Guy Gecht (“Executive”).

RECITALS

Executive is currently employed by the Company as its Chief Executive Officer and President. Executive desires to resign from these positions with Company on the terms and conditions set forth herein.

Executive and the Company are parties to an Executive Employment Agreement dated as of January 27, 2014 (the “Current Employment Agreement”), an Indemnity Agreement dated as of February 15, 2008 (the “Indemnity Agreement”), and an Employment, Confidential Information and Invention Assignment Agreement dated November 6, 1995 (the “1995 Confidentiality Agreement”).

NOW, THEREFORE, in consideration of the above recitals incorporated herein and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the Company and Executive agree as follows:

1.Retirement. Executive hereby voluntarily resigns his position as Chief Executive Officer and President of the Company, resigns from his employment with the Company, and resigns and from each and every other position (as an officer, director, employee, member, manager and in any other capacity) with the Company and each of its affiliates that Executive may hold (other than as a member of the Company’s Board of Directors (the “Board”)), effective on the Effective Date.

2.Compensation. Executive agrees that the Company has paid Executive all wages, bonuses, commissions and any other compensation earned by Executive during his employment with the Company (or any of its affiliates). Following the Effective Date, Executive will not be entitled to receive any further compensation or benefits arising out of his employment or any other relationship with the Company or any of its affiliates, except (a) as provided for in the Consulting Agreement (as defined in Section 3), and (b) compensation that Executive may be entitled to for his service after the Effective Date as a non-employee member of the Board (which will be in accordance with the Company’s compensation arrangements for its non-employee directors, as approved by the Board and as in effect from time to time (the “Director Compensation Policy”)). For clarity, as Executive has previously been employed by the Company and previously served on the Board, he will not be entitled to an initial equity award in connection with becoming a non-employee director, but will be entitled in the future (so long as he serves on the Board) to regular annual equity awards and cash compensation to the extent provided in the Director Compensation Policy. Executive agrees to promptly submit any business expenses he incurred during his employment with the Company (to the extent not previously reimbursed) in accordance with the Company’s expense reimbursement policies.

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Executive’s coverage under the Company’s group healthcare insurance plan will end on October 31, 2018; provided, however, that Executive will be eligible to continue healthcare coverage for Executive and his eligible dependents under the Company’s group health insurance plans in accordance with COBRA commencing on November 1, 2018, provided that Executive makes a timely election for COBRA coverage and Executive pays the monthly COBRA premiums necessary to continue such coverage.

3.Consulting Agreement. Concurrently with entering into this Agreement, Executive and the Company are entering into the Consulting Agreement attached hereto as Exhibit A (the “Consulting Agreement”). Executive acknowledges and agrees that the Consulting Agreement (including, without limitation, the continued vesting of Executive’s equity awards previously granted by the Company to the extent set forth in the Consulting Agreement and subject to the terms and conditions of the Consulting Agreement, and regardless of the actual term the consulting services pursuant to the Consulting Agreement are provided) constitutes payments and benefits that Executive would not otherwise be entitled to receive without entering into this Agreement and constitutes valuable and adequate consideration for the terms, conditions, and releases provided by Executive in this Agreement. Notwithstanding anything to the contrary in the Consulting Agreement, if Executive revokes this Agreement (or any portion of it) pursuant to Section 6 or any revocation right provided by applicable law, then the Consulting Agreement shall be void and of no effect.

4.Confidentiality Agreement; Indemnity Agreement; Employment Agreements. Concurrently with entering into this Agreement, Executive and the Company are entering into a Confidential Information and Invention Assignment Agreement dated as of the Effective Date (the “New Confidentiality Agreement”). The New Confidentiality Agreement shall continue in full force and effect in accordance with its terms. As a material condition of this Agreement, Executive represents and agrees that he has not previously breached the 1995 Confidentiality Agreement or the New Confidentiality Agreement, and he agrees to observe and abide by the terms of the New Confidentiality Agreement. The Indemnity Agreement shall remain in full force and effect in accordance with its terms. The Current Employment Agreement is hereby terminated, and neither Executive, the Company, nor any Company affiliate shall have any further right, benefit or obligation under the Current Employment Agreement; provided that the second paragraph of Section 10 of the Current Employment Agreement continues in effect. For clarity, all other employment agreements between Executive and the Company were previously terminated and neither the Executive, the Company, nor any Company affiliate has any right, benefit or obligation under any such other employment agreement.

5.Release of Claims.Executive agrees that the consideration provided for above in Section 3 represents settlement in full of all outstanding obligations owed to Executive by the Company, each of the Company’s affiliates, and each of the officers, directors, agents and employees of the Company and each of its affiliates, and is satisfactory consideration for the release of claims set forth herein. On behalf of himself, and each of his heirs, family members, executors and assigns, Executive hereby fully and forever releases the Company, and each of its parent, subsidiary and affiliated companies, past and present, and their successors, and each of its and their respective officers, agents, directors, employees, investors, stockholders, administrators, attorneys, affiliates, divisions, subsidiaries, parents, predecessor and successor corporations, and assigns (the “Releasees”), from, and agree not to sue concerning, or in any manner to institute, prosecute or pursue, or cause to be instituted, prosecuted, or pursued, any

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claim, charge or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Executive may possess against any of the Releasees arising from any omissions, acts or facts that have occurred up until and including the Effective Date (collectively, “Claims”) including, without limitation, (i) any and all Claims relating to or arising from Executive’s employment relationship with the Company and the termination of that relationship; (ii) any and all Claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied (including but not limited to the Current Employment Agreement and any prior employment agreements); breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; and conversion; (iii) any and all Claims for or arising out of any violation of any federal, state or municipal law, regulation, ordinance, constitution or common law, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967; the Americans with Disabilities Act of 1990; the Fair Labor Standards Act; the Employee Retirement Income Security Act of 1974; The Worker Adjustment and Retraining Notification Act; the Sarbanes-Oxley Act; the California Fair Employment and Housing Act; the California Family Rights Act; the California Business & Professions Code; and the California Labor Code; (iv) any and all Claims for severance pay, bonus, sick leave, holiday pay, vacation pay, paid time off, life insurance, health and/or medical insurance or any other fringe benefit; and (v) any and all Claims for attorneys' fees, costs and penalties. This release does not extend to any claims that cannot be released as a matter of applicable law, any claims for any breach of any obligations of the Company arising under this Agreement or any claims arising after the date of this Agreement.

6.ADEA Waiver.Executive expressly acknowledges and agrees that, by entering into this Agreement, Executive is waiving any and all rights or claims that he may have arising under the Age Discrimination in Employment Act, as amended (the “ADEA”), which have arisen on or before the date that he signs this Agreement. Executive further acknowledges and agrees that:

(a)In return for this Agreement, Executive will receive compensation beyond that which Executive was already entitled to receive before entering into this Agreement;

(b)Executive is hereby advised in writing to consult with an attorney before signing this Agreement;

(c)Executive is hereby informed that (i) Executive has 21 days within which to consider the Agreement, (ii) the 21-day period to consider this Agreement will not re-start or be extended if any changes (whether material or immaterial) are made to this Agreement after the date it is first provided to Executive, and (iii) if Executive signs this Agreement before the end of such 21-day period, Executive acknowledges and agrees that Executive will have done so voluntarily and with full knowledge that Executive was waiving his right to have 21 days to consider this Agreement;

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(d)Executive is hereby informed that he has seven (7) days following the date that he signs this Agreement in which to revoke this waiver of ADEA claims, and that this waiver of ADEA claims will become null and void if Executive elects revocation during that time. Any revocation must be in writing and must be received by the Company (delivered to its Chief Executive Officer) during the seven-day revocation period. In the event that Executive exercises his right to revoke this Agreement, the Agreement shall be null and void and neither the Company nor Executive will have any rights or obligations under this Agreement and Executive will not be entitled to the benefits set forth in Section 3; and

(e)Nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law.

7.Waiver of Unknown Claims.Executive acknowledges that, by signing this Agreement, he intends for the general release of claims in Section 5 above to extend to each and every Claim, demand and cause of action hereinabove specified (and that are not specifically excluded above), including but not limited to claims that are unknown or unsuspected by him. In so doing, Executive expressly acknowledges that he is knowingly waiving rights he may have under any applicable state, federal or local law that restricts the right of a person to waive unknown or unsuspected claims, including but not limited to California Civil Code Section 1542, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

8.No Pending or Future Lawsuits. Executive represents that he has no lawsuits, claims, or actions pending in his name, or on behalf of any other person or entity, against the Company or any of the Releasees. Executive also represents that he does not intend to bring any claims on his own behalf or on behalf of any other person or entity against the Company or any of the Releasees. Executive also agrees to opt out of any class or representative action and to take such other steps as he has the power to take to disassociate himself from any class or representative action seeking relief against the Company and/or any other Releasee regarding any of the matters released hereinabove.

9.Cooperation. Executive agrees to cooperate with the Company and its affiliates, including as may be reasonably necessary in the defense, prosecution or investigation of any actual or potential claim, demand, dispute, lawsuit, arbitration, subpoena, grievance or other legal proceeding (collectively “Disputes”) initiated or currently in progress by or against the Company or any of its affiliates; in connection with any audit of the Company’s financial statements relating to a period of time he was employed by the Company; in connection with any ongoing activity related to, or resignations from, any boards of directors of the Company’s subsidiaries of which Executive may be a member; and in connection with the orderly transition of his duties.

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10.Protected Rights. Executive understands that nothing in this Agreement limits Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local government agency or commission (“Government Agencies”). Executive further understands that this Agreement does not limit his ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. However, by signing this Agreement, Executive waives his right to recover individual relief based on any claims asserted in such a charge or complaint with the exception that this Agreement does not limit Executive’s right to receive an award for information provided to any Government Agency authorized to provide monetary or other awards to eligible individuals who come forward with information that leads to an agency enforcement action. Notwithstanding anything to the contrary herein, consistent with the federal Defend Trade Secrets Act of 2016 (“DTSA”), nothing in this Agreement or the Confidentiality Agreement is intended to limit Executive’s right (a) to disclose the Company’s trade secrets in a confidential manner either to a federal, state or local government official or to an attorney where such disclosure is solely for the purpose of reporting or investigating a suspected violation of law, or (b) to disclose the Company’s trade secrets in an anti-retaliation lawsuit or other legal proceeding, so long as that disclosure or filing is made under seal and Executive does not otherwise disclose such trade secrets, except pursuant to court order.

11.No Admission of Liability. Executive understands and acknowledges that this Agreement constitutes a compromise and settlement of any and all potential disputed claims as to the released matters set forth in Section 5 above. No action taken by the Company, either previously or in connection with this Agreement, shall be deemed or construed to be: (a) an admission of the truth or falsity of any potential claims; or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to Executive or to any third party.

12.No Liens. Executive represents and warrants that (a) he has the capacity to act on Executive’s own behalf and on behalf of all who might claim through Executive to bind them to the terms and conditions of this Agreement; and (b) there are no liens or claims of any lien or assignment in law or equity or otherwise of or against any of the claims released herein.

13.Miscellaneous.

13.1Governing Law. This Agreement shall be deemed to have been executed and delivered within the State of California, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the laws of the State of California without regard to principles of conflict of laws.

13.2Amendments. This Agreement may not be modified or amended except in a writing signed by an authorized officer of the Company and by Executive.

13.3No Waiver. No waiver of any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach.

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13.4Severability. To the extent any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect.

13.5Assignment and Successors.

(a)This Agreement is personal to Executive and shall not be assignable by Executive. This Agreement shall be binding upon Executive’s heirs, executors, administrators and other legal representatives.

(b)The Company may assign its rights and obligations under this Agreement, and this Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns. As used herein, “successor” and “assignee” shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires ownership of the Company or to which the Company assigns this Agreement by operation of law or otherwise.

13.6Tax Matters. The Company and Executive intend that all payments made and benefits provided under this Agreement are either exempt from or comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) so that none of the payments or benefits will be subject to the adverse tax penalties imposed under Section 409A, and any ambiguities herein will be interpreted to be so exempt. The payments and benefits referenced and provided for in this Agreement are subject to all applicable withholding requirements. Except for the Company’s withholding right, Executive will be solely responsible for any and all taxes that may be due with respect to the payments and benefits referenced and provided for in this Agreement.

13.7Entire Agreement. This Agreement, together with the second paragraph of Section 10 of the Employment Agreement, the Indemnity Agreement, the Confidentiality Agreement, and the Consulting Agreement (together, the “Integrated Agreement”), embodies the entire agreement of the parties hereto respecting the matters within its scope and is an integrated agreement. The Integrated Agreement supersedes all prior or contemporaneous agreements of the parties hereto and that directly or indirectly bear upon the subject matter hereof. Any prior negotiations, correspondence, agreements, proposals or understandings relating to the subject matter hereof or of any portion of the Integrated Agreement shall be deemed to have been merged into the Integrated Agreement, and to the extent inconsistent with the Integrated Agreement, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. The Integrated Agreement is a fully integrated agreement. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth in the Integrated Agreement. Any written agreement evidencing an equity award previously granted by the Company to Executive is outside of the scope of the integration provisions of the preceding paragraph as to the terms and conditions of the award evidenced by such agreement, as modified by the Consulting Agreement.

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13.8Interpretation. Each party has cooperated in the drafting and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any party on the basis that the party was the drafter.

13.9Review of Agreement. Each party recognizes that this is a legally binding contract and acknowledges and agrees that it or he, as the case may be, party has had the opportunity to consult with legal counsel of its or his own choice. Each party has cooperated in the drafting, negotiation and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language. Executive specifically agrees and acknowledges that he has read and understands this Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.

13.10Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic transmission (including e-mail) if sent during normal business hours of the recipient, if not, then on the next business day; (iii) two days after being sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent: (x) if to the Company, to the Company at the address of its principal executive offices and to the attention of its Chief Executive Officer, (y) if to Executive, to Executive at his last address as reflected in the Company’s payroll records, or (z) in either case, at such other address as such party may designate by ten days advance written notice to the other party hereto.

13.11Supplementary Documents. All parties agree to cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full force to the basic terms and intent of this Agreement and which are not inconsistent with its terms.

13.12Headings; Construction. The section and paragraph headings and titles contained in this Agreement are inserted for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation of this Agreement. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders and the neutral. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.

13.13Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned. Either party may execute this letter agreement by signing on the designated signature block below, and by transmitting such signature page via facsimile or e-mail (via PDF format) to the other party. Any signature made and transmitted by facsimile or e-mail (via PDF format) for the purpose of executing this letter agreement shall be deemed an original signature for purposes of this letter agreement, and shall

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be binding upon the party transmitting its or his signature by facsimile or e-mail (via PDF format).

[The remainder of this page has intentionally been left blank.]

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IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the Effective Date first set forth above.

“EXECUTIVE”

/s/ Guy Gecht            

Guy Gecht

“COMPANY”

Electronics For Imaging, Inc.,

a Delaware corporation

By:    /s/ Alex Grab        

Its:    CORPORATE SECRETARY

CHIEF LEGAL OFFICER

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EXHIBIT A

CONSULTING AGREEMENT

This Consulting Agreement (this “Agreement”) is made and entered into this 15^th day of October 2018 (the “Effective Date”), by and between Electronics For Imaging, Inc., a Delaware corporation (the “Company”), and Guy Gecht (“Consultant”).

RECITALS

Concurrently with entering into this Agreement, Consultant and the Company are entering into a Transition Agreement (the “Transition Agreement”). The Company and Consultant desire to enter into a relationship whereby Consultant will provide to the Company certain services as the Company’s Board of Directors (the “Board”) or the Company’s Chief Executive Officer (the “CEO”) may request from time to time (the “Services”) on the terms set forth in this Agreement.

It is the parties’ intention that Consultant, in performing the Services, be an independent contractor and that Consultant not be employed by the Company, and that, to the fullest extent allowed by law, Consultant retain sole and absolute discretion and judgment in the manner and means of performing the Services.

NOW, THEREFORE, in consideration of the above recitals incorporated herein and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, the Company and Consultant agree as follows:

1.Appointment as Consultant. The Company hereby appoints Consultant to act as an independent consultant to provide the Services. Consultant hereby accepts such engagement. The Services may include, as requested by the Board or by the CEO, Consultant’s reasonable cooperation regarding the transition of his former duties to the Company, reasonable cooperation with respect to any litigation or audits of the Company or any of its subsidiaries, and advice as to such matters as the Board or the CEO may request from time to time.

2.Independent Contractor Status. Consultant and the Company agree that, with respect to the performance of the Services, Consultant is not an employee of the Company for any purpose whatsoever, including state and federal taxes and workers’ compensation insurance. Neither this Agreement, the relationship created between the parties hereto pursuant to this Agreement, nor any course of dealing between the parties hereto is intended to create, or shall create, an employment relationship, a joint venture, partnership or any similar relationship between the Company and Consultant. The Company is interested only in the results obtained by Consultant, who shall have sole control of the manner and means of performing under this Agreement. Consultant does not have any authority to bind the Company by contract or otherwise.

3.Nature of Consultant's Relationship to the Company. Consultant is engaged in Consultant’s own business independent of the Company, and the nature of Consultant’s independent contractor relationship with the Company shall be further defined as follows:

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(a)Fringe Benefits. Consultant shall not receive any fringe benefits under this Agreement whatsoever, and accordingly, shall receive no insurance benefits (medical, dental or otherwise), disability income, vacation, holiday pay, sick pay, or any other benefits. Consultant hereby waives the right to receive any such benefits that the Company provides to its employees.

(b)Workers’ Compensation. Consultant shall be solely responsible for compensating any employee of Consultant. Consultant shall be solely responsible with respect to reporting and withholding as to any compensation or benefits for any such employee. No employee of Consultant shall have any right to any compensation or benefit from the Company, and the Company shall have no obligation as to any compensation or benefit for any employee of Consultant. Consultant is not (and any employees employed by Consultant are not) entitled to worker’s compensation benefits or unemployment compensation benefits provided by the Company. Consultant shall be solely responsible for the payment of Consultant’s worker’s compensation, unemployment compensation, and other such payments for Consultant and any employees of Consultant. The Company will not pay for worker’s compensation for Consultant or any employees of Consultant. the Company will not contribute to a state unemployment fund for Consultant or any employee of Consultant. The Company will not pay the federal unemployment tax for Consultant or any employee of Consultant.

(c)Consultant’s Expenses. Consultant shall be responsible for any expenses incurred by Consultant in performing the Services hereunder, except that the Company shall reimburse Consultant for any travel-related expenses incurred by Consultant in connection with any travel requested by the Company. Consultant agrees to promptly submit to the Company customary documentation to substantiate any such travel-related expenses, and the Company will make any required reimbursement payment promptly after receiving such documentation from Consultant.

(d)Records. Consultant shall maintain Consultant’s own books and records in whatever format Consultant elects provided such books and records conform to the requirements of federal and state laws.

(e)Non-Exclusivity of Services. Consultant is free to pursue any and all outside activities and/or employment as Consultant desires, and the Company acknowledges that Consultant may be involved in other business activities, contracting and/or employment, provided, that Consultant complies with Sections 6 through 11 below and Consultant’s Confidential Information and Invention Assignment Agreement with the Company.

4.Term. The term of the Services (the “Term”) shall commence on the date hereof and shall continue until the first to occur of (i) a Change of Control (as defined below), and (ii) March 31, 2020. However, if on or before March 31, 2020, the Company enters into an agreement for a transaction that, if consummated, would constitute a Change of Control, but the Change of Control does not occur on or before March 31, 2020 and such agreement has not expired or terminated on or prior to March 31, 2020, the Term will automatically extend beyond March 31, 2020 and continue until the first to occur of (i) the closing of the Change of Control transaction, and (ii) the date on which the Change of Control transaction agreement expires or terminates without the Change of Control transaction having been closed (unless the Change of Control transaction agreement

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expires or terminates without the Change of Control transaction having been closed because a more attractive offer is received from a different party, in which case the Term would continue until the closing of the Change of Control transaction or the expiration or termination of the Change of Control transaction agreement with the new party). In all cases, however, the Term will end earlier upon the death of Consultant.

For purposes of this Agreement, “Change of Control” means the occurrence of any of the following after the Effective Date:

(a)Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, a “Person”), alone or together with its affiliates and associates, including any group of persons which is deemed a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (other than the Company or any subsidiary thereof), becomes the “beneficial owner” (as such term is defined in Rule 13d-3 of the Exchange Ac, referred to herein as “Beneficially Own” or “Beneficial Owner” as the context may require) of fifty percent (50%) or more of (i) the then outstanding shares of the Company’s common stock (“Outstanding Company Common Stock”) or (ii) securities representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities (“Outstanding Company Voting Securities”) (in each case, other than an acquisition in the context of a merger, consolidation, reorganization, asset sale or other extraordinary transaction covered by, and which does not constitute a Change of Control under, clause (b) below); or

(b)Consummation of any merger, consolidation, reorganization or other extraordinary transaction (or series of related transactions) involving the Company, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the Beneficial Owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination Beneficially Own, directly or indirectly, more than fifty percent (50%) of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets directly or through one or more subsidiaries (a “Parent”)), (2) no Person (excluding any entity resulting from such Business Combination or a Parent) Beneficially Owns, directly or indirectly, fifty percent (50%) or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity.

5.Treatment of Equity Awards.

(a)Exhibit I hereto sets forth, for each equity award granted by the Company to Consultant that is outstanding on the Effective Date (an “Equity Award”), the number of stock units remaining subject to the award as of the Effective Date (in the case of performance-based restricted stock units, at the applicable “target” level).

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(b)In accordance with the existing terms of such awards, the Equity Awards will continue to vest during the Term. In accordance with the existing terms of such awards, the termination of employment/service rules applicable to the Equity Awards will apply when the Term ends. However, as to any Equity Awards granted after 2016, if Consultant is a member of the Board at the time the Term ends, and Consultant continues to serve on the Board following the end of the Term, in accordance with the existing terms of such awards the termination of employment/service rules applicable to those awards will apply when Executive’s service as a member of the Board ends. For clarity, as to any such award that was granted subject to performance-based vesting conditions, the applicable performance-based vesting conditions shall continue to apply. The Compensation Committee of the Board will determine the vesting level of any Equity Award with performance-based vesting conditions not later than the March 31 of the calendar year immediately following the calendar year in which the applicable performance period ends.

(c)If a Change of Control of the Company occurs during the Term, Consultant’s Equity Awards, to the extent outstanding and unvested immediately prior to the Change of Control, will fully vest upon (or, as may be necessary to give effect to the acceleration, immediately prior to) the Change of Control and, in such circumstances: (1) any performance-based vesting requirements applicable to such portion of such Equity Awards as to any performance period that has not ended prior to the date of such Change of Control shall be deemed satisfied at the applicable target level of performance; and (2) the portion of such Equity Awards that becomes vested in connection with such Change of Control shall be settled in accordance with the terms of the applicable award upon or as soon as practical after such Change of Control.

6.Inventions.

(a) Disclosure to the Company. Consultant agrees to promptly disclose to the Company (or any persons designated by it) any discovery, development, design, improvement, invention, formula, algorithm, process, technique, method, software, program, know‑how or data, whether or not patentable or registrable under copyright or similar statutes (collectively, “Properties”), made or conceived or reduced to practice or learned by Consultant, either alone or jointly with others that (a) was developed using any trade secret or Confidential Information of the Company or any of its subsidiaries, (b) results from any work performed by Consultant for, or on behalf of, the Company while the Services are being performed, or (c) was developed during the Term and relates at the time of conception or reduction to practice to the Company’s (or any of the Company subsidiary’s) business or its actual or demonstrably anticipated research or development. All such Properties described above are collectively referred to in this Agreement as “Inventions.”

(b) Proprietary Interests. Consultant agrees that all Inventions shall be the sole property of the Company and its assigns, and the Company and its assigns shall be the sole owner of all patents, copyrights and other rights in connection with such Inventions. Consultant agrees not to use in Consultant’s work for the Company any Properties owned by Consultant that have been made or conceived or reduced to practice or learned by Consultant, either alone or jointly with others, prior to Consultant’s engagement by the Company unless such Properties are assigned to the Company.

(c) Assignment of Proprietary Interests. All materials prepared or developed by Consultant in connection with this Agreement, including documents, source code, calculations, sketches, notes, reports, data, models and samples, shall be the property of the Company, whether

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delivered to the Company or not, and shall, together with any materials furnished to Consultant by the Company hereunder, be delivered to the Company upon request and, in any event, upon expiration or termination of the Term. Consultant hereby assigns to the Company and/or its assigns any right, title and interest Consultant may have or acquire in the Inventions together with all Moral Rights that Consultant may have in any Inventions, and agrees to assist the Company and its assigns in every proper way (but at the expense of the Company or its assigns) to obtain and enforce patents, copyrights and other rights and protections relating to such Inventions and/or Moral Rights in any and all countries and to further carry out the provisions of this Agreement. For purposes of this Agreement, “Moral Rights” means any right or claim to authorship of a work, any right to object to any distortion or other modification of a work, and any similar right, existing under the law of any country in the world or under any treaty. Consultant waives and agrees not to assert against the Company, its successors or licensees, any and all Moral Rights Consultant may have or acquire in any Invention or Confidential Information.

(d) Special Power of Attorney. If the Company or its assigns is unable, after reasonable effort, to secure Consultant’s signature on any document or documents needed to apply for or prosecute any patent, copyright, or other right or protection relating to any Invention, whether because of Consultant’s absence, physical or mental incapacity or for any other reason whatsoever, Consultant hereby irrevocably designates and appoints the Company and its assigns, and their duly authorized officers and agents, and each of them, as Consultant’s agent and attorney-in-fact, to act for and in Consultant’s behalf and stead to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights or other rights or protections thereon with the same legal force and effect as if executed by Consultant. Consultant acknowledges that the foregoing special power of attorney is coupled with an interest of the Company and its assigns in the subject of the special power.

