Kofax Reports Financial Results for its Third Quarter and Nine Months Ended March 31, 2015

Lexmark’s Acquisition of Kofax Expected to Close in the Second Calendar Quarter of 2015

Kofax® Limited (NASDAQ: KFX), a leading provider of software to simplify and transform the First Mile™ of customer engagement, today reported unaudited financial results for its third quarter and nine months of its fiscal year 2015 ended March 31, 2015.

Non-GAAP Financial Highlights:

Software license revenue increased 4.8% to $30.9 million (PY: $29.5 million), and for the nine months increased 2.9% to $90.8 million (PY: $88.2 million)
Total revenues increased 4.2% to $75.3 million (PY: $72.2 million), and for the nine months increased 3.9% to $225.6 million (PY: $217.1 million)
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 14.0% to $8.6 million (PY: $7.5 million) or a 11.4% margin (PY: 10.4%), and for the nine months decreased 5.6% to $27.2 million (PY: $28.9 million) or a 12.1% margin (PY: 13.3%)
Adjusted diluted earnings per share (EPS) was $0.07 (PY: $0.05), and for the nine months was $0.18 (PY: $0.17)
Adjusted cash generated by operations was $12.1 million (PY: $19.7 million), and for the nine months was $19.6 million (PY: $42.8 million)

GAAP Financial Highlights:

Software license revenue increased 7.5% to $30.2 million (PY: $28.1 million), and for the nine months increased 7.4% to $89.2 million (PY: $83.1 million)
Total revenues increased 4.6% to $74.0 million (PY: $70.8 million), and for the nine months increased 5.6% to $222.3 million (PY: $210.5 million)
Income from operations1 decreased to a loss of $1.7 million (PY: $0.2 million) or a -2.3% margin (PY: 0.3%), and for the nine months decreased 33.4% to $2.8 million (PY: $4.2 million) or a 1.3% margin (PY: 2.0%)
Diluted EPS was $0.02 (PY: $0.01), and for the nine months was $0.04 (PY: $0.05)
Cash generated by operations was $10.4 million (PY: 16.1 million), and for the nine months was $15.8 million (PY: $33.7 million)

Quarter end cash was $55.6 million (PY: $93.1 million).

A summary of Kofax’s unaudited revenues and adjusted EBITDA for its third quarter and nine months compared to the prior year on both a GAAP and non-GAAP basis is as follows:

Non-GAAP Quarter Nine Months Y/Y % Y/Y % $M Change Total $M Change Total Software Licenses 30.9 4.8 % 41.1 % 90.8 2.9 % 40.2 % Maintenance Services 34.5 5.2 % 45.8 % 106.2 7.2 % 47.1 % Professional Services 9.9 -0.6 % 13.1 % 28.6 -3.9 % 12.7 % Total Revenues 75.3 4.2 % 100.0 % 225.6 3.9 % 100.0 %

Adjusted EBITDA

8.6 14.0 % 27.2 -5.6 %

Margin

11.4 % 12.1 % GAAP Quarter Nine Months Y/Y % Y/Y % $M Change Total $M Change Total Software Licenses 30.2 7.5 % 40.8 % 89.2 7.4 % 40.1 % Maintenance Services 34.0 4.2 % 45.9 % 104.5 6.3 % 47.0 % Professional Services 9.8 -2.3 % 13.3 % 28.6 -1.8 % 12.9 % Total Revenues 74.0 4.6 % 100.0 % 222.3 5.6 % 100.0 %

Income from Operations1

-1.7 -826.7 % 2.8 -33.4 %

Margin

-2.3 % 1.3 %

1 Includes $2.3 million of legal and other expenses related to the Company’s acquisition by Lexmark.

Commenting on the Non-GAAP financial results for the quarter, Reynolds C. Bish, Chief Executive Officer, said: “We had a solid quarter with strong growth in new and acquired software products and a continuing year over year increase in the number of six and seven figure software license transactions. Despite this, the strengthening of the U.S. dollar since we last provided guidance on January 29 again negatively impacted our revenues. On a constant currency basis, using exchange rate levels in the prior year period, software license revenue would have been approximately $1.8 million and total revenues $5.0 million higher. The effect on Adjusted EBITDA was less pronounced as a result of the global nature and distribution of our employees and expenses. We expect Lexmark’s acquisition of Kofax to close in the second calendar quarter of 2015, and look forward to working with its management to combine the two businesses.”

Operating Highlights:

Announced a definitive agreement for Lexmark to acquire all of Kofax’s outstanding shares for $11.00 per share in cash at a total value of more than $1 billion. The acquisition is contingent on Kofax shareholder approval at a special general meeting of Kofax shareholders scheduled for May 18, 2015, applicable regulatory clearances and other customary closing conditions.
Acquired Aia Holding BV, a provider of customer communications management (CCM) software for $19.5 million. Aia’s CCM software helps organizations manage interactive and ad hoc customer correspondence both electronically and on paper, and will be fully integrated within Kofax TotalAgility®.
Launched Kofax Mobile ID™, a mobile capture framework that powers the capture and submittal of proof of identity documents, including U.S. and most international driver licenses, passports and national identity cards, and their content. This capability is an essential part of an account opening or other process initiated by taking a picture of such documents using a smartphone or other mobile device.
Delisted Kofax’s shares from the London Stock Exchange effective March 31, 2015.
Gartner’s reports on its Magic Quadrants for Intelligent Business Process Management Suites and BPM-Platform-Based Case Management Frameworks were issued and recognized Kofax for its TotalAgility Platform.