7. Work for Others.Consultant represents that Consultant will not bring to the Company (or any of its subsidiaries), and will not use in the performance of the Services, any materials or documents, discoveries, developments, designs, improvements, inventions, processes, techniques, methods, software, know‑how or other data of any current or former employer that may be patentable or copyrightable or that are not generally available to the public, unless Consultant has obtained the express written consent of Consultant’s current or former employer for their possession and use. Moreover, Consultant represents that Consultant’s performance as a consultant of the Company does not and will not breach any agreement or relationship of trust and confidence Consultant may have with any third party, whether oral, written or implied. Consultant agrees that Consultant has not entered into, and that Consultant will not enter into, any agreement in conflict with this Agreement.

8.No Breach of Contract. Consultant hereby represents to the Company that: (i) the execution and delivery of this Agreement by Consultant and by the Company and the performance by Consultant of the Services hereunder do not and shall not constitute a breach of, conflict with, or otherwise contravene or cause a default under, the terms of any other agreement or policy to which Consultant is a party or otherwise bound or any judgment, order or decree to which Consultant is subject; (ii) that Consultant has no information (including, without limitation, confidential information and trade secrets) relating to any other individual, company or other entity which would prevent, or be violated by, Consultant entering into this Agreement or performing the Services hereunder; (iii) Consultant is not bound by any employment, consulting, non-compete, confidentiality, trade secret or similar agreement (other than this Agreement) with any other

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individual, company or other entity which would prevent, or be violated by, Consultant entering into this Agreement or Consultant performing the Services hereunder; and (iv) Consultant understands the Company will rely upon the accuracy and truth of the representations and warranties of Consultant set forth herein and Consultant consents to such reliance.

9.Confidential Information. Consultant agrees that during the Term and at all times thereafter, (a) Consultant shall not disclose any Confidential Information (as defined below) to any other person or business entity, whether or not employed by the Company, unless (i) such other person is an employee of the Company and then only if such communication shall be required to perform the duties required of Consultant pursuant to this Agreement or (ii) such other person is not an employee of the Company, and then only if such communication has previously been specifically authorized in writing by the Company; and (b) Consultant shall refrain from publishing information containing Confidential Information or from assisting in the publication of such information by others, unless Consultant first obtains the Company’s written consent. Even if a communication or publication has been specifically authorized by the Company, in no event shall Consultant communicate any Confidential Information to persons who are not Company employees if Consultant could reasonably foresee that such communication of any Confidential Information to persons who are not Company employees would adversely affect the Company’s business. For purposes of this Agreement, the term “Confidential Information” includes but is not limited to the Company’s (as well as each of its subsidiary’s) modes and methods of conducting its business and marketing activities, its trade secrets, customer lists, investor lists, partner lists, copyrighted and non-copyrighted or non-protected computer, contracts, contract terms and negotiations, software programs, techniques of operation, financial structure and information, inventions, improvements, technical developments, trademarks, designs, formulae, processes, computer programs, know-how, techniques, data, discoveries, copyrightable works, business plans and other information, personnel information (including the compensation, job performance, skills, expertise, and discipline of employees and consultants of the Company and each of its subsidiaries), and documents regarding the business or technology of the Company (or any of its subsidiaries). Consultant acknowledges and agrees that Confidential Information is and shall at all times remain the Company's property. Notwithstanding anything to the contrary herein, nothing in this Agreement shall prevent Consultant from (i) reporting Confidential Information in a confidential manner either to a federal, state or local government official or to an attorney where such disclosure is solely for the purpose of reporting or investigating a suspected violation of law, or (iii) disclosing Confidential Information in an anti-retaliation lawsuit or other legal proceeding, so long as that disclosure or filing is made under seal and Consultant does not otherwise disclose such Confidential Information, except pursuant to court order.

10.No Competition During Consulting Term. Consultant acknowledges that Consultant is familiar with, and during the Term Consultant will continue to have access to, the Company’s trade secret, confidential and proprietary information. Therefore, during the Term, Consultant shall not, provide services to (whether as an employee, advisor, director, officer, or a consultant, with or without pay) or own, manage, operate, join, control, participate in, or be connected with (as a stockholder, member, partner, or otherwise), any person or entity that competes directly with the business of the Company (the “Restricted Business”); provided, however, that the “beneficial ownership” by Consultant, either individually or as a member of a “group” as such terms are used in Rule 13d of the General Rules and Regulations under the Exchange Act, of not more than two percent (2%) of the voting stock of any publicly held corporation that engages in the Restricted Business shall not alone constitute a violation of this paragraph. Consultant acknowledges

6

and agrees that the covenants in this Section 10 are reasonable and necessary to protect the Company’s trade secrets, confidential information and proprietary information.

11.Non-Solicitation of Personnel. Consultant recognizes that he possesses and will possess Confidential Information about employees and other consultants of the Company and its subsidiaries relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customers and business partners of the Company and its subsidiaries. Consultant recognizes that the information he possesses and will possess about these employees and other consultants is not and will not be generally known, is of substantial value to the Company and in developing its business and in securing and retaining customers and business partners, and has been and will be acquired by Consultant because of Consultant’s business position with the Company. Consultant agrees that, during the Term and for a period of twelve months thereafter, Consultant will not, directly or indirectly, solicit, recruit, induce, or encourage or attempt to solicit, recruit, induce, or encourage any employee of the Company or any of its subsidiaries to terminate his or her employment or any other relationship with the Company (or Company subsidiary, as the case may be) or otherwise interfere with their relationship with the Company or the Company’s subsidiaries.

12.Remedies. Consultant acknowledges and agrees that any violation by Consultant of any of the provisions in Sections 6, 7, 9, 10 or 11 of this Agreement would cause the Company to suffer irreparable harm and that money damages would not be an adequate remedy for any such breach. Therefore, in the event a breach or threatened breach of any provision of Sections 6, 7, 9, 10 or 11 of this Agreement, the Company and its successors or assigns, in addition to other rights and remedies existing in their favor, shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce, or prevent any violations of, the provisions hereof.

13.Miscellaneous.

13.1Governing Law. This Agreement shall be deemed to have been executed and delivered within the State of California, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the laws of the State of California without regard to principles of conflict of laws.

13.2Amendments. This Agreement may not be modified or amended except in a writing signed by an authorized officer of the Company and by Consultant.

13.3No Waiver. No waiver of any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach.

13.4Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction or an arbitrator, as the case may be, to be invalid, prohibited or unenforceable under any present or future law, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other

7

jurisdiction, and to this end the provisions of this Agreement are declared to be severable; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. Notwithstanding the foregoing, if such provision could be more narrowly drawn (as to geographic scope, period of duration or otherwise) so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

13.5.Assignment and Successors.

(a)This Agreement is personal to Consultant and shall not be assignable by Consultant. This Agreement shall be binding upon Consultant’s heirs, executors, administrators and other legal representatives.

(b)The Company may assign its rights and obligations under this Agreement, and this Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns. As used herein, “successor” and “assignee” shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires ownership of the Company or to which the Company assigns this Agreement by operation of law or otherwise.

13.6.Tax Matters. The Company and Consultant intend that all payments made and benefits provided under this Agreement are either exempt from or comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) so that none of the payments or benefits will be subject to the adverse tax penalties imposed under Section 409A, and any ambiguities herein will be interpreted to be so exempt. The payments and benefits referenced and provided for in this Agreement are subject to all applicable withholding requirements. Except for the Company’s withholding right, Consultant will be solely responsible for any and all taxes that may be due with respect to the payments and benefits referenced and provided for in this Agreement.

13.7.Entire Agreement. This Agreement, together with the Transition Agreement, second paragraph of Section 10 of the Employment Agreement (as defined in the Transition Agreement), the Indemnity Agreement (as defined in the Transition Agreement), and the Confidentiality Agreement (as defined in the Transition Agreement) (together, the “Integrated Agreement”), embodies the entire agreement of the parties hereto respecting the matters within its scope and is an integrated agreement. The Integrated Agreement supersedes all prior or contemporaneous agreements of the parties hereto and that directly or indirectly bear upon the subject matter hereof. Any prior negotiations, correspondence, agreements, proposals or understandings relating to the subject matter hereof or of any portion of the Integrated Agreement shall be deemed to have been merged into the Integrated Agreement, and to the extent inconsistent with the Integrated Agreement, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. The Integrated Agreement is a fully integrated agreement. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth in the Integrated Agreement. Any written agreement

8

evidencing an equity award previously granted by the Company to Consultant is outside of the scope of the integration provisions of the preceding paragraph as to the terms and conditions of the award evidenced by such agreement, as modified pursuant to Section 5 above.

13.8.Interpretation. Each party has cooperated in the drafting and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any party on the basis that the party was the drafter.

13.9.Review of Agreement. Each party recognizes that this is a legally binding contract and acknowledges and agrees that it or he, as the case may be, party has had the opportunity to consult with legal counsel of its or his own choice. Each party has cooperated in the drafting, negotiation and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language. Consultant specifically agrees and acknowledges that he has read and understands this Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.

13.10.Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic transmission (including e-mail) if sent during normal business hours of the recipient, if not, then on the next business day; (iii) two days after being sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent: (x) if to the Company, to the Company at the address of its principal executive offices and to the attention of its Chief Executive Officer, (y) if to Consultant, to Consultant at his last address as reflected in the Company’s payroll records, or (z) in either case, at such other address as such party may designate by ten days advance written notice to the other party hereto.

13.11.Supplementary Documents. All parties agree to cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full force to the basic terms and intent of this Agreement and which are not inconsistent with its terms.

13.12.Headings; Construction. The section and paragraph headings and titles contained in this Agreement are inserted for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation of this Agreement. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders and the neutral. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.

13.13.Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned. Either party may execute this letter agreement by signing on the designated signature block below, and by transmitting such

9

signature page via facsimile or e-mail (via PDF format) to the other party. Any signature made and transmitted by facsimile or e-mail (via PDF format) for the purpose of executing this letter agreement shall be deemed an original signature for purposes of this letter agreement, and shall be binding upon the party transmitting its or his signature by facsimile or e-mail (via PDF format).

[The remainder of this page has intentionally been left blank.]

10

IN WITNESS WHEREOF, Consultant and the Company have executed this Agreement as of the Effective Date first set forth above.

“CONSULTANT”

/s/ Guy Gecht            

Guy Gecht

“COMPANY”

Electronics For Imaging, Inc.,

a Delaware corporation

By:    /s/ Alex Grab        

Its:    CORPORATE SECRETARY

CHIEF LEGAL OFFICER

11

OMM_US:76482359.6

EXHIBIT I

Performance-Based Restricted Stock Units:

Grant Date	Target Number of Restricted Stock Units Granted*
August 25, 2016	40,900
August 25, 2016	27,266
December 8, 2017	48,606
December 8, 2017	48,606
August 29, 2018	41,116
August 29, 2018	41,116

* Vesting of each award is subject to, among continued service-based vesting conditions, performance-based vesting conditions. 0% to 150% of the applicable target number of restricted stock units subject to the award could become eligible to vest as a result of the performance-based vesting conditions.

Restricted Stock Units:

Grant Date	Number of Restricted Stock Units Outstanding**
August 25, 2016	34,083
December 8, 2017	48,606
August 29, 2018	41,116

** Vesting of the award is subject to service-based vesting conditions. The total number of restricted stock units outstanding and subject to the award as of the Effective Date is shown (i.e., not including any restricted stock units subject to the award that vested prior to the Effective Date).

* * *

EX-10.5

AMENDMENT NO. 1 to TRANSITION AGREEMENT

Reference is made to the Transition Agreement (the“Agreement”) made and entered into on the 15^th day of October 2018, by and between Electronics For Imaging, Inc., a Delaware corporation (the “Company”), and Guy Gecht (“Executive”).

RECITALS

Executive and the Company desire to amend Exhibit I to the Agreement.

NOW, THEREFORE, in consideration of the above recitals incorporated herein and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the Company and Executive agree as follows:

1. Amendment of Exhibit I. Exhibit I of the Agreement is hereby amended and restated in its entirety as set forth below.

EXHIBIT I

Performance-Based Restricted Stock Units:

Grant Date	Target Number of Restricted Stock Units Granted1
September 4, 2015	26,420
August 25, 2016	27,2662
August 25, 2016	18,1772
December 8, 2017	48,6072
December 8, 2017	48,6062
March 20, 2018	27,9763
August 29, 2018	41,1162
August 29, 2018	41,1162

¹Vesting of each award is subject to, among continued service-based vesting conditions, performance-based vesting conditions.

² 0% to up to 150% of the applicable target number of restricted stock units subject to the award could become eligible to vest as a result of the performance-based vesting conditions.

³ 0% to up to 200% of the applicable target number of restricted stock units subject to the award could become eligible to vest as a result of the performance-based vesting conditions.

Restricted Stock Units:

Grant Date	Number of Restricted Stock Units Outstanding4
August 25, 2016	11,361
December 8, 2017	48,606
August 29, 2018	41,116

⁴ Vesting of each award is subject to service-based vesting conditions. The total number of restricted stock units outstanding and subject to the award as of the Effective Date is shown (i.e., not including any restricted stock units subject to the award that vested prior to the Effective Date).

2. Miscellaneous. This Amendment may be executed in any number of counterparts, each of which shall be enforceable against the party actually executing such counterpart, and all of which together shall constitute one instrument. Except as explicitly stated herein, all terms, conditions and provisions of the Agreement shall continue in full force and effect.

[The remainder of this page has intentionally been left blank.]

IN WITNESS WHEREOF, Executive and the Company have executed this Amendment on and as of November 5, 2018.

“EXECUTIVE”

/s/ Guy Gecht                

Guy Gecht

“COMPANY”

Electronics For Imaging, Inc.,

a Delaware corporation

By:    /s/ Alex Grab            

Its:    CORPORATE SECRETARY

CHIEF LEGAL OFFICER

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William Muir, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Electronics For Imaging, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2018

/s/ William Muir

William Muir

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Marc Olin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Electronics For Imaging, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2018

/s/ Marc Olin

Marc Olin

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER & CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Electronics For Imaging, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 5, 2018

/s/ William Muir

William Muir

Chief Executive Officer

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Electronics For Imaging, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 5, 2018

/s/ Marc Olin

Marc Olin

Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Oct. 30, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Trading Symbol	EFII
Entity Registrant Name	ELECTRONICS FOR IMAGING INC
Entity Central Index Key	0000867374
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding		43,931,611

XML

Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 180,942	$ 170,345
Short-term investments	112,986	148,697
Accounts receivable, net of allowances of $30.2 million and $32.2 million, respectively	240,150	244,416
Inventories	121,290	125,813
Income taxes receivable	13,958	4,565
Assets held for sale	3,143	4,200
Other current assets	47,814	41,799
Total current assets	720,283	739,835
Property and equipment, net	79,495	98,762
Restricted cash equivalents	39,809	32,531
Goodwill	394,372	403,278
Intangible assets, net	86,246	123,008
Deferred tax assets	43,265	45,083
Other assets	34,369	15,504
Total assets	1,397,839	1,458,001
Current liabilities:
Accounts payable	118,703	123,935
Accrued and other liabilities	74,797	98,090
Deferred revenue	65,181	55,833
Convertible senior notes, net – current	330,367	0
Income taxes payable	6,762	5,309
Total current liabilities	595,810	283,167
Convertible senior notes, net – non-current	0	318,957
Imputed financing obligation related to build-to-suit lease	0	13,944
Noncurrent contingent and other liabilities	17,307	28,801
Deferred tax liabilities	6,151	11,652
Noncurrent income taxes payable	18,305	20,169
Total liabilities	637,573	676,690
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding	0	0
Common stock, $0.01 par value; 150,000 shares authorized; 54,990 and 54,249 shares issued, respectively	550	542
Additional paid-in capital	785,475	745,661
Treasury stock, at cost; 10,747 and 9,070 shares, respectively	(428,074)	(375,574)
Accumulated other comprehensive income (loss)	(6,996)	8,138
Retained earnings	409,311	402,544
Total stockholders’ equity	760,266	781,311
Total liabilities and stockholders’ equity	$ 1,397,839	$ 1,458,001

XML

Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Accounts receivable, allowances	$ 30.2	$ 32.2
Preferred stock, par value (in USD per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000	5,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in USD per share)	$ 0.01	$ 0.01
Common stock, shares authorized	150,000	150,000
Common stock, shares issued	54,990	54,249
Treasury stock, shares	10,747	9,070

XML

Condensed Consolidated Statements of Operations (unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Revenue		$ 257,134	$ 248,359	$ 758,072	$ 724,097
Cost of revenue	[1]	131,615	120,902	384,858	345,858
Gross profit		125,519	127,457	373,214	378,239
Operating expenses:
Research and development	[1]	40,341	39,585	119,701	118,201
Sales and marketing	[1]	44,661	42,269	137,448	129,018
General and administrative	[1]	24,466	25,075	57,093	67,239
Amortization of identified intangibles		11,137	12,299	34,801	34,829
Restructuring and other		2,799	832	10,477	5,421
Total operating expenses		123,404	120,060	359,520	354,708
Income from operations		2,115	7,397	13,694	23,531
Interest expense		(4,796)	(4,912)	(14,739)	(14,538)
Interest income and other income, net		336	1,760	1,270	2,802
Income (loss) before income taxes		(2,345)	4,245	225	11,795
Benefit from (provision for) income taxes		4,265	(791)	1,868	(795)
Net income		$ 1,920	$ 3,454	$ 2,093	$ 11,000
Net income per basic common share (in usd per share)		$ 0.04	$ 0.07	$ 0.05	$ 0.24
Net income per diluted common share (in usd per share)		$ 0.04	$ 0.07	$ 0.05	$ 0.23
Shares used in basic per-share calculation (in shares)		44,428	46,348	44,714	46,442
Shares used in diluted per-share calculation (in shares)		45,354	46,937	45,388	47,102

[1] Includes stock-based compensation expense as follows: Three Months EndedSeptember 30, Nine Months Ended September 30, 2018 2017 2018 2017Cost of revenue$904 $486 $2,715 $1,985Research and development3,649 1,640 9,517 7,556Sales and marketing2,377 1,108 6,767 5,176General and administrative4,993 1,414 11,479 7,824

XML

Condensed Consolidated Statements of Operations (unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Stock-based compensation expense	$ 11,923	$ 4,648	$ 30,478	$ 22,541
Cost of revenue
Stock-based compensation expense	904	486	2,715	1,985
Research and development
Stock-based compensation expense	3,649	1,640	9,517	7,556
Sales and marketing
Stock-based compensation expense	2,377	1,108	6,767	5,176
General and administrative
Stock-based compensation expense	$ 4,993	$ 1,414	$ 11,479	$ 7,824

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Net income (loss)		$ 1,920	$ 3,454	$ 2,093	$ 11,000
Net unrealized investment gains (losses):
Unrealized holding gains (losses), net of tax	[1]	182	48	(254)	283
Reclassification adjustments included in net income, net of tax	[1]	(1)	(27)	10	(49)
Net unrealized investment gains (losses)		181	21	(244)	234
Currency translation adjustments		(1,975)	4,931	(14,850)	23,121
Net unrealized losses on cash flow hedges		0	(28)	(41)	(24)
Comprehensive income (loss)		$ 126	$ 8,378	$ (13,042)	$ 34,331

[1] Tax effects were less than $0.2 million for the periods presented above.

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Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) (Parenthetical) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Unrealized holding gains (losses), tax provisions (benefits) (less than)	$ 0.2	$ 0.2	$ 0.2	$ 0.2
Reclassification adjustments included in net income (loss), tax provisions (benefits) (less than)	$ 0.2	$ 0.2	$ 0.2	$ 0.2

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Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017
Cash flows from operating activities:
Net income (loss)		$ 2,093	$ 11,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		50,094	48,029
Deferred taxes		(248)	(9,149)
Provisions for bad debt and sales-related allowances		2,424	10,868
Provision for inventory obsolescence		4,488	3,642
Stock-based compensation expense		30,478	22,541
Non-cash accretion of interest expense on convertible notes and imputed financing obligation		11,304	11,211
Change in fair value of contingent consideration, including accretion		11,860	(2,187)
Net change in derivative assets and liabilities		(2,431)	737
Other non-cash charges		88	330
Changes in operating assets and liabilities, net of effect of acquired businesses		(36,275)	(58,955)
Net cash provided by operating activities		50,155	42,441
Cash flows from investing activities:
Purchases of short-term investments		0	(87,623)
Proceeds from sales and maturities of short-term investments		35,129	164,979
Purchases of restricted investments	[1]	0	(15,775)
Purchases, net of proceeds from sales, of property and equipment		(9,785)	(8,745)
Proceeds from sale of held-for-sale building and land		1,137	0
Businesses purchased, net of cash acquired		696	(16,739)
Net cash provided by (used for) investing activities	[1]	27,177	36,097
Cash flows from financing activities:
Proceeds from issuance of common stock		10,165	11,730
Purchases of treasury stock and net share settlements		(52,500)	(56,937)
Repayment of acquisition-related debt		(11,956)	(10,786)
Contingent consideration payments related to businesses acquired		(3,116)	(9,512)
Net cash used for financing activities		(57,407)	(65,505)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash equivalents		(2,050)	4,168
Increase in cash, cash equivalents, and restricted cash equivalents	[1]	17,875	17,201
Cash, cash equivalents, and restricted cash equivalents at beginning of period	[1]	202,876	165,455
Cash, cash equivalents, and restricted cash equivalents at end of period	[1]	$ 220,751	$ 182,656

[1] Certain prior period amounts have been revised due to the implementation of ASU 2016-18. See Note 1 for details.

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Basis of Presentation and Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements (“condensed consolidated financial statements”) include the accounts of Electronics For Imaging, Inc. and its subsidiaries (“EFI” or “Company”). All intercompany accounts and transactions have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information, rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements, and accounting policies consistent in all material respects with those applied in preparing our audited annual consolidated financial statements included in our Annual Report on Form 10-K, as amended by Amendment No. 1, for the year ended December 31, 2017 (the “2017 Form 10-K”). These condensed consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and notes included in the 2017 Form 10-K. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments, management considers necessary for the fair presentation of our financial position, operating results, comprehensive income, and cash flows for the interim periods presented. Our results for the interim periods are not necessarily indicative of results for the entire year.

Out-of-Period Adjustments

In the nine months ended September 30, 2017, we recorded out-of-period adjustments related to certain bill and hold transactions, which decreased revenue by $3.4 million, gross profit by $0.5 million, and net income by $0.3 million (or $0.01 per diluted share). We evaluated these adjustments considering both qualitative and quantitative factors and their impact in relation to each period, as well as the periods in which they originated. The impact of recognizing these adjustments in prior years was not significant to any individual period. Management believes the adjustments are immaterial to these condensed consolidated financial statements for the nine months ended September 30, 2017 and all previously issued financial statements.

Recently Adopted Accounting Pronouncements

Revenue Recognition. Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606 Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method applied to all incomplete contracts as of the date of initial application. ASC 606 supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (“ASC 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. In addition, ASC 606 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Effective January 1, 2018, we also adopted ASC 340-40, Other Assets and Deferred Costs – Contracts with Customers (“ASC 340-40”), using the modified retrospective method to all incomplete contracts as of the date of initial application. ASC 340-40 requires the deferral of incremental costs of obtaining a contract with a customer.

Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 and ASC 340-40, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. Additional discussion of these recently adopted pronouncements and their impact on our Condensed Consolidated Financial Statements is included below under Significant Accounting Policies, in Note 4 – Revenue, and in Note 5 – Supplemental Financial Statement Information.

Income Taxes. Staff Accounting Bulletin (“SAB”) 118 provides guidance for the application of ASC 740 for a measurement period to complete the accounting for certain elements of the Tax Cut & Jobs Act of 2017 (the “2017 Tax Act”). The measurement period is defined as up to one year from the enactment date, which will expire on December 22, 2018. SAB 118 requires that we recognize those income tax effects in our financial statements for which the accounting can be completed, as may be the case for the effect of rate changes on deferred tax assets and deferred tax liabilities. For matters that have not been completed, we are required to recognize provisional amounts to the extent that they are reasonably estimable, adjust them during the measurement period when more information becomes available, and report this information in our financial statements in that period. See additional information in Note 14 – Income Taxes.

Restricted Cash. Accounting Standard Update (“ASU”) 2016-18, Statement of Cash Flows: Restricted Cash, became effective in the first quarter of 2018 and requires the statement of cash flows to explain the change in cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts in the statement of cash flows. We previously included the changes in restricted cash equivalents in operating or investing activities in the Consolidated Statements of Cash Flows. Prior period amounts have been revised to conform to the current year presentation.

Reconciliation of cash, cash equivalents, and restricted cash equivalents

(in thousands)	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash and cash equivalents	$	180,942	$	170,345	$	175,830	$	164,313
Restricted cash equivalents	39,809		32,531		6,826		1,142
Total cash, cash equivalents, and restricted cash equivalents shown in the statement of cash flows	$	220,751	$	202,876	$	182,656	$	165,455

Definition of a Business. In January 2017, the Financial Accounting Standard Board (“FASB’) issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, which became effective in the first quarter of 2018 and significantly narrows how businesses are defined. Under ASU 2017-01, when substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar identifiable assets, then the assets acquired do not constitute a business. If substantially all of the fair value of the gross assets acquired is not concentrated in a single asset or group of similar assets, then the assets acquired may constitute a business if certain criteria are met. We must determine whether the acquired gross assets and activities include an input and a “substantive” process that together “significantly” contribute to the ability to create an output. A framework and specific criteria are provided to assist with the evaluation of whether a process is “substantive” and “significantly contributes” to the ability to create an output. “Output” is narrowly defined to be consistent with the description of a performance obligation in the new revenue guidance or this ASU. Missing inputs and processes may not be replaced by integration with our own inputs and processes under the new guidance. The adoption of ASU 2017-1 did not impact our condensed consolidated financial statements as of September 30, 2018 because we did not acquire a business during the nine months ended September 30, 2018.

Nonfinancial Asset Derecognition. In February 2017, the FASB issued ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets: Clarifying the Scope of Asset Derecognition and Accounting for Partial Sales of Nonfinancial Assets, which clarifies the scope of recent guidance as it relates to nonfinancial asset derecognition and the accounting for partial sales of nonfinancial assets. The ASU conforms the derecognition guidance as it relates to nonfinancial assets with the derecognition guidance in the new revenue standard (ASC 606) and is not expected to have a material impact on the accounting for real estate dispositions. ASU 2017-5 became effective in the first quarter of 2018. During the nine months ended September 30, 2018, we sold a non-financial asset, which is discussed further in Note 10–Commitments and Contingencies. There was no material impact from the adoption of this ASU in our condensed consolidated financial statements during the three and nine months ended September 30, 2018.

Stock Compensation Modification. In May 2017, the FASB issued ASU 2017-09, Stock Compensation – Scope of Modification Accounting, which clarifies the scope of modification accounting for share-based payment arrangements, which became effective in the first quarter of 2018. Specifically, we do not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. We elected to adopt this guidance prospectively to awards modified on or after the adoption date. The adoption of ASU 2017-09 did not have a material impact on our condensed consolidated financial statements during the three and nine months ended September 30, 2018.

Settlement of Convertible Debt. ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, issued in August 2016, requires that cash settlements of principal amounts of debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the debt must classify the portion of the principal payment attributable to the accreted interest related to the debt discount as cash outflows from operating activities. This is consistent with the classification of the coupon interest payments.

ASU 2016-15 became effective in the first quarter of 2018. Accordingly, $63.6 million of the debt discount attributable to the difference between the 0.75% coupon interest rate on our 0.75% Convertible Senior Notes due 2019 (“Notes”) and the 4.98% (5.46% inclusive of debt issuance costs) effective interest rate on the Notes will be classified as an operating cash outflow in the Condensed Consolidated Statement of Cash Flows upon any cash settlement of the Notes. The Notes were not settled as of September 30, 2018. We will apply ASU 2016-15 upon any cash settlement of the Notes.

Recent Accounting Pronouncements Not Yet Adopted

Lease Arrangements. Under current guidance, the classification of a lease by a lessee as either an operating or capital lease determines whether an asset and liability is recognized on the balance sheet. ASU 2016-2, Leases, which was issued in February 2016 and will be effective in the first quarter of 2019, requires that a lessee recognize an asset and liability on its balance sheet related to all leases with terms more than one year. For all leases, a lessee will be required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. The right-to-use asset represents the right to use the underlying asset during the lease term.

The recognition, measurement, and presentation of expenses and cash flows by a lessee will not significantly change from previous guidance. There continues to be a differentiation between finance leases and operating leases. The criteria for determining whether a lease is a finance or operating lease are substantially the same as existing guidance except that the “bright line” percentages have been removed. Also, an additional criterion has been added in the new guidance to consider whether the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Additional judgment will be required in applying the new lease guidance.

• For finance leases, interest is recognized on the lease liability separately from depreciation of the right-of-use asset in the statement of operations. Principal repayments are classified within financing activities and interest payments are classified as operating activities in the statement of cash flows.

• For operating leases, a lessee is required to recognize lease expense generally on a straight-line basis. All operating lease payments are classified as operating activities in the statement of cash flows.

The current build-to-suit lease accounting guidance will be rescinded by the new guidance, although simplified guidance will remain regarding lessee control during the construction period. Consequently, the accounting for build-to-suit leases will be the same as operating leases unless the lessee control provisions are applicable.

We expect to apply the additional transition method provided in ASU 2018-11, which allows us to initially apply the new leases standard at our January 1, 2019 adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. We expect to elect all of the available transition practical expedients which permit us not to reassess our prior conclusions about lease identification, lease classification, and initial direct costs. While we continue to assess the effects of the adoption, we have not yet quantified the impact but we believe there will be material increases in our non-current assets and liabilities, and in our current liabilities on our Consolidated Balance Sheets at the time of adoption. The adoption of this new standard to our lease transactions as lessee is not expected to have a material impact on our results of operations as reflected in our Consolidated Statements of Operations. We do not expect a material impact on our results of operations or financial position from adoption of this standard to our lease transactions as lessor.

Significant Accounting Policies

There have been no material changes in our significant accounting policies, as compared to the significant accounting policies described in our 2017 Form 10-K, with the exception of the following:

Revenue Recognition

On January 1, 2018, we adopted ASC 606 using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. On January 1, 2018, we also adopted ASC 340-40 using the modified retrospective method applied to all contracts as of the date of initial application.

We apply judgment in determining the customer’s ability and intention to pay. Judgments are made after considering a variety of factors including the customer’s historical payment experience, current creditworthiness, current economic impacts on the customer, past due balances, and significant one-time events or, in the case of a new customer, published credit and financial information.

For customer arrangements that include multiple products or services, judgment is required to determine the standalone selling price (“SSP”) for each distinct performance obligation. Where an observable price is not available, we gather all reasonable available data points, consider adjustments based on market conditions, entity-specific factors, and the need to stratify selling prices into meaningful groups (e.g., geographic region) in determining SSP. We allocate the total contract consideration to each distinct performance obligation on a relative SSP basis. Revenue is then recognized in accordance with the timing of the transfer of control of each performance obligation to the customer.

Accounting for long-term contracts where we provide information technology system development and implementation services requires significant judgment to estimate total contract revenue and costs. For long-term contracts, we estimate the profit on a contract as the difference between the total estimated revenue and expected costs to complete the services. We then recognize that revenue and profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that could span several years.

A change in our estimate of total costs to complete could affect the profitability of our contracts. We review and update our contract-related estimates regularly, and the effects of changes, if any, are reflected in the Condensed Consolidated Statements of Operations in the period that they are determined. Changes in estimates related to certain types of contracts accounted for using an input method measure of progress, such as cost-to-cost, can occur over the life of a contract for a variety of reasons, including the availability of labor and labor productivity, the nature and complexity of the work to be performed, cost estimates, level of effort and/or other assumptions impacting revenue or cost to perform a contract. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If, at any time, the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter it is identified.

Management exercises judgment to determine the period of benefit to amortize contract acquisition costs by considering factors such as expected renewals of customer contracts, duration of customer relationships and our technology development life cycle. Although we believe that the historical assumptions and estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. Amortization of deferred contract acquisition costs is included in sales and marketing expense in the Condensed Consolidated Statements of Operations. We periodically review these deferred costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred contract acquisition costs.

The nature of our products and services are as follows:

Hardware. Our hardware, such as Industrial Inkjet printers and Fiery digital front ends (“DFEs”), is generally sold with software that is integral to the functionality of the product. In these cases, the hardware and software license are accounted for as a single performance obligation. The contract consideration is generally in the form of a fixed fee at contract inception and revenue is recognized at the point in time when control is transferred to the customer. Consideration received from customers may include trade-in printers, which are valued at the lower of cost or net realizable value.

We offer shipping and handling services to customers related to the sale of hardware. We have elected the practical expedient to account for shipping and handling activities performed after transferring control of goods to our customer as a cost to fulfill the contract. The cost of shipping and handling is accrued at the point in which control transfers to the customer and revenue is recognized.

Ink. We typically enter into contracts with our existing customer base of installed printers to purchase ink that is not bundled with other deliverables within the contract. The ink is accounted for as a single performance obligation and revenue is recognized at the point in time when control of the ink is transferred to the customer.

Licenses. Our software license arrangements provide the customer with the right to install and use functional intellectual property (as it exists at the point in time at which the license is granted) for the duration of the contract term. Revenue from distinct software licenses is recognized at the point in time when the software is made available to the customer for download.

Our software license arrangements are generally comprised of fixed license fees (“license fees”) that are payable upfront, annually, quarterly, or monthly based on negotiated customer payment terms. For software license arrangements in which a significant portion of the license fees are due more than 12 months after the software is delivered to the customer, a significant financing component may exist. The significant financing component is calculated as the difference between the stated value and present value of the software license fees and is recognized as interest income under the effective interest method over the contract term. The total software license fee net of the significant financing component is recognized as revenue at the point in time when the software is made available to the customer for download or when the software is shipped to the customer. In instances where the timing of revenue recognition and the timing of invoicing is one year or less, we follow the practical expedient and do not impute interest for these contracts.

Maintenance. Our software license arrangements typically include an initial (bundled) post contract customer support (maintenance or “PCS”) term. Our promise to those customers who elect to purchase PCS represents a distinct, stand-alone performance obligation. Contract consideration is allocated to the PCS based on its relative SSP and revenue is recognized over the PCS term.

Professional Services. We provide various professional services to customers, primarily project management, software implementation, non-recurring engineering design, and training. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract(s). The majority of our professional services contracts are billed on a time and materials basis and revenue is recognized over time as the services are performed.

Software as a Service (“SaaS”). Our SaaS-based arrangements provide customers with continuous access to our software solutions in the form of a service hosted in the cloud. These arrangements may include initial implementation and setup and/or on-going support that represent a single promise (i.e. each individual promised component is not distinct) to provide continuous access to the software solution. Any setup fees associated with our SaaS arrangements are recognized ratably over the contract term plus expected renewal periods. As the customer simultaneously receives and consumes the benefits as access is provided, our performance obligation under our SaaS-based arrangements is comprised of a series of distinct components delivered over time. Our SaaS-based arrangements consideration is typically fixed.

Extended Service Plans (“ESP”). For our hardware arrangements, we enter into contracts with certain customers to provide services to maintain and repair the hardware for an extended period. ESPs are classified as service-type warranties under ASC 606 as they are sold separately and provide services which are incremental to the assurance that the product will perform to the agreed upon standards. The ESPs are accounted for as a separate performance obligation. Revenue from ESPs are recognized ratably over the contract period as the service is provided.

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Earnings Per Share

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Net income per basic common share is computed using the weighted average number of common shares outstanding during the period. Net income per diluted common share is computed using the weighted average number of common and dilutive potential common shares outstanding during the period. Potential common shares result from the assumed exercise of outstanding common stock options having a dilutive effect using the treasury stock method, non-vested shares of time-based restricted stock units ("RSUs") having a dilutive effect, non-vested performance-based restricted stock units ("PSUs") for which the performance criteria have been met, shares to be purchased under our Employee Stock Purchase Plan (“ESPP”) having a dilutive effect, the assumed release of shares for the expected satisfaction of contingent consideration based on achievement of specified performance criteria related to the acquisition of Corrugated Technologies, Inc. (“CTI”), the assumed conversion of our Notes having a dilutive effect using the treasury stock method when the stock price exceeds the conversion price of the Notes, as well as the dilutive effect of our warrants when the stock price exceeds the warrant strike price. Our stock price has not exceeded the conversion price of the Notes or the strike price of the warrants during any periods presented. Any potential shares that are anti-dilutive are excluded from the effect of dilutive securities.

PSUs and market-based restricted stock units that would be issuable if the end of the reporting period were the end of the vesting period, if the result would be dilutive, are assumed to be outstanding for purposes of determining net income per diluted common share as of the later of the beginning of the period or the grant date. Accordingly, PSUs, which vested on various dates during the three and nine months ended September 30, 2018 and 2017, based on achievement of specified performance criteria related to revenue, cash flows from operating activities, and non-GAAP operating income targets, are included in the determination of net income per diluted common share as of the beginning of each period.

Basic and diluted earnings per share are reconciled as follows (in thousands, except per share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Basic net income per share:
Net income available to common shareholders	$	1,920	$	3,454	$	2,093	$	11,000
Weighted average common shares outstanding	44,428		46,348		44,714		46,442
Basic net income per share	$	0.04	$	0.07	$	0.05	$	0.24
Diluted net income per share:
Net income available to common shareholders	$	1,920	$	3,454	$	2,093	$	11,000
Weighted average common shares outstanding	44,428		46,348		44,714		46,442
Dilutive stock options and non-vested RSUs and PSUs	926		589		674		660
Weighted average common shares outstanding for purposes of computing diluted net income per share	45,354		46,937		45,388		47,102
Diluted net income per share	$	0.04	$	0.07	$	0.05	$	0.23

Potential shares of common stock that were not included in the determination of diluted net income per share because the impact of including them would have been anti-dilutive or performance conditions have not been met, consisted of the following (in thousands):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2018	2017	2018	2017
RSUs & PSUs	626	327	554	304
ESPP purchase rights	41	410	638	342
Total potential shares of common stock excluded from the computation of diluted earnings per share	667	737	1,192	646

The weighted-average number of common shares outstanding does not include the effect of the potential common shares from conversion of our Notes and exercise of our warrants because the effect would have been anti-dilutive since the conversion price of the Notes and the strike price of the warrants exceeded the average market price of our common stock. We have the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon conversion of the Notes. Our intent is to settle the principal amount of the Notes in cash upon conversion. As a result, only amounts payable in excess of the principal amount of the Notes are considered in diluted net income per share under the treasury stock method. The Note Hedges are not included in the calculation of diluted net income per share because the effect of any exercise of the Note Hedges would be anti-dilutive. Please refer to Note 9 – Convertible Senior Notes for additional information and definitions.

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Segment and Geographic Information

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Segment and Geographic Information

Segment and Geographic Information

Operating segment information is presented based on the internal reporting used by the chief operating decision making group (“CODM”) to allocate resources and evaluate operating segment performance. Our segments consist of Industrial Inkjet, Productivity Software, and Fiery.

Industrial Inkjet consists of our VUTEk super-wide and wide format display graphics, Nozomi corrugated packaging and display, Reggiani textile, and Cretaprint ceramic tile decoration and building material industrial digital inkjet printers; digital ultra-violet (“UV”) curable, light-emitting diode (“LED”) curable, ceramic, water-based, and thermoforming and specialty inks, as well as a variety of textile inks including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, water-based dispersed printing ink, supplies, and coatings; digital inkjet printer parts; and professional services. Printing surfaces include paper, vinyl, corrugated, textile, glass, plastic, aluminum composite, ceramic tile, wood, and many other flexible and rigid substrates.

Productivity Software consists of a complete software suite that enables efficient and automated end-to-end business and production workflows for the print and packaging industry. This Productivity Suite also provides tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry and consists of the: (i) Packaging Suite, with Radius at its core, for tag & label, cartons, and flexible packaging businesses; (ii) Corrugated Packaging Suite, with CTI at its core, for corrugated packaging businesses, including corrugated control capability using EFI Escada; (iii) Enterprise Commercial Print Suite, with Monarch at its core, for enterprise print businesses; (iv) Publication Print Suite, with Monarch or Technique at its core, for publication print businesses; (v) Midmarket Print Suite, with Pace at its core, for medium size print businesses; (vi) Quick Print Suite, with PrintSmith Vision and essential capabilities of Digital StoreFront at its core, for small printers and in-plant sites; and (vii) Value Added Products, available with the suite and standalone, such as web-to-print, e-commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and shipping to reduce costs, increase profits, and offer new products and services to their existing and future customers. We also market Optitex computer-aided fashion design (“fashion CAD”) software, which facilitates fast fashion and increased efficiency in the textile and fashion industries.

Fiery consists of Fiery and FreeFlow Print Server (“FFPS”), which was acquired from Xerox Corporation (“Xerox”), that transform digital copiers and printers into high performance networked printing devices for the office, commercial and industrial printing markets. This operating segment is comprised of (i) stand-alone DFEs connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our DFE solutions such as Fiery Central, and Graphics Arts Package, (iv) Fiery Self Serve, our self-service and payment solution, and (v) stand-alone software-based solutions such as our proofing, textile, and scanning solutions.

Operating income is not reported by operating segment because operating expenses include significant shared expenses and other costs that are managed outside of the operating segments. Such operating expenses include various corporate expenses such as stock-based compensation, corporate sales and marketing, research and development, amortization of identified intangibles, various non-recurring charges, and other separately managed general and administrative expenses.

Our revenue and gross profit (i.e., gross profit excluding stock-based compensation expense) by operating segment are summarized as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Industrial Inkjet
Revenue	$	154,902		$	142,930		$	453,545		$	407,886
Gross profit	53,661			53,392			158,351			154,972
Gross profit percentages	34.6		%	37.4		%	34.9		%	38.0		%
Productivity Software
Revenue	$	40,452		$	37,171		$	125,839		$	111,292
Gross profit	28,394			26,667			88,988			81,431
Gross profit percentages	70.2		%	71.7		%	70.7		%	73.2		%
Fiery
Revenue	$	61,780		$	68,258		$	178,688		$	204,919
Gross profit	44,368			47,884			128,590			143,821
Gross profit percentages	71.8		%	70.2		%	72.0		%	70.2		%

Operating segment profit is reconciled to our Condensed Consolidated Statements of Operations as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Segment gross profit	$	126,423		$	127,943		$	375,929		$	380,224
Stock-based compensation expense	(904		)	(486		)	(2,715		)	(1,985		)
Gross profit	$	125,519		$	127,457		$	373,214		$	378,239

Tangible and intangible assets, net of liabilities, are summarized by operating segment as follows (in thousands):

	Industrial Inkjet		Productivity Software			Fiery		Corporate and Unallocated Net Assets		Total
September 30, 2018
Goodwill	$	150,197	$	170,098		$	74,077	$	—	$	394,372
Identified intangible assets, net	45,688		24,903			15,655		—		86,246
Tangible assets, net of liabilities	251,948		(26,192		)	25,738		28,154		279,648
Net tangible and intangible assets	$	447,833	$	168,809		$	115,470	$	28,154	$	760,266

December 31, 2017
Goodwill	$	154,373	$	174,644		$	74,261	$	—	$	403,278
Identified intangible assets, net	66,547		36,379			20,082		—		123,008
Tangible assets, net of liabilities	221,933		(27,755		)	11,286		49,561		255,025
Net tangible and intangible assets	$	442,853	$	183,268		$	105,629	$	49,561	$	781,311

Corporate and unallocated net assets consist of cash and cash equivalents, short-term investments, restricted cash equivalents, corporate headquarters facility, convertible senior notes, imputed financing obligation related to build-to-suit lease, income taxes receivable, and income taxes payable.

Revenue by Geographic Region

We report revenue by geographic region based on ship-to destination which is summarized as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Americas	$	134,491	$	129,488	$	374,170	$	353,397
Europe, Middle East, and Africa (“EMEA”)	88,879		85,089		271,064		274,635
Asia Pacific (“APAC”)	33,764		33,782		112,838		96,065
Total revenue	$	257,134	$	248,359	$	758,072	$	724,097

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Revenue

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

We derive our revenue primarily from product revenue, which includes industrial digital inkjet printers, ink, and parts; print production software; and DFEs. We receive service revenue from printer maintenance agreements, customer support, training, software development, and consulting.

Upon the adoption of ASC 606 and ASC 340-40, we recorded a net increase to our opening balance of retained earnings of $4.7 million as of January 1, 2018, after considering the income tax impact, due to the cumulative effect of adoption. The adoption impact primarily related to capitalizing customer contract acquisition costs consisting of sales commissions, partially offset by an increase in deferred revenue to reflect the deferral of a significant financing component that will be recognized as interest income as payments are received over the contractual terms, and deferral of upfront setup fees that will be recognized ratably over the expected contractual terms.

The cumulative effect of applying ASC 606 and ASC 340-40 to active contracts as of the adoption date resulted in the following adjustments to the Condensed Consolidated Balance Sheet as of January 1, 2018 (in thousands):

	Reported as of December 31, 2017		ASC 606 Adjustments			As Adjusted January 1, 2018
Assets
Accounts receivable, net	$	244,416	$	102		$	244,518
Other current assets	41,799		(1,628		)	40,171
Deferred tax assets	45,083		(1,466		)	43,617
Other assets	15,504		8,062			23,566
Liabilities
Deferred revenue	55,833		(95		)	55,738
Noncurrent contingent and other liabilities	28,801		491			29,292
Stockholders’ equity:
Retained earnings	402,544		4,674			407,218

The impact of adopting ASC 606 and ASC 340-40 on our Condensed Consolidated Statement of Operations is summarized as follows (in thousands):

	Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
	Amounts in Accordance with ASC 606			Amounts in Accordance with ASC 605			Effect of change higher (lower)			Amounts in Accordance with ASC 606		Amounts in Accordance with ASC 605			Effect of change higher (lower)
Revenue	$	257,134		$	255,746		$	1,388		$	758,072	$	754,348		$	3,724
Cost of revenue	131,615			131,067			548			384,858		384,509			349
Gross profit	125,519			124,679			840			373,214		369,839			3,375
Operating expenses	123,404			123,316			88			359,520		359,418			102
Income from operations	2,115			1,363			752			13,694		10,421			3,273
Interest income and other income, net	336			199			137			1,270		823			447
Income (loss) before income taxes	(2,345		)	(3,234		)	889			225		(3,495		)	3,720
Benefits from income taxes	4,265			4,465			(200		)	1,868		2,363			(495		)
Net income (loss)	1,920			1,231			689			2,093		(1,132		)	3,225

The impact of adopting ASC 606 and ASC 340-40 on our Condensed Consolidated Balance Sheet as of September 30, 2018 was as follows (in thousands):

	Amounts in Accordance with ASC 606		Amounts in Accordance with ASC 605		Effect of change higher (lower)
Assets
Accounts receivable, net	$	240,150	$	236,018	$	4,132
Other current assets	47,814		49,790		(1,976		)
Deferred tax assets	43,265		45,226		(1,961		)
Other assets	34,369		26,409		7,960
Liabilities
Deferred revenue	65,181		65,239		(58		)
Noncurrent contingent and other liabilities	17,307		16,993		314
Stockholders’ equity
Retained earnings	409,311		401,412		7,899

The following table presents our disaggregated revenue by source (in thousands). Sales and usage-based taxes are excluded from revenue:

	Three Months Ended September 30, 2018								Nine Months Ended September 30, 2018
	Industrial Inkjet		Productivity Software		Fiery		Total		Industrial Inkjet		Productivity Software		Fiery		Total
Major Products and Service Lines:
Industrial Inkjet
Printers and parts	$	97,846	$	—	$	—	$	97,846	$	283,819	$	—	$	—	$	283,819
Ink, supplies, and maintenance	57,056		—		—		57,056		169,726		—		—		169,726
Productivity Software
Licenses	—		10,774		—		10,774		—		34,086		—		34,086
Professional services	—		7,349		—		7,349		—		22,919		—		22,919
Maintenance and subscriptions	—		22,329		—		22,329		—		68,834		—		68,834
Fiery
Digital front ends and related  products	—		—		58,257		58,257		—		—		167,713		167,713
Maintenance and subscriptions	—		—		3,523		3,523		—		—		10,975		10,975
Total	$	154,902	$	40,452	$	61,780	$	257,134	$	453,545	$	125,839	$	178,688	$	758,072
Timing of Revenue Recognition:
Transferred at a Point in Time	$	149,521	$	10,774	$	58,257	$	218,552	$	437,780	$	34,086	$	167,713	$	639,579
Transferred Over Time	5,381		29,678		3,523		38,582		15,765		91,753		10,975		118,493
Total	$	154,902	$	40,452	$	61,780	$	257,134	$	453,545	$	125,839	$	178,688	$	758,072
Recurring/Non-Recurring:
Non-Recurring	$	97,846	$	18,123	$	58,257	$	174,226	$	283,819	$	57,005	$	167,713	$	508,537
Recurring	57,056		22,329		3,523		82,908		169,726		68,834		10,975		249,535
Total	$	154,902	$	40,452	$	61,780	$	257,134	$	453,545	$	125,839	$	178,688	$	758,072

Remaining Performance Obligations

Revenue allocated to remaining performance obligations includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods (“backlog”). Remaining performance obligations were $105.4 million as of September 30, 2018, of which we expect to recognize substantially all of the revenue over the next 12 months.

Contract Balances

Timing of revenue recognition may differ from timing of invoicing to customers. Payment terms and conditions vary by contract. Deferred revenue (contract liability) represents amounts received in advance, or invoiced in advance, for product support contracts, software customer support contracts, consulting and integration projects, SaaS arrangements, or product sales. We defer these amounts when we collect or invoice the customer and then generally recognize revenue either ratably over the support contract term, upon performing the related services, under the cost-to-cost method, or in accordance with our revenue recognition policy. Revenue recognized during the three and nine months ended September 30, 2018, which was included in deferred revenue as of December 31, 2017, was $7.6 and $45.3 million, respectively.

Unbilled accounts receivable represents contract assets for revenue that have been recognized in advance of billing the customer, which is common for long-term contracts. Billing requirements vary by contract but are generally structured around the completion of certain development milestones. Unbilled accounts receivable as of December 31, 2017, that were transferred to accounts receivable during the three and nine months ended September 30, 2018, were $2.7 and $24.6 million, respectively.

The following table reflects the balances in unbilled accounts receivable and deferred revenue (in thousands):

	September 30, 2018		January 1, 2018
Unbilled accounts receivable – current	$	34,830	$	23,296
Unbilled accounts receivable – noncurrent	3,483		4,122
Deferred revenue – current	65,181		55,738
Deferred revenue – noncurrent	349		565

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Supplemental Financial Statement Information

9 Months Ended

Sep. 30, 2018

Supplemental Financial Statement Information [Abstract]

Supplemental Financial Statement Information

Supplemental Financial Statement Information

Supplemental Cash Flow Information

	Nine Months Ended September 30,
(in thousands)	2018		2017
Net cash paid for income taxes	$	12,765	$	15,724
Cash paid for interest expense	3,001		3,667
Property, equipment, and intellectual property received, but not paid	639		703

See also Note 10 – Commitments and Contingencies for information about the impact from the termination of our lease in Fremont, CA.

Inventories

Inventories are summarized as follows (in thousands):

	September 30, 2018		December 31, 2017
Raw materials	$	52,085	$	57,061
Work-in-process	13,584		9,792
Finished goods	55,621		58,960
Total	$	121,290	$	125,813

Deferred Contract Acquisition Costs

Certain of our sales incentive programs that meet the definition of an incremental cost of obtaining a customer contract are required to be capitalized under ASC 340-40. We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year.

Sales commissions for renewal of a contract may not be commensurate with the commissions paid for the acquisition of the initial contract because commissions are generally not paid on the renewal of a specifically anticipated contract. Sales commissions for initial contracts are deferred and then amortized generally on a straight-line basis over a period of benefit that we have determined to be three to four years. We determined the period of benefit by taking into consideration our customer contracts, our technology, and other factors.

Upon adoption of ASC 340-40 on January 1, 2018, we capitalized $8.1 million in contract acquisition costs related to contracts that were not completed. For contracts that have durations of less than one year, we follow the practical expedient and expense these costs when incurred.

During the three and nine months ended September 30, 2018, we amortized $1.1 and $3.3 million of deferred contract acquisition costs, respectively, and we recognized no impairment losses in relation to costs capitalized. During the three and nine months ended September 30, 2018, an additional $1.1 and $3.2 million of contract acquisition costs were capitalized, respectively. Deferred contract acquisition costs are included within other noncurrent assets in our Condensed Consolidated Balance Sheets.

Deferred Cost of Revenue

Deferred cost of revenue related to unrecognized revenue on shipments to customers was $1.3 and $3.5 million as of September 30, 2018 and December 31, 2017, respectively, and is included in other current assets in our Condensed Consolidated Balance Sheets.

Product Warranty Reserves

Product warranty reserves are included in accrued and other liabilities on our Condensed Consolidated Balance Sheets. The changes in product warranty reserves are as follows (in thousands):

	Nine Months Ended September 30,
	2018			2017
Beginning balance	$	16,335		$	10,319
Liability assumed upon acquiring FFPS	—			9,368
Provisions, net of releases	8,154			9,284
Settlements	(11,245		)	(12,588		)
Ending balance	$	13,244		$	16,383

Equipment Leased to Customers Under Operating Leases, Net

Equipment leased to customers under operating leases was as follows (in thousands):

	September 30, 2018			December 31, 2017
Equipment leased to customers under operating leases	$	7,755		$	5,432
Accumulated depreciation	(3,297		)	(1,927		)
Equipment leased to customers under operating leases, net	$	4,458		$	3,505

Scheduled minimum future rental revenue on operating leases as of September 30, 2018 was as follows (in thousands):

Remainder of 2018	$	729
2019	2,134
2020	2,590
2021	384
2022	432
Total	$	6,269

Accumulated Other Comprehensive Income (Loss) (“AOCI”)

AOCI classified within stockholders’ equity on our Condensed Consolidated Balance Sheets was as follows (in thousands):

	September 30, 2018			December 31, 2017
Net unrealized investment losses	$	(941	)	$	(697	)
Currency translation gains (losses)	(6,055		)	8,794
Net unrealized gain on cash flow hedges	—			41
Total	$	(6,996	)	$	8,138

Amounts reclassified out of AOCI, net of tax, were immaterial for all periods presented, and consisted of unrealized gains and losses from investments in debt securities that are reported within interest income and other income, net, in our Condensed Consolidated Statements of Operations.

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Accounts Receivable

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Accounts Receivable

Accounts Receivable

Financing Receivables

Our financing receivables consist of sales-type lease and trade receivables that have an original contractual maturity in excess of one year. Sales-type lease receivables are included within other current assets and other assets, while trade receivables are included in accounts receivable (net of allowances) and other assets. Our financing receivables are summarized as follows (in thousands):

	September 30, 2018		December 31, 2017
Sales-type lease receivables	$	30,196	$	16,558
Trade receivables	11,814		12,125
Total financing receivables	$	42,010	$	28,683
Scheduled to be received in excess of one year	$	23,727	$	15,191

The credit quality of financing receivables is evaluated on the same basis as trade receivables. An allowance for estimated uncollectible amounts is provided as needed.

Accounts Receivable Sales Arrangements

Trade receivables are derecognized from our Condensed Consolidated Balance Sheets when sold to third parties upon determining that such receivables are presumptively beyond the reach of creditors in a bankruptcy proceeding. Any recourse obligation is measured using market data from similar transactions and the servicing liability is determined based on the fair value that a third party would charge to service these receivables. These liabilities were determined to not be material as of September 30, 2018 and December 31, 2017.

We have facilities in the U.S. that enable us to sell to third parties, on an ongoing basis, certain trade receivables with recourse. Trade receivables sold with recourse are generally short-term receivables with payment due dates of less than 10 days from the date of sale. Trade receivables sold under these facilities were $3.1 and $13.1 million during the three and nine months ended September 30, 2018 respectively, and $21.4 million during the year ended December 31, 2017, which approximates the cash received.

We have facilities in Europe that enable us to sell to third parties, on an ongoing basis, certain trade receivables without recourse. Trade receivables sold without recourse are generally short-term receivables secured by letters of credit with payment due dates of less than one year. Trade receivables sold under these facilities were $1.1 and $6.8 million during the three and nine months ended September 30, 2018, respectively, and $5.9 million during the year ended December 31, 2017, which approximates the cash received.

We report collections from the sale of trade receivables to third parties as operating cash flows in the Condensed Consolidated Statements of Cash Flows.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

We invest our excess cash on deposit with major banks in money market, United States (“U.S.”) Treasury and government-sponsored entity, corporate, municipal government, asset-backed, and mortgage-backed residential debt securities. By policy, we invest primarily in high-grade marketable securities. We are exposed to credit risk in the event of default by the financial institutions or issuers of these investments to the extent of the amounts recorded in our Condensed Consolidated Balance Sheets.

We consider all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Typically, the cost of these investments approximates fair value. Marketable investments with a maturity greater than three months are classified as available-for-sale short-term investments. Available-for-sale securities are stated at fair value with unrealized gains and losses reported as a separate component of AOCI, net of tax. The credit portion of any other-than-temporary impairment is included in net income. Realized gains and losses on sales or maturities of financial instruments are recognized upon sale of the investments using the specific identification method.

Our available-for-sale short-term investments are summarized as follows (in thousands):

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
September 30, 2018
U.S. Government and sponsored entities	$	55,322	$	—	$	(714	)	$	54,608
Corporate debt securities	51,345		—		(495		)	50,850
Municipal securities	383		—		(4		)	379
Asset-backed securities	7,020		33		(61		)	6,992
Mortgage-backed securities – residential	158		—		(1		)	157
Total short-term investments	$	114,228	$	33	$	(1,275	)	$	112,986
December 31, 2017
U.S. Government and sponsored entities	$	59,824	$	—	$	(660	)	$	59,164
Corporate debt securities	79,356		—		(450		)	78,906
Municipal securities	382		—		(2		)	380
Asset-backed securities	9,808		44		(47		)	9,805
Mortgage-backed securities – residential	445		—		(3		)	442
Total short-term investments	$	149,815	$	44	$	(1,162	)	$	148,697

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss position below are as follows (in thousands):

	Less than 12 Months					More than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2018
U.S. Government and sponsored entities	$	—	$	—		$	54,608	$	(714	)	$	54,608	$	(714	)
Corporate debt securities	10,159		(90		)	40,691		(405		)	50,850		(495		)
Municipal securities	379		(4		)	—		—			379		(4		)
Asset-backed securities	—		—			6,934		(61		)	6,934		(61		)
Mortgage-backed securities – residential	18		—			86		(1		)	104		(1		)
Total	$	10,556	$	(94	)	$	102,319	$	(1,181	)	$	112,875	$	(1,275	)
December 31, 2017
U.S. Government and sponsored entities	$	23,023	$	(206	)	$	35,989	$	(454	)	$	59,012	$	(660	)
Corporate debt securities	45,857		(207		)	32,634		(243		)	78,491		(450		)
Municipal securities	378		(2		)	—		—			378		(2		)
Asset-backed securities	6,779		(31		)	2,947		(16		)	9,726		(47		)
Mortgage-backed securities – residential	162		(2		)	142		(1		)	304		(3		)
Total	$	76,199	$	(448	)	$	71,712	$	(714	)	$	147,911	$	(1,162	)

For fixed income securities that have unrealized losses as of September 30, 2018, we do not have the intent to sell any of these investments and it is not more likely than not that we will be required to sell any of these investments before recovery of the entire amortized cost basis. We have evaluated these fixed income securities and determined that no credit losses exist. Accordingly, management has determined that the unrealized losses on our fixed income securities as of September 30, 2018 were temporary in nature.

Amortized cost and estimated fair value of investments as of September 30, 2018, are summarized as follows (in thousands):

	Amortized cost		Fair value
Mature in less than one year	$	75,459	$	74,864
Mature in one to three years	38,769		38,122
Total short-term investments	$	114,228	$	112,986

Net realized gains from sales of investments are recognized in interest income and other income, net, and were immaterial during the three and nine months ended September 30, 2018, and September 30, 2017, respectively. Net unrealized losses of $1.2 and $1.1 million were included in AOCI, net of tax effect, on the Condensed Consolidated Balance Sheets as of September 30, 2018, and December 31, 2017, respectively.

Fair Value Measurements

Our fair value hierarchy is defined as follows:

Level 1: Inputs that are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

Level 2: Inputs that are other than quoted prices included within Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date for the duration of the instrument’s anticipated life or by comparison to similar instruments; and

Level 3: Inputs that are unobservable or reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. These include management’s own judgments about market participant assumptions developed based on the best information available in the circumstances.

We utilize the market approach to measure the fair value of our fixed income securities. The market approach is a valuation technique that uses the prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The fair value of our fixed income securities is obtained using readily-available market prices from a variety of industry standard data providers, large financial institutions, and other third-party sources for the identical underlying securities. The fair value of our investments in certain money market funds is expected to maintain a net asset value of $1.00 per share and, as such, is priced at the expected market price.

We obtain the fair value of our Level 2 financial instruments from several third-party asset managers, custodian banks, and accounting service providers. Independently, these service providers use professional pricing services to gather pricing data, which may include quoted market prices for identical or comparable instruments or inputs other than quoted prices that are observable either directly or indirectly. As part of this process, we engaged a pricing service to assist management in its pricing analysis and assessment of other-than-temporary impairment. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we utilize a third-party pricing service, the impairment analysis and related valuations represent conclusions of management and not conclusions or statements of any third party.

Our assets and liabilities measured at fair value by levels within the fair value hierarchy are summarized as follows (in thousands):

	September 30, 2018								December 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	18,524	$	—	$	—	$	18,524	$	9,897	$	—	$	—	$	9,897
U.S. Government and sponsored  entities	33,279		21,328		—		54,607		33,261		25,903		—		59,164
Corporate debt securities	—		50,850		—		50,850		—		78,906		—		78,906
Municipal securities	—		379		—		379		—		380		—		380
Asset-backed securities	—		6,934		59		6,993		—		9,754		51		9,805
Mortgage-backed securities  – residential	—		157		—		157		—		442		—		442
Total	$	51,803	$	79,648	$	59	$	131,510	$	43,158	$	115,385	$	51	$	158,594
Liabilities:
Contingent consideration,  current and noncurrent	$	—	$	—	$	20,323	$	20,323	$	—	$	—	$	35,702	$	35,702
Self-insurance	—		—		982		982		—		—		902		902
Total	$	—	$	—	$	21,305	$	21,305	$	—	$	—	$	36,604	$	36,604

Money market funds have been classified as cash equivalents as of September 30, 2018, and December 31, 2017, respectively.

Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. Investments in U.S. Treasury obligations and overnight money market mutual funds have been classified as Level 1 because these securities are valued based on quoted prices in active markets or are actively traded at $1.00 net asset value. There have been no transfers between Level 1 and 2 during the nine months ended September 30, 2018 and 2017.

Government agency investments and corporate debt instruments, including investments in asset-backed and mortgage-backed securities, have generally been classified as Level 2 because markets for these securities are less active or valuations for such securities utilize significant inputs, which are directly or indirectly observable. We hold asset-backed securities with income payments derived from and collateralized by a specified pool of underlying assets. Asset-backed securities in the portfolio are predominantly collateralized by credit cards and auto loans. We also hold mortgage-backed securities which have been fully reserved.

Liabilities for Contingent Consideration

Acquisition-related liabilities for contingent consideration (i.e., earnouts) as of September 30, 2018 are related to the 2017 acquisitions of Escada Innovations Limited and Escada Systems, Inc. (collectively, “Escada”) and Generation Digital Solutions, Inc. (“Generation Digital”); the 2016 acquisitions of Optitex Ltd. (“Optitex”) and Rialco Limited (“Rialco”); the 2015 acquisitions of Shuttleworth Business Systems Limited and CDM Solutions Limited (collectively, “Shuttleworth”), and CTI; and the 2013 acquisition of PrintLeader Software (“PrintLeader”).

The fair value of these earnouts is estimated to be $20.3 and $35.7 million as of September 30, 2018, and December 31, 2017, respectively, by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include risk-free discount rates between 0.6% and 5.0%, as well as probability-adjusted revenue, gross profit, and direct operating income using the Monte Carlo valuation method. Probability-adjusted revenue, gross profit, and direct operating income are significant inputs that are not observable in the market, and are therefore classified as Level 3 inputs. These contingent liabilities have been reflected in the Condensed Consolidated Balance Sheet as of September 30, 2018, as current and noncurrent liabilities of $8.5 and $11.8 million, respectively.

Changes in the fair value of contingent consideration are summarized as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Liability for Contingent Consideration
Beginning balance	$	22,129		$	61,414		$	35,702		$	56,463
Fair value of Generation Digital contingent consideration at August 14, 2017	—			3,600			—			3,600
Changes in valuation	721			75			(12,054		)	974
Earnout accretion	91			336			194			1,213
Payments and settlements	(2,611		)	(10,265		)	(3,361		)	(11,559		)
Foreign currency adjustment	(7		)	(1,640		)	(158		)	2,829
Ending balance	$	20,323		$	53,520		$	20,323		53,520

The Optitex, Generation Digital, and Shuttleworth earnout liability valuations decreased, on a combined basis, during the three and nine months ended September 30, 2018 by $1.5 and $14.3 million, respectively, based on recent actual and updated forecasted financial performance data. The Escada earnout liability valuation increased $2.2 millionduring the three and nine months ended September 30, 2018. The Optitex, CTI, and Rialco earnout probabilities increased, while the Shuttleworth earnout performance probability decreased, during 2017. The earnout liability valuations increased during the three and nine months ended September 30, 2017 by $0.1 and $1.0 million, respectively. Changes in the fair value of contingent consideration subsequent to the acquisition date are reported in general and administrative expenses.

Earnout payments and settlements during the three and nine months ended September 30, 2018 of $2.6 and $3.4 million were primarily related to the Rialco, Generation Digital, and Shuttleworth contingent consideration liabilities. Earnout payments and settlements during the three and nine months ended September 30, 2017 of $10.3 and $11.6 million, respectively, were related to the Reggiani, Optitex, Rialco, and Shuttleworth contingent consideration liabilities.

The primary inputs to the fair value measurement of contingent consideration liability are the discount rate and probability-adjusted revenue or earnings targets specified in the acquisition agreements. Accordingly, we reviewed the sensitivity of the fair value measurement to changes in these inputs. We assessed the probability of achieving the revenue and profitability performance targets for contingent consideration associated with each acquisition at percentage levels between 50% and 100% as of each respective acquisition date based on an assessment of the historical performance of each acquired entity, our current expectations of future performance, and other relevant factors. A change in probability-adjusted revenue of five percentage points from the level assumed in the current valuations would result in an increase in the fair value of contingent consideration of $1.8 million or a decrease of $1.2 million. A change in the discount rate of one percentage point would result in an increase in the fair value of contingent consideration of $0.2 million or a decrease of $0.2 million. The potential undiscounted amount of contingent consideration that we could be required to pay related to our business acquisitions, assuming all remaining earnout payments were maximized, would be $11.4 million above amounts currently accrued as of September 30, 2018.

Fair Value of Derivative Instruments

We utilize the income approach to measure the fair value of our derivative assets and liabilities. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices, and are therefore classified as Level 2 measurements. The notional amount of our derivative assets and liabilities was $209.9 and $239.4 million as of September 30, 2018 and December 31, 2017, respectively.

Fair Value of Convertible Senior Notes

In September 2014, we issued $345 million aggregate principal amount of our Notes. The Notes are carried at their original issuance value, net of unamortized debt discount, and are not marked to market each period. The fair value of the Notes as of September 30, 2018 was approximately $340.7 million and was classified as a Level 2 fair value measurement. Fair value was estimated based upon actual quotations obtained at the end of the reporting period or the most recent date available. The market value of our Notes can be in excess of the outstanding principal amount due to the conversion premium.

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Derivatives and Hedging

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

Derivatives and Hedging

We are exposed to market risk and foreign currency exchange risk from changes in foreign currency exchange rates, which could affect operating results, financial position, and cash flows. We manage our exposure to these risks through our regular operating and financing activities and, when appropriate, through use of derivative financial instruments. These derivative financial instruments are used to hedge monetary assets and liabilities, intercompany balances, trade receivables, anticipated cash flows, and to reduce earnings and cash flow volatility resulting from shifts in foreign currency exchange rates. Our objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting fair values of assets and liabilities. We do not have any leveraged derivatives, nor do we use derivative contracts for speculative purposes. We present the fair value of all open derivative instruments, including those embedded in other contracts, as assets or liabilities on our Condensed Consolidated Balance Sheets. The related cash flow impacts of our derivative contracts are reflected as cash flows from operating activities.

Our exposures are primarily related to non-U.S. dollar-denominated revenue in Europe, the U.K., Latin America, China, Israel, and Australia, and to non-U.S. dollar-denominated operating expenses in Europe, India, the U.K., China, Israel, Brazil, and Australia. From time to time we have hedged our operating expense cash flow exposure in Indian rupees. We hedge balance sheet remeasurement exposure associated with British pound sterling, Canadian dollar, Chinese renminbi, Brazilian real, Israeli shekel, Japanese yen, and Euro-denominated intercompany balances; Brazilian real, British pound sterling, Australian dollar, Chinese renminbi, Israeli shekel, and Euro-denominated trade receivables; and British pound sterling, Israeli shekel, Canadian dollar, and Euro-denominated net monetary assets.

By their nature, derivative instruments involve, to varying degrees, elements of market and credit risk. The market risk associated with these instruments resulting from currency exchange movement is expected to offset the market risk of the underlying transactions, assets, and liabilities being hedged. Under our master netting agreements with our foreign currency derivative counterparties, we are allowed to net transactions of the same currency with a single net amount payable by one party to the other. The derivatives held by us are not subject to any credit contingent features negotiated with these counterparties. We are not required to pledge cash collateral related to these foreign currency derivative contracts. We do not believe there is significant risk of loss from non-performance by the counterparty associated with these instruments because, by policy, we only deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

Cash Flow Hedges

We did not have any foreign currency derivative contracts designated as cash flow hedges as of September 30, 2018 nor during the nine months ended September 30, 2018. Our foreign currency derivative contracts designated as cash flow hedges for our Indian rupee operating expenses were in the notional amount of $3.9 million as of December 31, 2017. The fair value of the net assets (liabilities) related to these cash flow hedges were not material. The changes in fair value of these contracts are reported as a component of AOCI and reclassified to operating expense in the periods of payment of the hedged operating expenses. The amount of ineffectiveness that was recorded in the Condensed Consolidated Statements of Operations for these designated cash flow hedges was immaterial. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

Balance Sheet Hedges

Our forward contracts are not designated for hedge accounting treatment since there is a natural offset for the remeasurement of the underlying foreign currency denominated asset or liability. We recognize changes in the fair value of non-designated derivative instruments in earnings in the period of change. Gains and losses on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest income and other income, net, in the same period as the remeasurement gain or loss of the related foreign currency denominated assets and liabilities. Our forward contracts not designated for hedge accounting treatment consisted of hedges of Australian dollar, British pound sterling, Brazilian real, Canadian dollar, Chinese renminbi, Euro, Israeli shekeland Japanese yen.

These balance sheet hedges cover currency exposures in the following line items in the notional amounts indicated (in thousands):

Balance sheet categories	September 30, 2018		December 31, 2017
Accounts Receivable	$	46,574	$	44,427
Other assets and liabilities, net	38,185		46,550
Intercompany balances	125,189		144,477
Total	$	209,948	$	235,454

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Convertible Senior Notes

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Convertible Senior Notes

Convertible Senior Notes

0.75% Convertible Senior Notes Due 2019

In September 2014, we completed a private placement of $345 million principal amount of 0.75% Convertible Senior Notes due September 1, 2019. The net proceeds from this offering were approximately $336.3 million, after deducting the initial purchasers’ commissions and the offering expenses paid by us. We used approximately $29.4 million of the net proceeds to purchase the Note Hedges described below, net of the proceeds from the Warrant transactions also described below.

The Notes are senior unsecured obligations of EFI with interest payable semiannually in arrears on March 1 and September 1 of each year. The Notes are not callable and will mature on September 1, 2019, unless previously purchased or converted in accordance with their terms prior to such date. Holders of the Notes who convert in connection with a “fundamental change,” as defined in the indenture governing the Notes (“Indenture”), may require us to purchase for cash all or any portion of their Notes at a purchase price equal to 100 percent of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.

The initial conversion rate is 18.9667 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $52.72 per share of common stock. Upon conversion of the Notes, holders will receive cash, shares of common stock or a combination thereof, at our election. Our intent is to settle the principal amount of the Notes in cash upon conversion. If the conversion value exceeds the principal amount, we would deliver shares of our common stock for our conversion obligation in excess of the aggregate principal amount. As of September 30, 2018, none of the conditions allowing holders of the Notes to convert had been met.

We separated the Notes into liability and equity components. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes using the effective interest method with an effective interest rate of 4.98% per annum (5.46% inclusive of debt issuance costs). The equity component is not remeasured if it continues to meet the conditions for equity classification.

We allocated the total transaction costs incurred by the issuance of the Notes to the liability and equity components based on their relative values. Issuance costs of $7.0 million attributable to the $281.4 million liability component are being amortized to expense over the term of the Notes, and issuance costs of $1.6 million attributable to the $63.6 million equity component were offset against the equity component in stockholders’ equity. Additionally, we recorded a deferred tax liability of $23.7 million on the debt discount, which is not deductible for tax purposes.

The Notes consisted of the following (in thousands):

	September 30, 2018			December 31, 2017
Liability component	$	345,000		$	345,000
Debt discount, net of amortization	(12,975		)	(23,178		)
Debt issuance costs, net of amortization	(1,658		)	(2,865		)
Net carrying amount	$	330,367		$	318,957
Equity component	$	63,643		$	63,643
Less: debt issuance costs allocated to equity	(1,582		)	(1,582		)
Net carrying amount	$	62,061		$	62,061

Interest expense recognized on the Notes was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
0.75% coupon	$	647	$	647	$	1,948	$	1,933
Amortization of debt discount	3,448		3,265		10,203		9,627
Amortization of debt issuance costs	407		388		1,207		1,144
Total	$	4,502	$	4,300	$	13,358	$	12,704

Note Hedges

We paid an aggregate of $63.9 million in convertible note hedge transactions with respect to our common stock (“Note Hedges”) in September 2014. The Note Hedges will expire upon maturity of the Notes. The Note Hedges are intended to offset the potential dilution upon conversion and/or offset any cash payments we are required to make in excess of the principal amount upon conversion of the Notes in the event that the market value per share of our common stock, as measured under the terms of the Note Hedges, is greater than the strike price of the Note Hedges. The strike price of the Note Hedges initially corresponded to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion price of the Notes. The Note Hedges are separate transactions and are not part of the Notes. Holders of the Notes will not have any rights with respect to the Note Hedges.

Warrants

Concurrently with entering into the Note Hedges, we separately sold Warrants to acquire shares of our common stock at a strike price of $68.86 per share (the "Warrants"). We received aggregate proceeds of $34.5 million from the sale of the Warrants. If the average market value per share of our common stock for the reporting period, as measured under the Warrants, exceeds the strike price of the Warrants, the Warrants will have a dilutive effect on our earnings per share. The Warrants are separate transactions and are not part of the Notes or the Note Hedges and are accounted for as a component of additional paid-in capital. Holders of the Notes and Note Hedges will not have any rights with respect to the Warrants.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Contingent Consideration

We are required to make payments to the former stockholders of acquired companies based on the achievement of specified performance targets as explained in Note 7 – Fair Value Measurements.

Lease Commitments and Contractual Obligations

As of September 30, 2018, we have leased certain of our current facilities and vehicles under noncancelable operating lease agreements. We are required to pay property taxes, insurance, and nominal maintenance costs for certain of these facilities and vehicles, and any increases over the base year of these expenses on the remainder of these leases.

Lease Termination

On July 27, 2018, we executed an agreement (the “Termination Agreement”) to terminate the lease agreement dated April 19, 2013 between John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee and the Company, pursuant to which the Company had leased a portion of an approximately 108,000 square foot, two-story building located at 6700 Dumbarton Circle, Fremont, CA, adjacent to the Company’s headquarters. The Termination Agreement was effective July 31, 2018. The Company moved its operations and personnel from the formerly leased facility into our headquarters building in July 2018. Prior to executing the Termination Agreement, the underlying lease had a remaining term of ten years and minimum noncancelable lease payments of $16.0 million. For accounting purposes, we were considered the owner of the building and had recorded the asset at a net book value of $13.7 million in property and equipment, net, on our Condensed Consolidated Balance Sheet prior to the termination. As of July 31, 2018, we derecognized the lease asset and removed the corresponding liability of $14.5 million, which represented the present value of the lease obligation, from our Condensed Consolidated Balance Sheet. The Termination Agreement required us to pay total penalties of $0.8 million. The net loss from this lease termination of $0.1 million was charged to restructuring expense during the three months ended September 30, 2018.

Assets Held for Sale

During the fourth quarter of 2017, our management approved a plan to sell approximately 31.5 acres of land and two manufacturing buildings located at One Vutek Place and 189 Waukewan Street, Meredith, New Hampshire, consisting of 163,000 total square feet. These assets, which were previously recorded within property and equipment, net at a net book value of $5.1 million, were reclassified as assets held for sale upon the approval of the plan. We recognized an impairment charge of $0.9 million in the fourth quarter of 2017, and reported the assets at $4.2 million on our Condensed Consolidated Balance Sheet as of December 31, 2017. During the three months ended September 30, 2018, we sold the 189 Waukewan Street land and building for net proceeds of $1.1 million and recognized a gain of $0.1 million. The One Vutek Place land and building remained in assets held for sale at a total value of $3.1 million as of September 30, 2018 on the Condensed Consolidated Balance Sheet and are actively being marketed.

Off-Balance Sheet Financing – Lease Arrangements

On August 26, 2016, we entered into a lease agreement with a lease term of 48.5 years, inclusive of two renewal options of 5.0 and 3.5 years, with the City of Manchester, NH to lease 16.9 acres adjacent to the Manchester Regional Airport. The land is subleased to MUFG Americas Capital Leasing & Finance, LLC (“MUFG”), formerly Bank of Tokyo – Mitsubishi UFJ Leasing & Finance LLC, during the term of the lease related to the manufacturing facility that was constructed on the site, which is described below. Minimum lease payments are $13.3 million during the entire 48.5-year term of the land lease, excluding six months of the land lease that were financed into the manufacturing facility lease.

On August 26, 2016, we entered into a six-year lease with MUFG whereby a 225,000-square foot manufacturing and warehouse facility was constructed for our Industrial Inkjet operating segment at a cost of $39.8 million. Construction was completed in April 2018. Minimum lease payments during the initial six-year term are $1.8 million. Upon completion of the initial six-year term, we have the option to renew the lease, purchase the facility, or return the facility to MUFG subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment. We have assessed our exposure in relation to the residual value guarantee and believe that there is no deficiency to the guaranteed value as of September 30, 2018.

During the construction period, we were required to maintain restricted cash equivalents or restricted investments equal to the amount expended to date on the construction of the building as collateral. The funds were deposited with a third-party trustee and were restricted during the construction period. Upon completion of construction, $39.8 million was deposited with MUFG and is restricted as collateral until the end of the underlying building lease period.

Legal Proceedings

From time to time, we are involved in a variety of claims, lawsuits, investigations, or proceedings relating to contractual disputes, securities laws, intellectual property rights, employment, or other matters that may arise in the normal course of business. We assess our potential liability in each of these matters by using the information available to us. We develop our views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and various combinations of appropriate litigation and settlement strategies. We accrue estimated losses from contingencies if a loss is deemed probable and can be reasonably estimated.

As of September 30, 2018, we are subject to the matters described below:

Matan Digital Printing (“MDG”) Matter. EFI acquired Matan Digital Printers (“Matan”) in 2015 from sellers (the “2015 Sellers”) that had acquired Matan Digital Printing Ltd. from other sellers in 2001 (the “2001 Sellers”). The 2001 Sellers have asserted a claim against the 2015 Sellers and Matan asserting that they are entitled to a portion of the 2015 Sellers’ proceeds from EFI’s acquisition. The 2015 Sellers dispute this claim and have agreed to indemnify EFI against the 2001 Sellers’ claim.

We do not believe that it is probable that we will incur a loss in the resolution of this matter. It is reasonably possible, however, that our financial statements could be materially affected by an unfavorable resolution and we could incur a material loss in this matter. We estimate the range of loss to be between one dollar and $10.1 million. If we incur a loss in this matter, it will be offset by a receivable of an equal amount representing a claim for indemnification against the escrow account established in connection with the Matan acquisition.

Purported Class Action Lawsuit.On August 10, 2017, a putative class action was filed against the Company and its two named executive officers in the United States District Court for the District of New Jersey, captioned Pipitone v. Electronics For Imaging, Inc., No. 2:17-cv-5992 (D.N.J.). A First Amended Complaint was filed on February 20, 2018. The plaintiffs allege, among other things, that statements by the Company and its officers about the Company’s financial reporting, revenue recognition, internal controls, and disclosure controls and procedures were false or misleading. The complaint seeks an unspecified amount of damages, interest, attorneys’ fees, and other costs, on behalf of a putative class of individuals and entities that purchased or otherwise acquired EFI securities from February 22, 2017 through August 3, 2017. EFI filed a motion to dismiss on April 23, 2018. The plaintiffs filed an opposition on May 23, 2018, and EFI filed its reply brief on June 13, 2018. A hearing on EFI’s motion to dismiss has not yet been scheduled.

At this time, we do not believe it is probable that we will incur a material loss in this matter. However, it is reasonably possible that our financial statements could be materially affected by an unfavorable resolution of this matter. Since this matter is in the preliminary stages, we are not yet in a position to estimate the amount or range of reasonably possible loss that may be incurred.

Purported Derivative Shareholder Lawsuits.On August 22, 2017, a purported derivative shareholder complaint was filed in the Superior Court of the State of California for the County of Alameda captioned Schiffmiller v. Gecht, No. RG17873197. A First Amended Complaint was filed on April 13, 2018. The complaint makes claims derivatively and on behalf of the Company as nominal defendant against the Company’s named executive officers and directors for alleged breaches of fiduciary duties and unjust enrichment, and alleges, among other things, that statements by the Company and its officers about the Company’s financial reporting, revenue recognition, internal controls, and disclosure controls and procedures were false or misleading. The complaint alleges the Company has suffered damage as a result of the individual defendants’ alleged actions, and seeks an unspecified amount of damages, restitution, and declaratory and other relief. The derivative action has been stayed pending the resolution of the Pipitone class action described above.

At this time, we do not believe it is probable that we will incur a material loss in this matter. However, it is reasonably possible that our financial statements could be materially affected by an unfavorable resolution of this matter. Because this matter has been stayed pending resolution of the Pipitone class action described above, we are not yet in a position to estimate the amount or range of reasonably possible loss that may be incurred.

Other Matters.As of September 30, 2018, we were subject to various other claims, lawsuits, investigations, and proceedings in addition to the matters discussed above. There is at least a reasonable possibility that additional losses may be incurred in excess of the amounts that we have accrued. However, we believe that these claims are not material to our financial statements or the range of reasonably possible losses is not reasonably estimable. Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

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Stock Repurchase Program

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Stock Repurchase Programs

Stock Repurchase Program

On September 11, 2017, the board of directors approved the repurchase of an additional $125 million for our share repurchase program commencing September 11, 2017 and expiring on December 31, 2018. The board of directors had previously authorized $150 million under the program in November 2015. Under this publicly announced program, we repurchased 1,614,166 and 1,019,544 shares for an aggregate purchase price of $50.5 and $47.0 million during the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, $58.9 million remained authorized for repurchases under this program.

Our employees have the option to surrender shares of common stock to satisfy their tax withholding obligations that arise on the vesting of RSUs, the exercise price of certain stock options, and any tax withholding obligations incurred from exercise of stock options. Employees surrendered 63,107 and 233,159 shares at an aggregate value of $2.0 and $10.0 million during the nine months ended September 30, 2018 and 2017, respectively.

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Stock-based Compensation

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

Stock-based Compensation

Stock-based compensation expense related to ESPP purchase rights and RSUs is summarized as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Stock-based compensation expense by type of awards
RSUs	$	10,587		$	3,545		$	25,793		$	18,875
ESPP purchase rights	1,336			1,103			4,685			3,666
Total stock-based compensation expense	11,923			4,648			30,478			22,541
Income tax benefit	(1,747		)	(1,525		)	(4,437		)	(6,929		)
Stock-based compensation expense, net of tax	$	10,176		$	3,123		$	26,041		$	15,612

Valuation Assumptions for ESPP Purchase Rights and Stock Options

We use the Black-Scholes-Merton (“BSM”) option pricing model to value stock-based compensation for all equity awards, except market-based awards, which are valued using the Monte Carlo valuation model. We value RSUs at the closing market price on the date of grant.

The estimated weighted average fair value per share and underlying assumptions of ESPP purchase rights issued were as follows:

	Nine Months Ended September 30,
	2018				2017
Weighted average fair value per share	$13.91				$12.09
Expected volatility	37	%	—	80%	24	%	—	28%
Risk-free interest rate	2.2	%	—	2.7%	0.7	%	—	1.3%
Expected term (in years)	0.5		—	2.0	0.5		—	2.0

No stock options were granted during the nine months ended September 30, 2018 and 2017. As of September 30, 2018, 100,000 shares underlying stock options are outstanding and exercisable. They are time-based options with an aggregate intrinsic value of $1.8 million, a weighted average exercise price of $16.00 per share, and remaining contractual term of 0.7 years. Aggregate intrinsic value for stock options represents the difference between the closing price per share of our common stock on the last trading day of the period and the option exercise price, multiplied by the number of in-the-money stock options outstanding, vested and expected to vest, and exercisable as of September 30, 2018.

Non-vested RSUs

Non-vested RSUs were awarded to employees under our equity incentive plans. Non-vested RSUs do not have the voting rights of common stock and the shares underlying non-vested RSUs are not considered issued and outstanding. Non-vested RSUs generally vest over a service period of one to four years. The compensation expense incurred for these service-based awards is based on the closing market price of our stock on the date of grant and is amortized on a graded vesting basis over the requisite service period.

Non-vested RSU activity during the nine months ended September 30, 2018 is summarized below (shares in thousands):

	Time-based				Performance-based				Market-based			Total
	Shares		Weighted average grant date fair value		Shares		Weighted average grant date fair value		Shares	Weighted average grant date fair value		Shares		Weighted average grant date fair value
Non-vested at January 1, 2018	1,048		$	35.76	1,209		$	42.18	23	$	35.15	2,280		$	39.16
Granted	985		31.31		829		30.92		—	—		1,814		31.13
Vested	(287	)	40.04		(20	)	44.84		—	—		(307	)	40.36
Forfeited	(96	)	34.90		(614	)	44.65		—	—		(710	)	43.33
Non-vested at September 30, 2018	1,650		32.41		1,404		34.42		23	35.15		3,077		33.35

Vested RSUs

The grant date fair value of RSUs vested during the nine months ended September 30, 2018 was $12.4 million. The aggregate intrinsic value of RSUs vested and expected to vest as of September 30, 2018 was $57.7 million and the remaining weighted average vesting period was 1.08 years. Aggregate intrinsic value for RSUs vested and expected to vest represents the closing market price per share of our common stock on the last trading day of the period, multiplied by the number of RSUs vested and expected to vest as of September 30, 2018. RSUs expected to vest represent time-based RSUs unvested and outstanding as of September 30, 2018, and performance-based RSUs for which the requisite service period has not been rendered, but are expected to vest based on the achievement of performance conditions. Performance-based RSUs that vested based on certain financial results achieved are expensed in the period that the performance and related service criteria were met.

Valuation Assumptions for Performance-based and Market-based RSUs

Performance-based stock options, market-based RSUs, and market-based stock options were not granted during the nine months ended September 30, 2018. We use the BSM option pricing model to value performance-based RSUs. The weighted average grant date fair value per share of performance-based RSUs granted and the assumptions used to estimate grant date fair value are as follows:

	Short-term		Long-term
Nine Months Ended September 30, 2018
Grant date fair value per share	$	28.26	$	34.56
Service period (years)	1.0		3.0
Nine Months Ended September 30, 2017
Grant date fair value per share	$	47.23	$	45.96
Service period (years)	1.0		2.0		–	3.0

Our performance-based RSUs generally vest when specified performance criteria are met based on bookings, revenue, cash provided by operating activities, non-GAAP operating income, non-GAAP earnings per share, revenue growth compared to market comparables, non-GAAP earnings per share growth compared to cash flow from operating activities growth, or other targets during the service period; otherwise, they are forfeited. Non-GAAP operating income is operating income determined in accordance with GAAP, adjusted to remove the impact of certain items and the related tax effects. Non-GAAP earnings per share is net income determined in accordance with GAAP, adjusted to remove the impact of certain items, and the related tax effects, divided by the weighted average number of common shares and dilutive potential common shares outstanding during the period.

The grant date fair value per share determined in accordance with the BSM valuation model is being amortized over the service period of the performance-based awards. The probability of achieving the performance criteria was determined based on review of the actual results achieved thus far by each business unit compared with the operating plan during the service period as well as the overall expectations of the business unit. Stock-based compensation expense was adjusted based on the updated fair value resulting from this probability assessment. As actual results are achieved during the service period, the probability assessment is updated and stock-based compensation expense is adjusted accordingly.

Market-based awards that were granted in prior periods vest when our average closing stock price exceeds defined multiples of the closing stock price for 90 consecutive trading days. If these multiples are not achieved by the expiration date, the awards are forfeited. The grant date fair value is amortized over the average derived service period of the awards. The average derived service period and total fair value were determined using a Monte Carlo valuation model based on our assumptions, which include a risk-free interest rate and implied volatility.

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Restructuring and Other

9 Months Ended

Sep. 30, 2018

Restructuring and Related Activities [Abstract]

Restructuring and Other

Restructuring and Other

During the nine months ended September 30, 2018 and 2017, we continued to analyze and re-align our cost structure following our business acquisitions. These charges primarily relate to integrating recently acquired businesses, consolidating facilities, eliminating redundancies, and lowering our operating expense run rate. Restructuring and other consists primarily of restructuring, severance, short-term retention costs, facility downsizing and relocation, and acquisition integration expenses.

Restructuring and other costs were $2.8 and $10.5 million during the three and nine months ended September 30, 2018, respectively, and were $0.8 and $5.4 million during the three and nine months ended September 30, 2017, respectively. Restructuring and other costs include severance charges of $1.6 and $5.9 million related to reductions in head count of 30 and 113 during the three and nine months ended September 30, 2018, respectively; and $0.3 and $3.8 million related to reductions in head count of 15 and 128 during the three and nine months ended September 30, 2017, respectively. Severance costs include severance payments, retention payments, related employee benefits, outplacement fees, recruiting, and employee relocation costs.

Facilities relocation and downsizing expenses were $0.4 and $1.4 million during the three and nine months ended September 30, 2018, respectively; and were $0.4 and $0.6 million during the three and nine months ended September 30, 2017, respectively. These expenses were primarily related to the relocation of certain manufacturing and administrative locations due to reduced space requirements. Integration expenses of $0.9 and $3.2 million during the three and nine months ended September 30, 2018, respectively, and $0.2 and $1.0 million during the three and nine months ended September 30, 2017, respectively, were incurred for the integration of our business acquisitions.

Restructuring and other reserve activities are summarized as follows (in thousands):

	Nine Months Ended September 30,
	2018			2017
Beginning reserve balance	$	2,452		$	1,824
Restructuring charges	6,289			4,101
Other charges	4,188			1,321
Non-cash restructuring and other	(686		)	(182		)
Payments	(9,751		)	(4,720		)
Ending reserve balance	$	2,492		$	2,344

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Income Taxes

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We recognized tax benefits of $4.3 and $1.9 million on pretax loss of $2.3 and pretax income of $0.2 million during the three and nine months ended September 30, 2018, respectively; and tax provisions of $0.8 and $0.8 million on pretax net income of $4.2 and $11.8 million during the three and nine months ended September 30, 2017, respectively. The benefit from (provision for) income taxes before discrete items reflected in the table below was a benefit of $0.9 and a provision of $0.1 million during the three and nine months ended September 30, 2018, respectively, and provisions of $2.0 and $4.5 million during the three and nine months ended September 30, 2017, respectively. The decrease in the provision for income taxes before discrete items for the three and nine months ended September 30, 2018, compared with the same periods in the prior year, was primarily due to decreased profitability before income taxes.

Primary differences between our provision for income taxes before discrete items and the income tax provision at the U.S. statutory rate include taxes on permanently reinvested foreign earnings, the tax effects of stock-based compensation expense which are non-deductible for tax purposes, and the U.S. Research and Development Credit.

Our tax benefit from (provision for) income taxes before discrete items is reconciled to our recorded benefit from (provision for) income taxes, as follows (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017			2018			2017
Benefit from (provision for) income taxes before discrete items	$	932	$	(1,973	)	$	(105	)	$	(4,517	)
Interest related to unrecognized tax benefits	71		—			(154		)	(121		)
Benefit from (provision for) stock-based compensation, including ESPP dispositions	112		(363		)	86			1,934
Benefit from reversals of uncertain tax positions	2,333		1,845			2,528			1,825
Benefit from (provision for) reassessment of taxes upon filing tax returns	135		(300		)	213			(396		)
Benefit from (provision for) reassessment of taxes upon tax law change	—		—			(160		)	480
Benefit from (provision for) deemed repatriation transition tax	682		—			(540		)	—
Benefit from (provision for) income taxes	$	4,265	$	(791	)	$	1,868		$	(795	)

On December 22, 2017, the 2017 Tax Act was enacted by the U.S. government. The 2017 Tax Act made broad and complex changes to the U.S. tax code that impact the nine months ended September 30, 2018 and year ended December 31, 2017, including, but not limited to, lowering the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, imposing a one-time deemed repatriation transition tax, and the remeasurement of U.S. deferred tax assets and liabilities.

The SEC issued SAB 118, which allows us to record a provisional estimate of the income tax effects of the 2017 Tax Act in the period in which we can make a reasonable estimate of its effects. We recorded a $27.5 million tax charge in the year ended December 31, 2017 as a provisional estimate. This provisional estimate included an estimated charge of $17.0 million related to the deemed repatriation transition tax, which is comprised of a gross transition tax of $27.0 million offset by foreign tax credits of $10.0 million. In addition, we recorded a $10.5 million charge related to the remeasurement of U.S. deferred tax assets and liabilities in the year ended December 31, 2017. While we have calculated a reasonable estimate of the impact of the U.S. tax rate reduction and the amount of the deemed repatriation transition tax, we are gathering additional information to refine and finalize our calculation of the impacts of the 2017 Tax Act on our U.S. deferred tax assets and liabilities, the deemed repatriation transition tax, and other provisions associated with the 2017 Tax Act. As an adjustment to our December 2017 provisional estimate, we recorded a benefit of $0.7 million and a provision of $0.5 million for federal and state taxes related to the deemed repatriation transition tax during the three and nine months ended September 30, 2018, respectively. As we obtain additional information, we will finalize the calculation of the income tax effects of the 2017 Tax Act in the fourth quarter of 2018.

The 2017 Tax Act also created a global intangible low-tax income (“GILTI”) provision, which is a minimum tax on certain foreign earnings, commencing in the year ending December 31, 2018. The amount of future U.S. inclusions in taxable income related to GILTI depends on our current structure, estimated future results of global operations, and our intent and ability to modify our structure and/or our business. We are not yet able to provide a reasonable estimate of the effect of this provision of the 2017 Tax Act. Therefore, we have not made any adjustments related to the potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred taxes associated with GILTI. Any subsequent adjustment to the deferred tax amounts related to GILTI (or other computations) will be recorded as a tax expense in the fourth quarter of 2018 when our analysis is complete.

As of September 30, 2018, and December 31, 2017, gross unrecognized benefits that would impact the effective tax rate if recognized were $30.8 and $33.9 million, respectively. Over the next twelve months, our existing tax positions will continue to generate increased liabilities for unrecognized tax benefits. It is reasonably possible that our gross unrecognized tax benefits will decrease up to $6.9 million in the next twelve months. These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits in our Condensed Consolidated Statements of Operations. $15.5 million of gross unrecognized tax benefits were offset against deferred tax assets as of September 30, 2018, and the remaining $15.3 million has been recorded as noncurrent income taxes payable.

We are open to assessment by the Internal Revenue Service (“IRS”) for the 2015-2017 tax years, state tax jurisdictions for the 2013-2017 tax years, the Netherlands tax authority for the 2014-2016 tax years, the Spanish tax authority for the 2014-2017 tax years, the Israel tax authority for the 2014-2016 tax years, and the Italian tax authority for the 2013-2016 tax years.

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Basis of Presentation and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements (“condensed consolidated financial statements”) include the accounts of Electronics For Imaging, Inc. and its subsidiaries (“EFI” or “Company”). All intercompany accounts and transactions have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information, rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements, and accounting policies consistent in all material respects with those applied in preparing our audited annual consolidated financial statements included in our Annual Report on Form 10-K, as amended by Amendment No. 1, for the year ended December 31, 2017 (the “2017 Form 10-K”). These condensed consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and notes included in the 2017 Form 10-K. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments, management considers necessary for the fair presentation of our financial position, operating results, comprehensive income, and cash flows for the interim periods presented. Our results for the interim periods are not necessarily indicative of results for the entire year.

Out-of-Period Adjustments

In the nine months ended September 30, 2017, we recorded out-of-period adjustments related to certain bill and hold transactions, which decreased revenue by $3.4 million, gross profit by $0.5 million, and net income by $0.3 million (or $0.01 per diluted share). We evaluated these adjustments considering both qualitative and quantitative factors and their impact in relation to each period, as well as the periods in which they originated. The impact of recognizing these adjustments in prior years was not significant to any individual period. Management believes the adjustments are immaterial to these condensed consolidated financial statements for the nine months ended September 30, 2017 and all previously issued financial statements.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Revenue Recognition. Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606 Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method applied to all incomplete contracts as of the date of initial application. ASC 606 supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (“ASC 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. In addition, ASC 606 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Effective January 1, 2018, we also adopted ASC 340-40, Other Assets and Deferred Costs – Contracts with Customers (“ASC 340-40”), using the modified retrospective method to all incomplete contracts as of the date of initial application. ASC 340-40 requires the deferral of incremental costs of obtaining a contract with a customer.

Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 and ASC 340-40, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. Additional discussion of these recently adopted pronouncements and their impact on our Condensed Consolidated Financial Statements is included below under Significant Accounting Policies, in Note 4 – Revenue, and in Note 5 – Supplemental Financial Statement Information.

Income Taxes. Staff Accounting Bulletin (“SAB”) 118 provides guidance for the application of ASC 740 for a measurement period to complete the accounting for certain elements of the Tax Cut & Jobs Act of 2017 (the “2017 Tax Act”). The measurement period is defined as up to one year from the enactment date, which will expire on December 22, 2018. SAB 118 requires that we recognize those income tax effects in our financial statements for which the accounting can be completed, as may be the case for the effect of rate changes on deferred tax assets and deferred tax liabilities. For matters that have not been completed, we are required to recognize provisional amounts to the extent that they are reasonably estimable, adjust them during the measurement period when more information becomes available, and report this information in our financial statements in that period. See additional information in Note 14 – Income Taxes.

Restricted Cash. Accounting Standard Update (“ASU”) 2016-18, Statement of Cash Flows: Restricted Cash, became effective in the first quarter of 2018 and requires the statement of cash flows to explain the change in cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts in the statement of cash flows. We previously included the changes in restricted cash equivalents in operating or investing activities in the Consolidated Statements of Cash Flows. Prior period amounts have been revised to conform to the current year presentation.

Reconciliation of cash, cash equivalents, and restricted cash equivalents

(in thousands)	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash and cash equivalents	$	180,942	$	170,345	$	175,830	$	164,313
Restricted cash equivalents	39,809		32,531		6,826		1,142
Total cash, cash equivalents, and restricted cash equivalents shown in the statement of cash flows	$	220,751	$	202,876	$	182,656	$	165,455

Definition of a Business. In January 2017, the Financial Accounting Standard Board (“FASB’) issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, which became effective in the first quarter of 2018 and significantly narrows how businesses are defined. Under ASU 2017-01, when substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar identifiable assets, then the assets acquired do not constitute a business. If substantially all of the fair value of the gross assets acquired is not concentrated in a single asset or group of similar assets, then the assets acquired may constitute a business if certain criteria are met. We must determine whether the acquired gross assets and activities include an input and a “substantive” process that together “significantly” contribute to the ability to create an output. A framework and specific criteria are provided to assist with the evaluation of whether a process is “substantive” and “significantly contributes” to the ability to create an output. “Output” is narrowly defined to be consistent with the description of a performance obligation in the new revenue guidance or this ASU. Missing inputs and processes may not be replaced by integration with our own inputs and processes under the new guidance. The adoption of ASU 2017-1 did not impact our condensed consolidated financial statements as of September 30, 2018 because we did not acquire a business during the nine months ended September 30, 2018.

Nonfinancial Asset Derecognition. In February 2017, the FASB issued ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets: Clarifying the Scope of Asset Derecognition and Accounting for Partial Sales of Nonfinancial Assets, which clarifies the scope of recent guidance as it relates to nonfinancial asset derecognition and the accounting for partial sales of nonfinancial assets. The ASU conforms the derecognition guidance as it relates to nonfinancial assets with the derecognition guidance in the new revenue standard (ASC 606) and is not expected to have a material impact on the accounting for real estate dispositions. ASU 2017-5 became effective in the first quarter of 2018. During the nine months ended September 30, 2018, we sold a non-financial asset, which is discussed further in Note 10–Commitments and Contingencies. There was no material impact from the adoption of this ASU in our condensed consolidated financial statements during the three and nine months ended September 30, 2018.

Stock Compensation Modification. In May 2017, the FASB issued ASU 2017-09, Stock Compensation – Scope of Modification Accounting, which clarifies the scope of modification accounting for share-based payment arrangements, which became effective in the first quarter of 2018. Specifically, we do not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. We elected to adopt this guidance prospectively to awards modified on or after the adoption date. The adoption of ASU 2017-09 did not have a material impact on our condensed consolidated financial statements during the three and nine months ended September 30, 2018.

Settlement of Convertible Debt. ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, issued in August 2016, requires that cash settlements of principal amounts of debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the debt must classify the portion of the principal payment attributable to the accreted interest related to the debt discount as cash outflows from operating activities. This is consistent with the classification of the coupon interest payments.

ASU 2016-15 became effective in the first quarter of 2018. Accordingly, $63.6 million of the debt discount attributable to the difference between the 0.75% coupon interest rate on our 0.75% Convertible Senior Notes due 2019 (“Notes”) and the 4.98% (5.46% inclusive of debt issuance costs) effective interest rate on the Notes will be classified as an operating cash outflow in the Condensed Consolidated Statement of Cash Flows upon any cash settlement of the Notes. The Notes were not settled as of September 30, 2018. We will apply ASU 2016-15 upon any cash settlement of the Notes.

Recent Accounting Pronouncements Not Yet Adopted

Lease Arrangements. Under current guidance, the classification of a lease by a lessee as either an operating or capital lease determines whether an asset and liability is recognized on the balance sheet. ASU 2016-2, Leases, which was issued in February 2016 and will be effective in the first quarter of 2019, requires that a lessee recognize an asset and liability on its balance sheet related to all leases with terms more than one year. For all leases, a lessee will be required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. The right-to-use asset represents the right to use the underlying asset during the lease term.

The recognition, measurement, and presentation of expenses and cash flows by a lessee will not significantly change from previous guidance. There continues to be a differentiation between finance leases and operating leases. The criteria for determining whether a lease is a finance or operating lease are substantially the same as existing guidance except that the “bright line” percentages have been removed. Also, an additional criterion has been added in the new guidance to consider whether the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Additional judgment will be required in applying the new lease guidance.

• For finance leases, interest is recognized on the lease liability separately from depreciation of the right-of-use asset in the statement of operations. Principal repayments are classified within financing activities and interest payments are classified as operating activities in the statement of cash flows.

• For operating leases, a lessee is required to recognize lease expense generally on a straight-line basis. All operating lease payments are classified as operating activities in the statement of cash flows.

The current build-to-suit lease accounting guidance will be rescinded by the new guidance, although simplified guidance will remain regarding lessee control during the construction period. Consequently, the accounting for build-to-suit leases will be the same as operating leases unless the lessee control provisions are applicable.

We expect to apply the additional transition method provided in ASU 2018-11, which allows us to initially apply the new leases standard at our January 1, 2019 adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. We expect to elect all of the available transition practical expedients which permit us not to reassess our prior conclusions about lease identification, lease classification, and initial direct costs. While we continue to assess the effects of the adoption, we have not yet quantified the impact but we believe there will be material increases in our non-current assets and liabilities, and in our current liabilities on our Consolidated Balance Sheets at the time of adoption. The adoption of this new standard to our lease transactions as lessee is not expected to have a material impact on our results of operations as reflected in our Consolidated Statements of Operations. We do not expect a material impact on our results of operations or financial position from adoption of this standard to our lease transactions as lessor.

Revenue Recognition

Revenue Recognition

On January 1, 2018, we adopted ASC 606 using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. On January 1, 2018, we also adopted ASC 340-40 using the modified retrospective method applied to all contracts as of the date of initial application.

We apply judgment in determining the customer’s ability and intention to pay. Judgments are made after considering a variety of factors including the customer’s historical payment experience, current creditworthiness, current economic impacts on the customer, past due balances, and significant one-time events or, in the case of a new customer, published credit and financial information.

For customer arrangements that include multiple products or services, judgment is required to determine the standalone selling price (“SSP”) for each distinct performance obligation. Where an observable price is not available, we gather all reasonable available data points, consider adjustments based on market conditions, entity-specific factors, and the need to stratify selling prices into meaningful groups (e.g., geographic region) in determining SSP. We allocate the total contract consideration to each distinct performance obligation on a relative SSP basis. Revenue is then recognized in accordance with the timing of the transfer of control of each performance obligation to the customer.

Accounting for long-term contracts where we provide information technology system development and implementation services requires significant judgment to estimate total contract revenue and costs. For long-term contracts, we estimate the profit on a contract as the difference between the total estimated revenue and expected costs to complete the services. We then recognize that revenue and profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that could span several years.

A change in our estimate of total costs to complete could affect the profitability of our contracts. We review and update our contract-related estimates regularly, and the effects of changes, if any, are reflected in the Condensed Consolidated Statements of Operations in the period that they are determined. Changes in estimates related to certain types of contracts accounted for using an input method measure of progress, such as cost-to-cost, can occur over the life of a contract for a variety of reasons, including the availability of labor and labor productivity, the nature and complexity of the work to be performed, cost estimates, level of effort and/or other assumptions impacting revenue or cost to perform a contract. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If, at any time, the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter it is identified.

Management exercises judgment to determine the period of benefit to amortize contract acquisition costs by considering factors such as expected renewals of customer contracts, duration of customer relationships and our technology development life cycle. Although we believe that the historical assumptions and estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. Amortization of deferred contract acquisition costs is included in sales and marketing expense in the Condensed Consolidated Statements of Operations. We periodically review these deferred costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred contract acquisition costs.

The nature of our products and services are as follows:

Hardware. Our hardware, such as Industrial Inkjet printers and Fiery digital front ends (“DFEs”), is generally sold with software that is integral to the functionality of the product. In these cases, the hardware and software license are accounted for as a single performance obligation. The contract consideration is generally in the form of a fixed fee at contract inception and revenue is recognized at the point in time when control is transferred to the customer. Consideration received from customers may include trade-in printers, which are valued at the lower of cost or net realizable value.

We offer shipping and handling services to customers related to the sale of hardware. We have elected the practical expedient to account for shipping and handling activities performed after transferring control of goods to our customer as a cost to fulfill the contract. The cost of shipping and handling is accrued at the point in which control transfers to the customer and revenue is recognized.

Ink. We typically enter into contracts with our existing customer base of installed printers to purchase ink that is not bundled with other deliverables within the contract. The ink is accounted for as a single performance obligation and revenue is recognized at the point in time when control of the ink is transferred to the customer.

Licenses. Our software license arrangements provide the customer with the right to install and use functional intellectual property (as it exists at the point in time at which the license is granted) for the duration of the contract term. Revenue from distinct software licenses is recognized at the point in time when the software is made available to the customer for download.

Our software license arrangements are generally comprised of fixed license fees (“license fees”) that are payable upfront, annually, quarterly, or monthly based on negotiated customer payment terms. For software license arrangements in which a significant portion of the license fees are due more than 12 months after the software is delivered to the customer, a significant financing component may exist. The significant financing component is calculated as the difference between the stated value and present value of the software license fees and is recognized as interest income under the effective interest method over the contract term. The total software license fee net of the significant financing component is recognized as revenue at the point in time when the software is made available to the customer for download or when the software is shipped to the customer. In instances where the timing of revenue recognition and the timing of invoicing is one year or less, we follow the practical expedient and do not impute interest for these contracts.

Maintenance. Our software license arrangements typically include an initial (bundled) post contract customer support (maintenance or “PCS”) term. Our promise to those customers who elect to purchase PCS represents a distinct, stand-alone performance obligation. Contract consideration is allocated to the PCS based on its relative SSP and revenue is recognized over the PCS term.

Professional Services. We provide various professional services to customers, primarily project management, software implementation, non-recurring engineering design, and training. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract(s). The majority of our professional services contracts are billed on a time and materials basis and revenue is recognized over time as the services are performed.

Software as a Service (“SaaS”). Our SaaS-based arrangements provide customers with continuous access to our software solutions in the form of a service hosted in the cloud. These arrangements may include initial implementation and setup and/or on-going support that represent a single promise (i.e. each individual promised component is not distinct) to provide continuous access to the software solution. Any setup fees associated with our SaaS arrangements are recognized ratably over the contract term plus expected renewal periods. As the customer simultaneously receives and consumes the benefits as access is provided, our performance obligation under our SaaS-based arrangements is comprised of a series of distinct components delivered over time. Our SaaS-based arrangements consideration is typically fixed.

Extended Service Plans (“ESP”). For our hardware arrangements, we enter into contracts with certain customers to provide services to maintain and repair the hardware for an extended period. ESPs are classified as service-type warranties under ASC 606 as they are sold separately and provide services which are incremental to the assurance that the product will perform to the agreed upon standards. The ESPs are accounted for as a separate performance obligation. Revenue from ESPs are recognized ratably over the contract period as the service is provided.

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Basis of Presentation and Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Reconciliation of Cash, cash equivalents, and restricted cash equivalents

Reconciliation of cash, cash equivalents, and restricted cash equivalents

(in thousands)	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash and cash equivalents	$	180,942	$	170,345	$	175,830	$	164,313
Restricted cash equivalents	39,809		32,531		6,826		1,142
Total cash, cash equivalents, and restricted cash equivalents shown in the statement of cash flows	$	220,751	$	202,876	$	182,656	$	165,455

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Basic and Diluted Earnings Per Share

Basic and diluted earnings per share are reconciled as follows (in thousands, except per share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Basic net income per share:
Net income available to common shareholders	$	1,920	$	3,454	$	2,093	$	11,000
Weighted average common shares outstanding	44,428		46,348		44,714		46,442
Basic net income per share	$	0.04	$	0.07	$	0.05	$	0.24
Diluted net income per share:
Net income available to common shareholders	$	1,920	$	3,454	$	2,093	$	11,000
Weighted average common shares outstanding	44,428		46,348		44,714		46,442
Dilutive stock options and non-vested RSUs and PSUs	926		589		674		660
Weighted average common shares outstanding for purposes of computing diluted net income per share	45,354		46,937		45,388		47,102
Diluted net income per share	$	0.04	$	0.07	$	0.05	$	0.23

Summary of Anti-dilutive Securities Excluded from Computation of Earnings Per Share

Potential shares of common stock that were not included in the determination of diluted net income per share because the impact of including them would have been anti-dilutive or performance conditions have not been met, consisted of the following (in thousands):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2018	2017	2018	2017
RSUs & PSUs	626	327	554	304
ESPP purchase rights	41	410	638	342
Total potential shares of common stock excluded from the computation of diluted earnings per share	667	737	1,192	646

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Segment and Geographic Information (Tables)

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Summary of Revenue and Operating Segment Profit (Gross Profit), Excluding Stock-Based Compensation Expense by Segment

Our revenue and gross profit (i.e., gross profit excluding stock-based compensation expense) by operating segment are summarized as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Industrial Inkjet
Revenue	$	154,902		$	142,930		$	453,545		$	407,886
Gross profit	53,661			53,392			158,351			154,972
Gross profit percentages	34.6		%	37.4		%	34.9		%	38.0		%
Productivity Software
Revenue	$	40,452		$	37,171		$	125,839		$	111,292
Gross profit	28,394			26,667			88,988			81,431
Gross profit percentages	70.2		%	71.7		%	70.7		%	73.2		%
Fiery
Revenue	$	61,780		$	68,258		$	178,688		$	204,919
Gross profit	44,368			47,884			128,590			143,821
Gross profit percentages	71.8		%	70.2		%	72.0		%	70.2		%

Reconciliation of Operating Segment Gross Profit to Condensed Consolidated Statements of Operations

Operating segment profit is reconciled to our Condensed Consolidated Statements of Operations as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Segment gross profit	$	126,423		$	127,943		$	375,929		$	380,224
Stock-based compensation expense	(904		)	(486		)	(2,715		)	(1,985		)
Gross profit	$	125,519		$	127,457		$	373,214		$	378,239

Tangible and Intangible Assets, Net of Liabilities, Summarized by Operating Segment

Tangible and intangible assets, net of liabilities, are summarized by operating segment as follows (in thousands):

	Industrial Inkjet		Productivity Software			Fiery		Corporate and Unallocated Net Assets		Total
September 30, 2018
Goodwill	$	150,197	$	170,098		$	74,077	$	—	$	394,372
Identified intangible assets, net	45,688		24,903			15,655		—		86,246
Tangible assets, net of liabilities	251,948		(26,192		)	25,738		28,154		279,648
Net tangible and intangible assets	$	447,833	$	168,809		$	115,470	$	28,154	$	760,266

December 31, 2017
Goodwill	$	154,373	$	174,644		$	74,261	$	—	$	403,278
Identified intangible assets, net	66,547		36,379			20,082		—		123,008
Tangible assets, net of liabilities	221,933		(27,755		)	11,286		49,561		255,025
Net tangible and intangible assets	$	442,853	$	183,268		$	105,629	$	49,561	$	781,311

Revenue by Ship-to Destination

We report revenue by geographic region based on ship-to destination which is summarized as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Americas	$	134,491	$	129,488	$	374,170	$	353,397
Europe, Middle East, and Africa (“EMEA”)	88,879		85,089		271,064		274,635
Asia Pacific (“APAC”)	33,764		33,782		112,838		96,065
Total revenue	$	257,134	$	248,359	$	758,072	$	724,097

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Revenue (Tables)

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

The cumulative effect of applying ASC 606 and ASC 340-40 to active contracts as of the adoption date resulted in the following adjustments to the Condensed Consolidated Balance Sheet as of January 1, 2018 (in thousands):

	Reported as of December 31, 2017		ASC 606 Adjustments			As Adjusted January 1, 2018
Assets
Accounts receivable, net	$	244,416	$	102		$	244,518
Other current assets	41,799		(1,628		)	40,171
Deferred tax assets	45,083		(1,466		)	43,617
Other assets	15,504		8,062			23,566
Liabilities
Deferred revenue	55,833		(95		)	55,738
Noncurrent contingent and other liabilities	28,801		491			29,292
Stockholders’ equity:
Retained earnings	402,544		4,674			407,218

The impact of adopting ASC 606 and ASC 340-40 on our Condensed Consolidated Statement of Operations is summarized as follows (in thousands):

	Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
	Amounts in Accordance with ASC 606			Amounts in Accordance with ASC 605			Effect of change higher (lower)			Amounts in Accordance with ASC 606		Amounts in Accordance with ASC 605			Effect of change higher (lower)
Revenue	$	257,134		$	255,746		$	1,388		$	758,072	$	754,348		$	3,724
Cost of revenue	131,615			131,067			548			384,858		384,509			349
Gross profit	125,519			124,679			840			373,214		369,839			3,375
Operating expenses	123,404			123,316			88			359,520		359,418			102
Income from operations	2,115			1,363			752			13,694		10,421			3,273
Interest income and other income, net	336			199			137			1,270		823			447
Income (loss) before income taxes	(2,345		)	(3,234		)	889			225		(3,495		)	3,720
Benefits from income taxes	4,265			4,465			(200		)	1,868		2,363			(495		)
Net income (loss)	1,920			1,231			689			2,093		(1,132		)	3,225

The impact of adopting ASC 606 and ASC 340-40 on our Condensed Consolidated Balance Sheet as of September 30, 2018 was as follows (in thousands):

	Amounts in Accordance with ASC 606		Amounts in Accordance with ASC 605		Effect of change higher (lower)
Assets
Accounts receivable, net	$	240,150	$	236,018	$	4,132
Other current assets	47,814		49,790		(1,976		)
Deferred tax assets	43,265		45,226		(1,961		)
Other assets	34,369		26,409		7,960
Liabilities
Deferred revenue	65,181		65,239		(58		)
Noncurrent contingent and other liabilities	17,307		16,993		314
Stockholders’ equity
Retained earnings	409,311		401,412		7,899

Summary of Disaggregated Revenue by Source

The following table presents our disaggregated revenue by source (in thousands). Sales and usage-based taxes are excluded from revenue:

	Three Months Ended September 30, 2018								Nine Months Ended September 30, 2018
	Industrial Inkjet		Productivity Software		Fiery		Total		Industrial Inkjet		Productivity Software		Fiery		Total
Major Products and Service Lines:
Industrial Inkjet
Printers and parts	$	97,846	$	—	$	—	$	97,846	$	283,819	$	—	$	—	$	283,819
Ink, supplies, and maintenance	57,056		—		—		57,056		169,726		—		—		169,726
Productivity Software
Licenses	—		10,774		—		10,774		—		34,086		—		34,086
Professional services	—		7,349		—		7,349		—		22,919		—		22,919
Maintenance and subscriptions	—		22,329		—		22,329		—		68,834		—		68,834
Fiery
Digital front ends and related  products	—		—		58,257		58,257		—		—		167,713		167,713
Maintenance and subscriptions	—		—		3,523		3,523		—		—		10,975		10,975
Total	$	154,902	$	40,452	$	61,780	$	257,134	$	453,545	$	125,839	$	178,688	$	758,072
Timing of Revenue Recognition:
Transferred at a Point in Time	$	149,521	$	10,774	$	58,257	$	218,552	$	437,780	$	34,086	$	167,713	$	639,579
Transferred Over Time	5,381		29,678		3,523		38,582		15,765		91,753		10,975		118,493
Total	$	154,902	$	40,452	$	61,780	$	257,134	$	453,545	$	125,839	$	178,688	$	758,072
Recurring/Non-Recurring:
Non-Recurring	$	97,846	$	18,123	$	58,257	$	174,226	$	283,819	$	57,005	$	167,713	$	508,537
Recurring	57,056		22,329		3,523		82,908		169,726		68,834		10,975		249,535
Total	$	154,902	$	40,452	$	61,780	$	257,134	$	453,545	$	125,839	$	178,688	$	758,072

Summary of Unbilled Accounts Receivable and Deferred Revenue

The following table reflects the balances in unbilled accounts receivable and deferred revenue (in thousands):

	September 30, 2018		January 1, 2018
Unbilled accounts receivable – current	$	34,830	$	23,296
Unbilled accounts receivable – noncurrent	3,483		4,122
Deferred revenue – current	65,181		55,738
Deferred revenue – noncurrent	349		565

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Supplemental Financial Statement Information Details (Tables)

9 Months Ended

Sep. 30, 2018

Supplemental Financial Statement Information [Abstract]

Summary of Supplemental Cash Flow Information

Supplemental Cash Flow Information

	Nine Months Ended September 30,
(in thousands)	2018		2017
Net cash paid for income taxes	$	12,765	$	15,724
Cash paid for interest expense	3,001		3,667
Property, equipment, and intellectual property received, but not paid	639		703

Schedule of Inventories

Inventories are summarized as follows (in thousands):

	September 30, 2018		December 31, 2017
Raw materials	$	52,085	$	57,061
Work-in-process	13,584		9,792
Finished goods	55,621		58,960
Total	$	121,290	$	125,813

Schedule of Changes in Product Warranty Reserves

The changes in product warranty reserves are as follows (in thousands):

	Nine Months Ended September 30,
	2018			2017
Beginning balance	$	16,335		$	10,319
Liability assumed upon acquiring FFPS	—			9,368
Provisions, net of releases	8,154			9,284
Settlements	(11,245		)	(12,588		)
Ending balance	$	13,244		$	16,383

Schedule of Equipment Subject to Operating Leases

Equipment leased to customers under operating leases was as follows (in thousands):

	September 30, 2018			December 31, 2017
Equipment leased to customers under operating leases	$	7,755		$	5,432
Accumulated depreciation	(3,297		)	(1,927		)
Equipment leased to customers under operating leases, net	$	4,458		$	3,505

Schedule of Minimum Future Rental Revenues on Operating Leases

Scheduled minimum future rental revenue on operating leases as of September 30, 2018 was as follows (in thousands):

Remainder of 2018	$	729
2019	2,134
2020	2,590
2021	384
2022	432
Total	$	6,269

Schedule of Accumulated Other Comprehensive Income (Loss)

AOCI classified within stockholders’ equity on our Condensed Consolidated Balance Sheets was as follows (in thousands):

	September 30, 2018			December 31, 2017
Net unrealized investment losses	$	(941	)	$	(697	)
Currency translation gains (losses)	(6,055		)	8,794
Net unrealized gain on cash flow hedges	—			41
Total	$	(6,996	)	$	8,138

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Accounts Receivable (Tables)

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

Our financing receivables are summarized as follows (in thousands):

	September 30, 2018		December 31, 2017
Sales-type lease receivables	$	30,196	$	16,558
Trade receivables	11,814		12,125
Total financing receivables	$	42,010	$	28,683
Scheduled to be received in excess of one year	$	23,727	$	15,191

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Available-for-Sale Short-Term Investments

Our available-for-sale short-term investments are summarized as follows (in thousands):

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
September 30, 2018
U.S. Government and sponsored entities	$	55,322	$	—	$	(714	)	$	54,608
Corporate debt securities	51,345		—		(495		)	50,850
Municipal securities	383		—		(4		)	379
Asset-backed securities	7,020		33		(61		)	6,992
Mortgage-backed securities – residential	158		—		(1		)	157
Total short-term investments	$	114,228	$	33	$	(1,275	)	$	112,986
December 31, 2017
U.S. Government and sponsored entities	$	59,824	$	—	$	(660	)	$	59,164
Corporate debt securities	79,356		—		(450		)	78,906
Municipal securities	382		—		(2		)	380
Asset-backed securities	9,808		44		(47		)	9,805
Mortgage-backed securities – residential	445		—		(3		)	442
Total short-term investments	$	149,815	$	44	$	(1,162	)	$	148,697

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss position below are as follows (in thousands):

	Less than 12 Months					More than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2018
U.S. Government and sponsored entities	$	—	$	—		$	54,608	$	(714	)	$	54,608	$	(714	)
Corporate debt securities	10,159		(90		)	40,691		(405		)	50,850		(495		)
Municipal securities	379		(4		)	—		—			379		(4		)
Asset-backed securities	—		—			6,934		(61		)	6,934		(61		)
Mortgage-backed securities – residential	18		—			86		(1		)	104		(1		)
Total	$	10,556	$	(94	)	$	102,319	$	(1,181	)	$	112,875	$	(1,275	)
December 31, 2017
U.S. Government and sponsored entities	$	23,023	$	(206	)	$	35,989	$	(454	)	$	59,012	$	(660	)
Corporate debt securities	45,857		(207		)	32,634		(243		)	78,491		(450		)
Municipal securities	378		(2		)	—		—			378		(2		)
Asset-backed securities	6,779		(31		)	2,947		(16		)	9,726		(47		)
Mortgage-backed securities – residential	162		(2		)	142		(1		)	304		(3		)
Total	$	76,199	$	(448	)	$	71,712	$	(714	)	$	147,911	$	(1,162	)

Amortized Cost and Estimated Fair Value of Investments

Amortized cost and estimated fair value of investments as of September 30, 2018, are summarized as follows (in thousands):

	Amortized cost		Fair value
Mature in less than one year	$	75,459	$	74,864
Mature in one to three years	38,769		38,122
Total short-term investments	$	114,228	$	112,986

Investments in Accordance with Fair Value Hierarchy

Our assets and liabilities measured at fair value by levels within the fair value hierarchy are summarized as follows (in thousands):

	September 30, 2018								December 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	18,524	$	—	$	—	$	18,524	$	9,897	$	—	$	—	$	9,897
U.S. Government and sponsored  entities	33,279		21,328		—		54,607		33,261		25,903		—		59,164
Corporate debt securities	—		50,850		—		50,850		—		78,906		—		78,906
Municipal securities	—		379		—		379		—		380		—		380
Asset-backed securities	—		6,934		59		6,993		—		9,754		51		9,805
Mortgage-backed securities  – residential	—		157		—		157		—		442		—		442
Total	$	51,803	$	79,648	$	59	$	131,510	$	43,158	$	115,385	$	51	$	158,594
Liabilities:
Contingent consideration,  current and noncurrent	$	—	$	—	$	20,323	$	20,323	$	—	$	—	$	35,702	$	35,702
Self-insurance	—		—		982		982		—		—		902		902
Total	$	—	$	—	$	21,305	$	21,305	$	—	$	—	$	36,604	$	36,604

Summary of Changes in Fair Value Contingent Consideration

Changes in the fair value of contingent consideration are summarized as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Liability for Contingent Consideration
Beginning balance	$	22,129		$	61,414		$	35,702		$	56,463
Fair value of Generation Digital contingent consideration at August 14, 2017	—			3,600			—			3,600
Changes in valuation	721			75			(12,054		)	974
Earnout accretion	91			336			194			1,213
Payments and settlements	(2,611		)	(10,265		)	(3,361		)	(11,559		)
Foreign currency adjustment	(7		)	(1,640		)	(158		)	2,829
Ending balance	$	20,323		$	53,520		$	20,323		53,520

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Derivatives and Hedging (Tables)

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Balance Sheet Hedges Cover Currency Exposures in Notional Amounts

These balance sheet hedges cover currency exposures in the following line items in the notional amounts indicated (in thousands):

Balance sheet categories	September 30, 2018		December 31, 2017
Accounts Receivable	$	46,574	$	44,427
Other assets and liabilities, net	38,185		46,550
Intercompany balances	125,189		144,477
Total	$	209,948	$	235,454

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Convertible Senior Notes (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Schedule of Convertible Notes

The Notes consisted of the following (in thousands):

	September 30, 2018			December 31, 2017
Liability component	$	345,000		$	345,000
Debt discount, net of amortization	(12,975		)	(23,178		)
Debt issuance costs, net of amortization	(1,658		)	(2,865		)
Net carrying amount	$	330,367		$	318,957
Equity component	$	63,643		$	63,643
Less: debt issuance costs allocated to equity	(1,582		)	(1,582		)
Net carrying amount	$	62,061		$	62,061

Summary of Interest Expense Recognized Related to Notes

Interest expense recognized on the Notes was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
0.75% coupon	$	647	$	647	$	1,948	$	1,933
Amortization of debt discount	3,448		3,265		10,203		9,627
Amortization of debt issuance costs	407		388		1,207		1,144
Total	$	4,502	$	4,300	$	13,358	$	12,704

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Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock-Based Compensation Expense

Stock-based compensation expense related to ESPP purchase rights and RSUs is summarized as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Stock-based compensation expense by type of awards
RSUs	$	10,587		$	3,545		$	25,793		$	18,875
ESPP purchase rights	1,336			1,103			4,685			3,666
Total stock-based compensation expense	11,923			4,648			30,478			22,541
Income tax benefit	(1,747		)	(1,525		)	(4,437		)	(6,929		)
Stock-based compensation expense, net of tax	$	10,176		$	3,123		$	26,041		$	15,612

Schedule of ESPP Purchase Rights and Underlying Weighted Average Assumptions

The estimated weighted average fair value per share and underlying assumptions of ESPP purchase rights issued were as follows:

	Nine Months Ended September 30,
	2018				2017
Weighted average fair value per share	$13.91				$12.09
Expected volatility	37	%	—	80%	24	%	—	28%
Risk-free interest rate	2.2	%	—	2.7%	0.7	%	—	1.3%
Expected term (in years)	0.5		—	2.0	0.5		—	2.0

Schedule of Non-Vested RSUs

Non-vested RSU activity during the nine months ended September 30, 2018 is summarized below (shares in thousands):

	Time-based				Performance-based				Market-based			Total
	Shares		Weighted average grant date fair value		Shares		Weighted average grant date fair value		Shares	Weighted average grant date fair value		Shares		Weighted average grant date fair value
Non-vested at January 1, 2018	1,048		$	35.76	1,209		$	42.18	23	$	35.15	2,280		$	39.16
Granted	985		31.31		829		30.92		—	—		1,814		31.13
Vested	(287	)	40.04		(20	)	44.84		—	—		(307	)	40.36
Forfeited	(96	)	34.90		(614	)	44.65		—	—		(710	)	43.33
Non-vested at September 30, 2018	1,650		32.41		1,404		34.42		23	35.15		3,077		33.35

Schedule of Weighted Average Grant Date Fair Value Per Share of Performance-Based RSUs Assumptions Used to Estimate Fair Value

The weighted average grant date fair value per share of performance-based RSUs granted and the assumptions used to estimate grant date fair value are as follows:

	Short-term		Long-term
Nine Months Ended September 30, 2018
Grant date fair value per share	$	28.26	$	34.56
Service period (years)	1.0		3.0
Nine Months Ended September 30, 2017
Grant date fair value per share	$	47.23	$	45.96
Service period (years)	1.0		2.0		–	3.0

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Restructuring and Other (Tables)

9 Months Ended

Sep. 30, 2018

Restructuring and Related Activities [Abstract]

Restructuring and Other Reserve Activities

Restructuring and other reserve activities are summarized as follows (in thousands):

	Nine Months Ended September 30,
	2018			2017
Beginning reserve balance	$	2,452		$	1,824
Restructuring charges	6,289			4,101
Other charges	4,188			1,321
Non-cash restructuring and other	(686		)	(182		)
Payments	(9,751		)	(4,720		)
Ending reserve balance	$	2,492		$	2,344

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Tax Provisions before Discrete Items Reconciled to Recorded Provision for (Benefits from) Income Taxes

Our tax benefit from (provision for) income taxes before discrete items is reconciled to our recorded benefit from (provision for) income taxes, as follows (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017			2018			2017
Benefit from (provision for) income taxes before discrete items	$	932	$	(1,973	)	$	(105	)	$	(4,517	)
Interest related to unrecognized tax benefits	71		—			(154		)	(121		)
Benefit from (provision for) stock-based compensation, including ESPP dispositions	112		(363		)	86			1,934
Benefit from reversals of uncertain tax positions	2,333		1,845			2,528			1,825
Benefit from (provision for) reassessment of taxes upon filing tax returns	135		(300		)	213			(396		)
Benefit from (provision for) reassessment of taxes upon tax law change	—		—			(160		)	480
Benefit from (provision for) deemed repatriation transition tax	682		—			(540		)	—
Benefit from (provision for) income taxes	$	4,265	$	(791	)	$	1,868		$	(795	)

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Basis of Presentation and Significant Accounting Policies - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2014
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue	$ (257,134)	$ (248,359)	$ (758,072)	$ (724,097)
Gross profit	(125,519)	(127,457)	(373,214)	(378,239)
Net loss	$ (1,920)	$ (3,454)	$ (2,093)	$ (11,000)
Net income per diluted common share (in usd per share)	$ (0.04)	$ (0.07)	$ (0.05)	$ (0.23)
Interest rate of debt, stated percentage	0.75%		0.75%
0.75% Convertible Senior Notes Due 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Debt discount	$ 63,600		$ 63,600
Interest rate of debt, stated percentage	0.75%		0.75%		0.75%
Effective interest rate percentage	4.98%		4.98%		4.98%
Debt issuance costs | 0.75% Convertible Senior Notes Due 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Effective interest rate percentage	5.46%		5.46%		5.46%
Out Of Period Adjustment For Bill And Hold Transactions
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue				$ 3,400
Gross profit				500
Net loss				$ 300
Net income per diluted common share (in usd per share)		$ 0.01		$ 0.01

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Basis of Presentation and Significant Accounting Policies - Cash, cash equivalents, and restricted cash equivalents (Detail) - USD ($) $ in Thousands		Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract]
Cash and cash equivalents		$ 180,942	$ 170,345	$ 175,830	$ 164,313
Restricted cash equivalents		39,809	32,531	6,826	1,142
Total cash, cash equivalents, and restricted cash equivalents shown in the statement of cash flows	[1]	$ 220,751	$ 202,876	$ 182,656	$ 165,455

[1] Certain prior period amounts have been revised due to the implementation of ASU 2016-18. See Note 1 for details.

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Earnings Per Share - Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Basic net income per share:
Net income available to common shareholders	$ 1,920	$ 3,454	$ 2,093	$ 11,000
Weighted average common shares outstanding (in shares)	44,428	46,348	44,714	46,442
Basic net income per share (in usd per share)	$ 0.04	$ 0.07	$ 0.05	$ 0.24
Diluted net income per share:
Net income available to common shareholders	$ 1,920	$ 3,454	$ 2,093	$ 11,000
Weighted average common shares outstanding (in shares)	44,428	46,348	44,714	46,442
Dilutive stock options and non-vested RSUs and PSUs (in shares)	926	589	674	660
Weighted average common shares outstanding for purposes of computing diluted net income per share (in shares)	45,354	46,937	45,388	47,102
Diluted net income per share (in usd per share)	$ 0.04	$ 0.07	$ 0.05	$ 0.23

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Earnings Per Share - Summary of Anti-dilutive Securities Excluded from Computation of Earnings Per Share (Detail) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potential shares of common stock excluded from the computation of diluted earnings per share	667	737	1,192	646
RSUs & PSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potential shares of common stock excluded from the computation of diluted earnings per share	626	327	554	304
ESPP purchase rights
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potential shares of common stock excluded from the computation of diluted earnings per share	41	410	638	342

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Segment and Geographic Information - Revenue and Operating Profit (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Segment Reporting Information [Line Items]
Revenue	$ 257,134	$ 248,359	$ 758,072	$ 724,097
Gross profit	125,519	127,457	373,214	378,239
Industrial Inkjet
Segment Reporting Information [Line Items]
Revenue	154,902	142,930	453,545	407,886
Gross profit	$ 53,661	$ 53,392	$ 158,351	$ 154,972
Gross profit percentages	34.60%	37.40%	34.90%	38.00%
Productivity Software
Segment Reporting Information [Line Items]
Revenue	$ 40,452	$ 37,171	$ 125,839	$ 111,292
Gross profit	$ 28,394	$ 26,667	$ 88,988	$ 81,431
Gross profit percentages	70.20%	71.70%	70.70%	73.20%
Fiery
Segment Reporting Information [Line Items]
Revenue	$ 61,780	$ 68,258	$ 178,688	$ 204,919
Gross profit	$ 44,368	$ 47,884	$ 128,590	$ 143,821
Gross profit percentages	71.80%	70.20%	72.00%	70.20%

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Segment and Geographic Information - Segment Gross Profit to Consolidated Operations (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Segment Reporting Information [Line Items]
Gross profit	$ 125,519	$ 127,457	$ 373,214	$ 378,239
Stock-based compensation expense	(11,923)	(4,648)	(30,478)	(22,541)
Segment gross profit
Segment Reporting Information [Line Items]
Gross profit	126,423	127,943	375,929	380,224
Stock-based compensation expense	$ (904)	$ (486)	$ (2,715)	$ (1,985)

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Segment and Geographic Information - Tangible and Intangible Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Segment Reporting Information [Line Items]
Goodwill	$ 394,372	$ 403,278
Identified intangible assets, net	86,246	123,008
Tangible assets, net of liabilities	279,648	255,025
Net tangible and intangible assets	760,266	781,311
Operating Segment | Industrial Inkjet
Segment Reporting Information [Line Items]
Goodwill	150,197	154,373
Identified intangible assets, net	45,688	66,547
Tangible assets, net of liabilities	251,948	221,933
Net tangible and intangible assets	447,833	442,853
Operating Segment | Productivity Software
Segment Reporting Information [Line Items]
Goodwill	170,098	174,644
Identified intangible assets, net	24,903	36,379
Tangible assets, net of liabilities	(26,192)	(27,755)
Net tangible and intangible assets	168,809	183,268
Operating Segment | Fiery
Segment Reporting Information [Line Items]
Goodwill	74,077	74,261
Identified intangible assets, net	15,655	20,082
Tangible assets, net of liabilities	25,738	11,286
Net tangible and intangible assets	115,470	105,629
Corporate and Unallocated Net Assets
Segment Reporting Information [Line Items]
Goodwill	0	0
Identified intangible assets, net	0	0
Tangible assets, net of liabilities	28,154	49,561
Net tangible and intangible assets	$ 28,154	$ 49,561

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Segment and Geographic Information - Revenue by Ship-to Destination (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Segment Reporting Information [Line Items]
Revenue	$ 257,134	$ 248,359	$ 758,072	$ 724,097
Americas
Segment Reporting Information [Line Items]
Revenue	134,491	129,488	374,170	353,397
Europe, Middle East, and Africa (“EMEA”)
Segment Reporting Information [Line Items]
Revenue	88,879	85,089	271,064	274,635
Asia Pacific (“APAC”)
Segment Reporting Information [Line Items]
Revenue	$ 33,764	$ 33,782	$ 112,838	$ 96,065

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Revenue - Additional Information (Detail) - USD ($) $ in Millions		3 Months Ended	9 Months Ended
	Jan. 01, 2018	Sep. 30, 2018	Sep. 30, 2018
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue recognized		$ 7.6	$ 45.3
Asset, reclassified to receivable		$ 2.7	$ 24.6
Effect of change higher (lower)
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Cumulative effect on retained earnings, net of tax	$ 4.7

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Revenue - Balance Sheet, Cumulative Effect (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Assets
Accounts receivable, net	$ 240,150	$ 244,518	$ 244,416
Other current assets	47,814	40,171	41,799
Deferred tax assets	43,265	43,617	45,083
Other assets	34,369	23,566	15,504
Liabilities
Deferred revenue	65,181	55,738	55,833
Noncurrent contingent and other liabilities	17,307	29,292	28,801
Stockholders’ equity:
Retained earnings	409,311	$ 407,218	402,544
Amounts in Accordance with ASC 606
Assets
Accounts receivable, net	240,150
Other current assets	47,814
Deferred tax assets	43,265
Other assets	34,369
Liabilities
Deferred revenue	65,181
Noncurrent contingent and other liabilities	17,307
Stockholders’ equity:
Retained earnings	$ 409,311
December 31, 2017
Assets
Accounts receivable, net			244,416
Other current assets			41,799
Deferred tax assets			45,083
Other assets			15,504
Liabilities
Deferred revenue			55,833
Noncurrent contingent and other liabilities			28,801
Stockholders’ equity:
Retained earnings			402,544
ASC 606 Adjustments | Amounts in Accordance with ASC 606
Assets
Accounts receivable, net			102
Other current assets			(1,628)
Deferred tax assets			(1,466)
Other assets			8,062
Liabilities
Deferred revenue			(95)
Noncurrent contingent and other liabilities			491
Stockholders’ equity:
Retained earnings			$ 4,674

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Revenue - Statement of Operations (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenue from External Customer [Line Items]
Cost of revenue	[1]	$ 131,615	$ 120,902	$ 384,858	$ 345,858
Gross profit		125,519	127,457	373,214	378,239
Operating expenses		123,404	120,060	359,520	354,708
Income from operations		2,115	7,397	13,694	23,531
Interest income and other income, net		336	1,760	1,270	2,802
Income (loss) before income taxes		(2,345)	4,245	225	11,795
Benefits from income taxes		(4,265)	791	(1,868)	795
Net income (loss)		1,920	$ 3,454	2,093	$ 11,000
Amounts in Accordance with ASC 606
Revenue from External Customer [Line Items]
Revenue		257,134		758,072
Cost of revenue		131,615		384,858
Gross profit		125,519		373,214
Operating expenses		123,404		359,520
Income from operations		2,115		13,694
Interest income and other income, net		336		1,270
Income (loss) before income taxes		(2,345)		225
Benefits from income taxes		(4,265)		(1,868)
Net income (loss)		1,920		2,093
Amounts in Accordance with ASC 605
Revenue from External Customer [Line Items]
Revenue		255,746		754,348
Cost of revenue		131,067		384,509
Gross profit		124,679		369,839
Operating expenses		123,316		359,418
Income from operations		1,363		10,421
Interest income and other income, net		199		823
Income (loss) before income taxes		(3,234)		(3,495)
Benefits from income taxes		(4,465)		(2,363)
Net income (loss)		1,231		(1,132)
Effect of change higher (lower) | Effect of change higher (lower)
Revenue from External Customer [Line Items]
Revenue		1,388		3,724
Cost of revenue		548		349
Gross profit		840		3,375
Operating expenses		88		102
Income from operations		752		3,273
Interest income and other income, net		137		447
Income (loss) before income taxes		889		3,720
Benefits from income taxes		200		495
Net income (loss)		$ 689		$ 3,225

[1] Includes stock-based compensation expense as follows: Three Months EndedSeptember 30, Nine Months Ended September 30, 2018 2017 2018 2017Cost of revenue$904 $486 $2,715 $1,985Research and development3,649 1,640 9,517 7,556Sales and marketing2,377 1,108 6,767 5,176General and administrative4,993 1,414 11,479 7,824

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Revenue - Balance Sheet, Impact of Adoption (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Assets
Accounts receivable, net	$ 240,150	$ 244,518	$ 244,416
Other current assets	47,814	40,171	41,799
Deferred tax assets	43,265	43,617	45,083
Other assets	34,369	23,566	15,504
Liabilities
Deferred revenue	65,181	55,738	55,833
Noncurrent contingent and other liabilities	17,307	29,292	28,801
Stockholders’ equity
Retained earnings	409,311	$ 407,218	$ 402,544
Amounts in Accordance with ASC 606
Assets
Accounts receivable, net	240,150
Other current assets	47,814
Deferred tax assets	43,265
Other assets	34,369
Liabilities
Deferred revenue	65,181
Noncurrent contingent and other liabilities	17,307
Stockholders’ equity
Retained earnings	409,311
Amounts in Accordance with ASC 605
Assets
Accounts receivable, net	236,018
Other current assets	49,790
Deferred tax assets	45,226
Other assets	26,409
Liabilities
Deferred revenue	65,239
Noncurrent contingent and other liabilities	16,993
Stockholders’ equity
Retained earnings	401,412
Effect of change higher (lower) | Effect of change higher (lower)
Assets
Accounts receivable, net	4,132
Other current assets	(1,976)
Deferred tax assets	(1,961)
Other assets	7,960
Liabilities
Deferred revenue	(58)
Noncurrent contingent and other liabilities	314
Stockholders’ equity
Retained earnings	$ 7,899

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Revenue - Summary of Disaggregated Revenue by Source (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Disaggregation of Revenue [Line Items]
Revenue	$ 257,134	$ 248,359	$ 758,072	$ 724,097
Printers and parts
Disaggregation of Revenue [Line Items]
Revenue	97,846		283,819
Ink, supplies, and maintenance
Disaggregation of Revenue [Line Items]
Revenue	57,056		169,726
Licenses
Disaggregation of Revenue [Line Items]
Revenue	10,774		34,086
Professional services
Disaggregation of Revenue [Line Items]
Revenue	7,349		22,919
Maintenance and subscriptions
Disaggregation of Revenue [Line Items]
Revenue	22,329		68,834
Digital front ends and related products
Disaggregation of Revenue [Line Items]
Revenue	58,257		167,713
Maintenance and subscriptions
Disaggregation of Revenue [Line Items]
Revenue	3,523		10,975
Industrial Inkjet
Disaggregation of Revenue [Line Items]
Revenue	154,902	142,930	453,545	407,886
Industrial Inkjet | Printers and parts
Disaggregation of Revenue [Line Items]
Revenue	97,846		283,819
Industrial Inkjet | Ink, supplies, and maintenance
Disaggregation of Revenue [Line Items]
Revenue	57,056		169,726
Industrial Inkjet | Licenses
Disaggregation of Revenue [Line Items]
Revenue	0		0
Industrial Inkjet | Professional services
Disaggregation of Revenue [Line Items]
Revenue	0		0
Industrial Inkjet | Maintenance and subscriptions
Disaggregation of Revenue [Line Items]
Revenue	0		0
Industrial Inkjet | Digital front ends and related products
Disaggregation of Revenue [Line Items]
Revenue	0		0
Industrial Inkjet | Maintenance and subscriptions
Disaggregation of Revenue [Line Items]
Revenue	0		0
Productivity Software
Disaggregation of Revenue [Line Items]
Revenue	40,452	37,171	125,839	111,292
Productivity Software | Printers and parts
Disaggregation of Revenue [Line Items]
Revenue	0		0
Productivity Software | Ink, supplies, and maintenance
Disaggregation of Revenue [Line Items]
Revenue	0		0
Productivity Software | Licenses
Disaggregation of Revenue [Line Items]
Revenue	10,774		34,086
Productivity Software | Professional services
Disaggregation of Revenue [Line Items]
Revenue	7,349		22,919
Productivity Software | Maintenance and subscriptions
Disaggregation of Revenue [Line Items]
Revenue	22,329		68,834
Productivity Software | Digital front ends and related products
Disaggregation of Revenue [Line Items]
Revenue	0		0
Productivity Software | Maintenance and subscriptions
Disaggregation of Revenue [Line Items]
Revenue	0		0
Fiery
Disaggregation of Revenue [Line Items]
Revenue	61,780	$ 68,258	178,688	$ 204,919
Fiery | Printers and parts
Disaggregation of Revenue [Line Items]
Revenue	0		0
Fiery | Ink, supplies, and maintenance
Disaggregation of Revenue [Line Items]
Revenue	0		0
Fiery | Licenses
Disaggregation of Revenue [Line Items]
Revenue	0		0
Fiery | Professional services
Disaggregation of Revenue [Line Items]
Revenue	0		0
Fiery | Maintenance and subscriptions
Disaggregation of Revenue [Line Items]
Revenue	0		0
Fiery | Digital front ends and related products
Disaggregation of Revenue [Line Items]
Revenue	58,257		167,713
Fiery | Maintenance and subscriptions
Disaggregation of Revenue [Line Items]
Revenue	3,523		10,975
Transferred at a Point in Time
Disaggregation of Revenue [Line Items]
Revenue	218,552		639,579
Transferred at a Point in Time | Industrial Inkjet
Disaggregation of Revenue [Line Items]
Revenue	149,521		437,780
Transferred at a Point in Time | Productivity Software
Disaggregation of Revenue [Line Items]
Revenue	10,774		34,086
Transferred at a Point in Time | Fiery
Disaggregation of Revenue [Line Items]
Revenue	58,257		167,713
Transferred Over Time
Disaggregation of Revenue [Line Items]
Revenue	38,582		118,493
Transferred Over Time | Industrial Inkjet
Disaggregation of Revenue [Line Items]
Revenue	5,381		15,765
Transferred Over Time | Productivity Software
Disaggregation of Revenue [Line Items]
Revenue	29,678		91,753
Transferred Over Time | Fiery
Disaggregation of Revenue [Line Items]
Revenue	3,523		10,975
Non-Recurring
Disaggregation of Revenue [Line Items]
Revenue	174,226		508,537
Non-Recurring | Industrial Inkjet
Disaggregation of Revenue [Line Items]
Revenue	97,846		283,819
Non-Recurring | Productivity Software
Disaggregation of Revenue [Line Items]
Revenue	18,123		57,005
Non-Recurring | Fiery
Disaggregation of Revenue [Line Items]
Revenue	58,257		167,713
Recurring
Disaggregation of Revenue [Line Items]
Revenue	82,908		249,535
Recurring | Industrial Inkjet
Disaggregation of Revenue [Line Items]
Revenue	57,056		169,726
Recurring | Productivity Software
Disaggregation of Revenue [Line Items]
Revenue	22,329		68,834
Recurring | Fiery
Disaggregation of Revenue [Line Items]
Revenue	$ 3,523		$ 10,975

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Revenue - Remaining Performance Obligation (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01 $ in Millions	Sep. 30, 2018 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligations	$ 105.4
Expect time to recognize revenue	12 months

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Revenue - Summary of Unbilled Accounts Receivable and Deferred Revenue (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Revenue Recognition [Abstract]
Unbilled accounts receivable – current	$ 34,830	$ 23,296
Unbilled accounts receivable – noncurrent	3,483	4,122
Deferred revenue – current	65,181	55,738	$ 55,833
Deferred revenue – noncurrent	$ 349	$ 565

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Supplemental Financial Statement Information - Cash Flow Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Supplemental Financial Statement Information [Abstract]
Net cash paid for income taxes	$ 12,765	$ 15,724
Cash paid for interest expense	3,001	3,667
Property, equipment, and intellectual property received, but not paid	$ 639	$ 703

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Supplemental Financial Statement Information - Schedule of Inventories (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Supplemental Financial Statement Information [Abstract]
Raw materials	$ 52,085	$ 57,061
Work-in-process	13,584	9,792
Finished goods	55,621	58,960
Total	$ 121,290	$ 125,813

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Supplemental Financial Statement Information - Additional Information (Detail) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Capitalized contract acquisition costs			$ 8,100,000
Amortization of deferred contract acquisition costs	$ 1,100,000	$ 3,300,000
Impairment loss of capitalized contract acquisition costs	0	0
Change in Capitalized Contract Cost	1,100,000	3,200,000
Deferred cost of revenue	$ 1,300,000	$ 1,300,000		$ 3,500,000
Minimum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred sales commissions amortization period		3 years
Maximum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred sales commissions amortization period		4 years

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Supplemental Financial Statement Information - Product Warranty Reserves (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Movement in Standard and Extended Product Warranty Accrual, Increase (Decrease) [Roll Forward]
Beginning balance	$ 16,335	$ 10,319
Liability assumed upon acquiring FFPS	0	9,368
Provisions, net of releases	8,154	9,284
Settlements	(11,245)	(12,588)
Ending balance	$ 13,244	$ 16,383

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Supplemental Financial Statement Information - Equipment Leased to Customers Under Operating Leases (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Supplemental Financial Statement Information [Abstract]
Equipment leased to customers under operating leases	$ 7,755	$ 5,432
Accumulated depreciation	(3,297)	(1,927)
Equipment leased to customers under operating leases, net	$ 4,458	$ 3,505

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Supplemental Financial Statement Information - Minimum Future Rental Revenues on Operating Leases (Detail) $ in Thousands	Sep. 30, 2018 USD ($)
Supplemental Financial Statement Information [Abstract]
Remainder of 2018	$ 729
2019	2,134
2020	2,590
2021	384
2022	432
Total	$ 6,269

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Supplemental Financial Statement Information - Accumulated Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Supplemental Financial Statement Information [Abstract]
Net unrealized investment losses	$ (941)	$ (697)
Currency translation gains (losses)	(6,055)	8,794
Net unrealized gain on cash flow hedges	0	41
Total	$ (6,996)	$ 8,138

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Accounts Receivable - Financing Receivables (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing receivables	$ 42,010	$ 28,683
Sales-type lease receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing receivables	30,196	16,558
Trade receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing receivables	11,814	12,125
Scheduled to be received in excess of one year
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing receivables	$ 23,727	$ 15,191

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Accounts Receivable - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	Dec. 31, 2017
United States And Europe
Accounts, Notes, Loans and Financing Receivable [Line Items]
Trade receivables sold with recourse	$ 3.1	$ 13.1	$ 21.4
Europe
Accounts, Notes, Loans and Financing Receivable [Line Items]
Trade receivables sold without recourse	$ 1.1	$ 6.8	$ 5.9

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Fair Value Measurements - Available-for-Sale Short-Term Investments (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Debt Securities, Available-for-sale [Line Items]
Amortized cost	$ 114,228	$ 149,815
Gross unrealized gains	33	44
Gross unrealized losses	(1,275)	(1,162)
Fair value	112,986	148,697
U.S. Government and sponsored entities
Debt Securities, Available-for-sale [Line Items]
Amortized cost	55,322	59,824
Gross unrealized gains	0	0
Gross unrealized losses	(714)	(660)
Fair value	54,608	59,164
Corporate debt securities
Debt Securities, Available-for-sale [Line Items]
Amortized cost	51,345	79,356
Gross unrealized gains	0	0
Gross unrealized losses	(495)	(450)
Fair value	50,850	78,906
Municipal securities
Debt Securities, Available-for-sale [Line Items]
Amortized cost	383	382
Gross unrealized gains	0	0
Gross unrealized losses	(4)	(2)
Fair value	379	380
Asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Amortized cost	7,020	9,808
Gross unrealized gains	33	44
Gross unrealized losses	(61)	(47)
Fair value	6,992	9,805
Mortgage-backed securities – residential
Debt Securities, Available-for-sale [Line Items]
Amortized cost	158	445
Gross unrealized gains	0	0
Gross unrealized losses	(1)	(3)
Fair value	$ 157	$ 442

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Fair Value Measurements - Gross Unrealized Loss Positions (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Debt Securities, Available-for-sale [Line Items]
Fair Value, Less than 12 Months	$ 10,556	$ 76,199
Unrealized Losses, Less than 12 Months	(94)	(448)
Fair Value, More than 12 Months	102,319	71,712
Unrealized Losses, More than 12 Months	(1,181)	(714)
Fair Value, Total	112,875	147,911
Unrealized Losses, Total	(1,275)	(1,162)
U.S. Government and sponsored entities
Debt Securities, Available-for-sale [Line Items]
Fair Value, Less than 12 Months	0	23,023
Unrealized Losses, Less than 12 Months	0	(206)
Fair Value, More than 12 Months	54,608	35,989
Unrealized Losses, More than 12 Months	(714)	(454)
Fair Value, Total	54,608	59,012
Unrealized Losses, Total	(714)	(660)
Corporate debt securities
Debt Securities, Available-for-sale [Line Items]
Fair Value, Less than 12 Months	10,159	45,857
Unrealized Losses, Less than 12 Months	(90)	(207)
Fair Value, More than 12 Months	40,691	32,634
Unrealized Losses, More than 12 Months	(405)	(243)
Fair Value, Total	50,850	78,491
Unrealized Losses, Total	(495)	(450)
Municipal securities
Debt Securities, Available-for-sale [Line Items]
Fair Value, Less than 12 Months	379	378
Unrealized Losses, Less than 12 Months	(4)	(2)
Fair Value, More than 12 Months	0	0
Unrealized Losses, More than 12 Months	0	0
Fair Value, Total	379	378
Unrealized Losses, Total	(4)	(2)
Asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Fair Value, Less than 12 Months	0	6,779
Unrealized Losses, Less than 12 Months	0	(31)
Fair Value, More than 12 Months	6,934	2,947
Unrealized Losses, More than 12 Months	(61)	(16)
Fair Value, Total	6,934	9,726
Unrealized Losses, Total	(61)	(47)
Mortgage-backed securities – residential
Debt Securities, Available-for-sale [Line Items]
Fair Value, Less than 12 Months	18	162
Unrealized Losses, Less than 12 Months	0	(2)
Fair Value, More than 12 Months	86	142
Unrealized Losses, More than 12 Months	(1)	(1)
Fair Value, Total	104	304
Unrealized Losses, Total	$ (1)	$ (3)

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Fair Value Measurements - Amortized Cost and Estimated Fair Value (Detail) $ in Thousands	Sep. 30, 2018 USD ($)
Amortized cost
Mature in less than one year	$ 75,459
Mature in one to three years	38,769
Total short-term investments	114,228
Fair value
Mature in less than one year	74,864
Mature in one to three years	38,122
Total short-term investments	$ 112,986

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Fair Value Measurements - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2016	Sep. 30, 2014
Investments And Fair Value Measurements [Line Items]
Net unrealized losses on sale of securities included in other comprehensive income			$ 1,200,000		$ 1,100,000
Transfers between Level 1 and 2	$ 0	$ 0	0	$ 0
Fair value of liability	20,323,000	53,520,000	20,323,000	53,520,000	35,702,000	$ 22,129,000	$ 61,414,000	$ 56,463,000
Contingent consideration, current	8,500,000		8,500,000
Contingent consideration, noncurrent	11,800,000		11,800,000
Payments	2,611,000	10,265,000	3,361,000	11,559,000
Change in fair value of contingent consideration	721,000	$ 75,000	(12,054,000)	$ 974,000
Increase in fair value of contingent consideration resulting from a change in discount rate			200,000
Decrease in fair value of contingent consideration resulting from a change in discount rate			200,000
Notional amount of derivative assets and liabilities	209,900,000		209,900,000		239,400,000
Increase in Fair Value
Investments And Fair Value Measurements [Line Items]
Change in fair value of contingent consideration			1,800,000
Decrease in Fair Value
Investments And Fair Value Measurements [Line Items]
Change in fair value of contingent consideration			(1,200,000)
Maximum Potential Payment
Investments And Fair Value Measurements [Line Items]
Payments			11,400,000
All Acquisitions
Investments And Fair Value Measurements [Line Items]
Fair value of liability	20,300,000		20,300,000		$ 35,700,000
Optitex, Generation Digital, and Shuttleworth [Member]
Investments And Fair Value Measurements [Line Items]
Change in fair value of contingent consideration	(1,500,000)		(14,300,000)
Escada
Investments And Fair Value Measurements [Line Items]
Change in fair value of contingent consideration	$ 2,200,000		$ 2,200,000
Earnout Achievement Probability Minimum
Investments And Fair Value Measurements [Line Items]
Probability of achieving revenue	50.00%		50.00%
Earnout Achievement Probability Maximum
Investments And Fair Value Measurements [Line Items]
Probability of achieving revenue	100.00%		100.00%
Minimum | All Acquisitions
Investments And Fair Value Measurements [Line Items]
Fair value key assumption risk-free discount rate			0.60%		0.60%
Maximum | All Acquisitions
Investments And Fair Value Measurements [Line Items]
Fair value key assumption risk-free discount rate			4.98%		4.98%
Level 1
Investments And Fair Value Measurements [Line Items]
Net Asset Value per share	$ 1		$ 1
Convertible Senior Notes Due Two Thousand Nineteen
Investments And Fair Value Measurements [Line Items]
Debt instrument, principal amount									$ 345,000,000
Debt instrument, fair value disclosure	$ 340,700,000		$ 340,700,000

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Fair Value Measurements - Investments in Accordance with Hierarchy (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Investments And Fair Value Measurements [Line Items]
Assets	$ 112,986		$ 148,697
Contingent consideration, current and noncurrent	20,323	$ 22,129	35,702	$ 53,520	$ 61,414	$ 56,463
U.S. Government and sponsored entities
Investments And Fair Value Measurements [Line Items]
Assets	54,608		59,164
Corporate debt securities
Investments And Fair Value Measurements [Line Items]
Assets	50,850		78,906
Municipal securities
Investments And Fair Value Measurements [Line Items]
Assets	379		380
Asset-backed securities
Investments And Fair Value Measurements [Line Items]
Assets	6,992		9,805
Mortgage-backed securities – residential
Investments And Fair Value Measurements [Line Items]
Assets	157		442
Fair Value
Investments And Fair Value Measurements [Line Items]
Assets	131,510		158,594
Contingent consideration, current and noncurrent	20,323		35,702
Self-insurance	982		902
Liabilities	21,305		36,604
Fair Value | Money market funds
Investments And Fair Value Measurements [Line Items]
Assets	18,524		9,897
Fair Value | U.S. Government and sponsored entities
Investments And Fair Value Measurements [Line Items]
Assets	54,607		59,164
Fair Value | Corporate debt securities
Investments And Fair Value Measurements [Line Items]
Assets	50,850		78,906
Fair Value | Municipal securities
Investments And Fair Value Measurements [Line Items]
Assets	379		380
Fair Value | Asset-backed securities
Investments And Fair Value Measurements [Line Items]
Assets	6,993		9,805
Fair Value | Mortgage-backed securities – residential
Investments And Fair Value Measurements [Line Items]
Assets	157		442
Fair Value | Level 1
Investments And Fair Value Measurements [Line Items]
Assets	51,803		43,158
Contingent consideration, current and noncurrent	0		0
Self-insurance	0		0
Liabilities	0		0
Fair Value | Level 1 | Money market funds
Investments And Fair Value Measurements [Line Items]
Assets	18,524		9,897
Fair Value | Level 1 | U.S. Government and sponsored entities
Investments And Fair Value Measurements [Line Items]
Assets	33,279		33,261
Fair Value | Level 1 | Corporate debt securities
Investments And Fair Value Measurements [Line Items]
Assets	0		0
Fair Value | Level 1 | Municipal securities
Investments And Fair Value Measurements [Line Items]
Assets	0		0
Fair Value | Level 1 | Asset-backed securities
Investments And Fair Value Measurements [Line Items]
Assets	0		0
Fair Value | Level 1 | Mortgage-backed securities – residential
Investments And Fair Value Measurements [Line Items]
Assets	0		0
Fair Value | Level 2
Investments And Fair Value Measurements [Line Items]
Assets	79,648		115,385
Contingent consideration, current and noncurrent	0		0
Self-insurance	0		0
Liabilities	0		0
Fair Value | Level 2 | Money market funds
Investments And Fair Value Measurements [Line Items]
Assets	0		0
Fair Value | Level 2 | U.S. Government and sponsored entities
Investments And Fair Value Measurements [Line Items]
Assets	21,328		25,903
Fair Value | Level 2 | Corporate debt securities
Investments And Fair Value Measurements [Line Items]
Assets	50,850		78,906
Fair Value | Level 2 | Municipal securities
Investments And Fair Value Measurements [Line Items]
Assets	379		380
Fair Value | Level 2 | Asset-backed securities
Investments And Fair Value Measurements [Line Items]
Assets	6,934		9,754
Fair Value | Level 2 | Mortgage-backed securities – residential
Investments And Fair Value Measurements [Line Items]
Assets	157		442
Fair Value | Level 3
Investments And Fair Value Measurements [Line Items]
Assets	59		51
Contingent consideration, current and noncurrent	20,323		35,702
Self-insurance	982		902
Liabilities	21,305		36,604
Fair Value | Level 3 | Money market funds
Investments And Fair Value Measurements [Line Items]
Assets	0		0
Fair Value | Level 3 | U.S. Government and sponsored entities
Investments And Fair Value Measurements [Line Items]
Assets	0		0
Fair Value | Level 3 | Corporate debt securities
Investments And Fair Value Measurements [Line Items]
Assets	0		0
Fair Value | Level 3 | Municipal securities
Investments And Fair Value Measurements [Line Items]
Assets	0		0
Fair Value | Level 3 | Asset-backed securities
Investments And Fair Value Measurements [Line Items]
Assets	59		51
Fair Value | Level 3 | Mortgage-backed securities – residential
Investments And Fair Value Measurements [Line Items]
Assets	$ 0		$ 0

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Fair Value Measurements - Contingent Consideration (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Business Acquisition, Contingent Consideration [Line Items]
Beginning balance, Fair value of contingent consideration	$ 22,129	$ 61,414	$ 35,702	$ 56,463
Changes in valuation	(721)	(75)	12,054	(974)
Earnout accretion	91	336	194	1,213
Payments and settlements	(2,611)	(10,265)	(3,361)	(11,559)
Foreign currency adjustment	7	1,640	158	(2,829)
Ending balance, Fair value of contingent consideration	$ 20,323	53,520	$ 20,323	53,520
Generation Digital Solutions, Inc.
Business Acquisition, Contingent Consideration [Line Items]
Beginning balance, Fair value of contingent consideration		$ 3,600		$ 3,600

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Derivatives and Hedging - Additional Information (Detail) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative assets and liabilities	$ 209,900,000	$ 239,400,000
Foreign Exchange Contracts | Designated as Cash Flow Hedges
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative assets and liabilities	$ 0	$ 3,900,000

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Derivatives and Hedging - Currency Exposures in Notional Amounts (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Derivatives, Fair Value [Line Items]
Derivatives and their notional amounts	$ 209,900	$ 239,400
Accounts Receivable
Derivatives, Fair Value [Line Items]
Derivatives and their notional amounts	46,574	44,427
Other assets and liabilities, net
Derivatives, Fair Value [Line Items]
Derivatives and their notional amounts	38,185	46,550
Intercompany balances
Derivatives, Fair Value [Line Items]
Derivatives and their notional amounts	125,189	144,477
Assets
Derivatives, Fair Value [Line Items]
Derivatives and their notional amounts	$ 209,948	$ 235,454

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Convertible Senior Notes - Additional Information (Detail)	1 Months Ended
	Sep. 30, 2014 USD ($) $ / shares	Sep. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Debt Instrument [Line Items]
Interest rate of debt, stated percentage		0.75%
Net carrying amount		$ 0	$ 318,957,000
Aggregate amount paid for Note Hedges	$ 63,900,000
Proceeds from sale of warrants	34,500,000
Liability component
Debt Instrument [Line Items]
Net carrying amount		330,367,000	318,957,000
Equity component
Debt Instrument [Line Items]
Net carrying amount		62,061,000	62,061,000
Equity component, gross
Debt Instrument [Line Items]
Net carrying amount	63,600,000	$ 63,643,000	$ 63,643,000
0.75% Convertible Senior Notes Due 2019
Debt Instrument [Line Items]
Debt instrument, principal amount	$ 345,000,000
Interest rate of debt, stated percentage	0.75%	0.75%
Net proceeds from issuance of debt	$ 336,300,000
Net proceeds used to purchase Note Hedges	$ 29,400,000
Conversion rate, number of share per $1,000 principal amount	18.9667
Conversion rate, principal amount of Notes	$ 1,000
Initial conversion price (in USD per share) | $ / shares	$ 52.72
Effective interest rate percentage	4.98%	4.98%
Deferred tax liability	$ 23,700,000
0.75% Convertible Senior Notes Due 2019 | Liability component
Debt Instrument [Line Items]
Debt issuance costs	7,000,000
0.75% Convertible Senior Notes Due 2019 | Liability component, gross
Debt Instrument [Line Items]
Net carrying amount	281,400,000
0.75% Convertible Senior Notes Due 2019 | Equity component
Debt Instrument [Line Items]
Debt issuance costs	$ 1,600,000
0.75% Convertible Senior Notes Due 2019 | Debt issuance costs
Debt Instrument [Line Items]
Effective interest rate percentage	5.46%	5.46%
Warrant
Debt Instrument [Line Items]
Common stock strike price per share | $ / shares	$ 68.86

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Convertible Senior Notes - Schedule of Convertible Notes (Detail) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2014
Debt Instrument [Line Items]
Net carrying amount	$ 0	$ 318,957
Liability component, gross
Debt Instrument [Line Items]
Liability component	345,000	345,000
Liability component
Debt Instrument [Line Items]
Debt discount, net of amortization	(12,975)	(23,178)
Debt issuance costs, net of amortization	(1,658)	(2,865)
Net carrying amount	330,367	318,957
Equity component, gross
Debt Instrument [Line Items]
Net carrying amount	63,643	63,643	$ 63,600
Equity component
Debt Instrument [Line Items]
Debt issuance costs, net of amortization	(1,582)	(1,582)
Net carrying amount	$ 62,061	$ 62,061

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Convertible Senior Notes - Interest Expense Recognized (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Debt Disclosure [Abstract]
0.75% coupon	$ 647	$ 647	$ 1,948	$ 1,933
Amortization of debt discount	3,448	3,265	10,203	9,627
Amortization of debt issuance costs	407	388	1,207	1,144
Total	$ 4,502	$ 4,300	$ 13,358	$ 12,704
Interest rate of debt, stated percentage	0.75%		0.75%

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Commitments and Contingencies (Detail) ft² in Thousands				3 Months Ended		9 Months Ended
	Jul. 31, 2018 USD ($)	Jul. 27, 2018 USD ($)	Aug. 26, 2016 USD ($) ft² a Renewal_Option	Sep. 30, 2018 USD ($)	Dec. 31, 2017 USD ($) ft² a Building	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)
Commitments And Contingencies [Line Items]
Lease term, capital lease		10 years
Capital lease obligations incurred		$ 16,000,000
Property and equipment, net	$ 13,700,000			$ 79,495,000	$ 98,762,000	$ 79,495,000
Capital lease decrease in obligations	14,500,000
Capital lease obligations, termination penalties	$ 800,000
Gain (loss) on sale of properties				(100,000)
Assets held for sale				3,143,000	4,200,000	3,143,000
Impairment of long-lived assets					900,000
Proceeds from sale of held-for-sale building and land				1,100,000		1,137,000	$ 0
Gain (loss) on disposal				100,000
Funds invested under lease				39,809,000	$ 32,531,000	39,809,000	$ 6,826,000	$ 1,142,000
Assets Held-for-Sale
Commitments And Contingencies [Line Items]
Acres of land | a					31.5
Number of manufacturing buildings | Building					2
Area of real estate property | ft²					163
Assets held for sale				3,100,000	$ 5,100,000	3,100,000
Off Balance Sheet Financing - Synthetic Lease Arrangements | City of Manchester | Land Lease
Commitments And Contingencies [Line Items]
Acres of land | a			16.9
Lease term			48 years 6 months
Number of renewal options for lease agreement | Renewal_Option			2
Renewal term of lease			5 years
Renewal term of lease			3 years 6 months
Minimum lease payments			$ 13,300,000
Lease term, included in facility lease			6 months
Off Balance Sheet Financing - Synthetic Lease Arrangements | MUFG Americas Capital Leasing and Finance, LLC | Building Lease
Commitments And Contingencies [Line Items]
Area of real estate property | ft²			225
Lease term			6 years
Minimum lease payments			$ 1,800,000
Residual value guarantee percentage			89.00%
Off Balance Sheet Financing - Synthetic Lease Arrangements | MUFG Americas Capital Leasing and Finance, LLC | Cash Equivalents
Commitments And Contingencies [Line Items]
Funds invested under lease				39,800,000		39,800,000
Minimum | Matan Digital Printers
Commitments And Contingencies [Line Items]
Estimated material loss from outstanding claim in business acquisition				1		1
Maximum | Matan Digital Printers
Commitments And Contingencies [Line Items]
Estimated material loss from outstanding claim in business acquisition				$ 10,100,000		$ 10,100,000

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Stock Repurchase Program (Detail) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 11, 2017	Nov. 30, 2015
Stock Repurchase Program [Line Items]
Repurchase of common stock, authorized amount			$ 125,000,000	$ 150,000,000
Aggregate shares repurchased (in shares)	1,614,166	1,019,544
Aggregate purchase price	$ 50,500,000	$ 47,000,000
Remaining available authorized repurchase amount	$ 58,900,000
Net Share Settlement
Stock Repurchase Program [Line Items]
Aggregate shares repurchased (in shares)	63,107	233,159
Value of shares surrendered to satisfy tax withholding obligations	$ 2,000,000	$ 10,000,000

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Stock-based Compensation - Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 11,923	$ 4,648	$ 30,478	$ 22,541
Income tax benefit	(1,747)	(1,525)	(4,437)	(6,929)
Stock-based compensation expense, net of tax	10,176	3,123	26,041	15,612
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	10,587	3,545	25,793	18,875
ESPP purchase rights
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 1,336	$ 1,103	$ 4,685	$ 3,666

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Stock-based Compensation - ESPP Purchase Rights (Detail) - ESPP purchase rights - $ / shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average fair value per share (in usd per share)	$ 13.91	$ 12.09
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	37.00%	24.00%
Risk-free interest rate	2.20%	0.70%
Expected term (in years)	6 months	6 months
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	80.00%	28.00%
Risk-free interest rate	2.70%	1.30%
Expected term (in years)	2 years	2 years

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Stock-based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants in Period (in shares)		0
Stock options outstanding (in shares)	100,000
Stock options exercisable (in shares)	150,000
Stock options, aggregate intrinsic value	$ 1.8
Stock options, weighted average exercise price (in USD per share)	$ 15.9975
Stock options, weighted average remaining contractual term (years)	8 months 22 days
Granted (in shares)	1,814,000
Consecutive trading days, vesting threshold	90 days
Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants in Period (in shares)	0
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of RSUs vested during the year	$ 12.4
Aggregate intrinsic value of RSUs vested and expected to vest	$ 57.7
Weighted average period of recognition of unrecognized compensation cost	1 year 1 month
Performance-based options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	0
Market-based
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	0
Market-based stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	0
Minimum | RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	1 year
Maximum | RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	4 years

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Stock-based Compensation - Schedule of Non-Vested RSUs (Detail)	9 Months Ended
	Sep. 30, 2018 $ / shares shares
Shares
Beginning balance (in shares) | shares	2,280,000
Granted (in shares) | shares	1,814,000
Vested (in shares) | shares	(307,000)
Forfeited (in shares) | shares	(710,000)
Ending balance (in shares) | shares	3,077,000
Weighted average grant date fair value
Beginning balance (in USD per share) | $ / shares	$ 39.16
Granted (in USD per share) | $ / shares	31.13
Vested (in USD per share) | $ / shares	40.36
Forfeited (in USD per share) | $ / shares	43.33
Ending balance (in USD per share) | $ / shares	$ 33.35
Time-based
Shares
Beginning balance (in shares) | shares	1,048,000
Granted (in shares) | shares	985,000
Vested (in shares) | shares	(287,000)
Forfeited (in shares) | shares	(96,000)
Ending balance (in shares) | shares	1,650,000
Weighted average grant date fair value
Beginning balance (in USD per share) | $ / shares	$ 35.76
Granted (in USD per share) | $ / shares	31.31
Vested (in USD per share) | $ / shares	40.04
Forfeited (in USD per share) | $ / shares	34.90
Ending balance (in USD per share) | $ / shares	$ 32.41
Performance-based
Shares
Beginning balance (in shares) | shares	1,209,000
Granted (in shares) | shares	829,000
Vested (in shares) | shares	(20,000)
Forfeited (in shares) | shares	(614,000)
Ending balance (in shares) | shares	1,404,000
Weighted average grant date fair value
Beginning balance (in USD per share) | $ / shares	$ 42.18
Granted (in USD per share) | $ / shares	30.92
Vested (in USD per share) | $ / shares	44.84
Forfeited (in USD per share) | $ / shares	44.65
Ending balance (in USD per share) | $ / shares	$ 34.42
Market-based
Shares
Beginning balance (in shares) | shares	23,000
Granted (in shares) | shares	0
Vested (in shares) | shares	0
Forfeited (in shares) | shares	0
Ending balance (in shares) | shares	23,000
Weighted average grant date fair value
Beginning balance (in USD per share) | $ / shares	$ 35.15
Granted (in USD per share) | $ / shares	0.00
Vested (in USD per share) | $ / shares	0.00
Forfeited (in USD per share) | $ / shares	0.00
Ending balance (in USD per share) | $ / shares	$ 35.15

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Stock-based Compensation - Performance-Based RSUs (Detail) - $ / shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant date fair value per share (in USD per share)	$ 31.13
Performance-based
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant date fair value per share (in USD per share)	30.92
Performance-based | Short-term
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant date fair value per share (in USD per share)	$ 28.26	$ 47.23
Service period (years)	1 year	1 year
Performance-based | Long-term
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant date fair value per share (in USD per share)	$ 34.56	$ 45.96
Service period (years)	3 years
Performance-based | Long-term | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Service period (years)		2 years
Performance-based | Long-term | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Service period (years)		3 years

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Restructuring and Other - Additional Information (Detail) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) employee	Sep. 30, 2017 USD ($) employee	Sep. 30, 2018 USD ($) employee	Sep. 30, 2017 USD ($) employee
Reorganizations [Abstract]
Restructuring and other costs	$ 2,799	$ 832	$ 10,477	$ 5,421
Severance charges	$ 1,600	$ 300	$ 5,900	$ 3,800
Number of positions eliminated | employee	30	15	113	128
Facilities relocation and downsizing expenses	$ 400	$ 400	$ 1,400	$ 600
Integration expenses	$ 900	$ 200	$ 3,200	$ 1,000

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Restructuring and Other - Reserve Activities (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Restructuring Reserve [Roll Forward]
Beginning reserve balance	$ 2,452	$ 1,824
Restructuring charges	6,289	4,101
Other charges	4,188	1,321
Non-cash restructuring and other	(686)	(182)
Payments	(9,751)	(4,720)
Ending reserve balance	$ 2,492	$ 2,344

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Benefit from (provision for) income taxes	$ 4,265	$ (791)	$ 1,868	$ (795)
Income (loss) before income taxes	(2,345)	4,245	225	11,795
Benefit from (provision for) income taxes before discrete items	932	$ (1,973)	$ (105)	$ (4,517)
U.S. Statutory income tax rate			21.00%		35.00%
Tax charge					$ 27,500
Estimated charges related to deemed repatriation transition tax	700		$ (500)		(17,000)
Estimated charges related to deemed repatriation transition tax, gross					27,000
Foreign tax credits					10,000
Estimated charges related to remeasurement of U.S. deferred tax assets and liabilities					10,500
Unrecognized tax benefits that would affect the effective tax rate if recognized	30,800		30,800		$ 33,900
Gross unrecognized tax benefits decrease in next 12 months	6,900		6,900
Offset to deferred tax assets for unrecognized tax benefits			15,500
Estimated unrecognized tax benefits	$ 15,300		$ 15,300

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Income Taxes - Tax Provisions Reconciled to Recorded Provision (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Tax Disclosure [Abstract]
Benefit from (provision for) income taxes before discrete items	$ 932	$ (1,973)	$ (105)	$ (4,517)
Interest related to unrecognized tax benefits	71	0	(154)	(121)
Benefit from (provision for) stock-based compensation, including ESPP dispositions	112	(363)	86	1,934
Benefit from reversals of uncertain tax positions	2,333	1,845	2,528	1,825
Benefit from (provision for) reassessment of taxes upon filing tax returns	135	(300)	213	(396)
Benefit from (provision for) reassessment of taxes upon tax law change	0	0	(160)	480
Benefit from (provision for) deemed repatriation transition tax	682	0	(540)	0
Benefit from (provision for) income taxes	$ 4,265	$ (791)	$ 1,868	$ (795)