About Kofax

Kofax is a leading provider of software to simplify and transform the First Mile™ of customer engagement. Success in the First Mile can dramatically improve the customer experience, greatly reduce operating costs and increase competitiveness, growth and profitability. Kofax software and solutions provide a rapid return on investment to more than 20,000 customers in financial services, insurance, government, healthcare, supply chain, business process outsourcing and other markets. Kofax delivers these through its direct sales and service organization, and a global network of more than 800 authorized partners in more than 75 countries throughout the Americas, EMEA and Asia Pacific. For more information, visit kofax.com.

Safe Harbor Statement

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in the forward-looking statements. The Company has attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. The Company may experience significant fluctuations in future operating results due to a number of economic, competitive and other factors, including, among other things, our reliance on third-party manufacturers and suppliers, government agency budgetary and political constraints, new or increased competition, changes in market demand, our ability to consummate and the timing of the consummation of software revenue transactions and the performance or reliability of our products and the ability of the Company and Lexmark to complete the transactions contemplated by the merger agreement, including the parties’ ability to satisfy the conditions to the transaction set forth in the merger agreement (including obtaining necessary Company shareholder and regulatory approvals) and the absence of facts, circumstances, changes or events resulting in a material adverse effect on the Company. These factors and others could cause operating results to vary significantly from those in prior periods, and those projected in forward-looking statements. Additional information with respect to these and other factors, which could materially affect the Company and its operations, are included in certain forms the Company has filed with the Securities and Exchange Commission. Although the Company believes that the expectations reflected in any forward-looking statements are reasonable based on its current knowledge of the business and operations, it cannot guarantee future results, levels of activity, performance or achievements. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change.

Non-GAAP Financial Measures

Management uses financial measures, both GAAP and Non-GAAP, in analyzing and assessing the overall performance of the business and making operational decisions. The Company has provided and believes that the Non-GAAP financial measures and supplemental reconciliations to GAAP financial measures are useful to investors and other users of its financial statements because the Non-GAAP financial measures may be used as additional tools to compare our performance across peer companies, periods and financial markets. Please refer to the forms the Company has filed with the Securities and Exchange Commission for a discussion of the Non-GAAP financial measures and supplemental reconciliations to GAAP financial measures for more information regarding the Non-GAAP measures.

Source: Kofax

KOFAX LIMITED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) March 31, 2015 June 30, 2014 Assets Current assets: Cash and cash equivalents $ 55,567 $ 89,631 Accounts receivable, net of allowances of $971 and $881, respectively 59,431 58,392 Other current assets 9,622 9,690 Income tax receivable 7,126 7,209 Deferred tax assets 5,579 3,502 Total current assets 137,325 168,424 Property and equipment, net 6,403 6,753 Goodwill 201,925 186,103 Acquired intangible assets, net 49,883 36,085 Deferred tax assets, net of current portion 3,897 1,877 Other non-current assets 4,638 4,105 Total assets $ 404,071 $ 403,347 Liabilities and shareholders’ equity Current liabilities: Accounts payable and accrued expenses $ 41,572 $ 37,445 Deferred revenue 79,746 78,497 Income taxes payable 2,699 1,101 Deferred tax liabilities 1,301 217 Contingent acquisition payables 6,086 4,775 Total current liabilities 131,404 122,035 Minimum pension liability 5,121 4,078 Deferred revenue, net of current portion 8,143 8,079 Deferred tax liabilities, net of current portion 10,729 3,243 Contingent acquisition payables, net of current portion 2,456 3,927 Other non-current liabilities 7,148 7,519 Total liabilities 165,001 148,881

Commitments and contingencies

Shareholders‘ equity: Common stock 98 97 Additional paid in capital 65,969 60,695 Employee benefit shares (17,685 ) (18,207 ) Treasury shares (15,980 ) (15,980 ) Retained earnings 210,778 207,141 Accumulated other comprehensive income (loss) (4,110 ) 20,720 Total shareholders’ equity 239,070 254,466 Total liabilities and shareholders’ equity $ 404,071 $ 403,347 KOFAX LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) Three Months Ended Nine Months Ended March 31, March 31, 2015 2014 2015 2014 Revenue: Software licenses $ 30,243 $ 28,137 $ 89,215 $ 83,082 Maintenance services 33,951 32,584 104,494 98,290 Professional services 9,818 10,052 28,585 29,096 Total revenues 74,012 70,773 222,294 210,468 Cost of revenue: Cost of software licenses 2,347 1,955 6,579 7,640 Cost of maintenance services 5,497 5,218 15,894 15,104 Cost of professional services 8,518 8,129 24,323 23,976 Amortization of intangible assets 1,532 1,275 4,761 4,186 Total cost of revenues 17,894 16,577 51,557 50,906 Gross profit 56,118 54,196 170,737 159,562 Operating expenses: Research and development 10,383 10,318 30,258 29,346 Sales and marketing 32,670 31,418 96,857 89,853 General and administrative 10,417 10,428 32,010 29,562 Amortization of intangible assets 1,253 889 3,272 2,542 Acquisition-related costs 711 504 2,960 400 Other operating expenses 2,392 404 2,567 3,638 Total operating expenses 57,826 53,961 167,924 155,341 Income from operations (1,708 ) 235 2,813 4,221 Interest (expense), net (96 ) (153 ) (367 ) (507 ) Other income, net 2,931 1,495 2,990 5,445 Income from operations, before tax 1,127 1,577 5,436 9,159 Income tax expense (credit) (451 ) 951 1,799 4,336 Net income $ 1,578 $ 626 $ 3,637 $ 4,823 Net income per share: Basic $ 0.02 $ 0.01 $ 0.04 $ 0.05 Diluted $ 0.02 $ 0.01 $ 0.04 $ 0.05 Weighted average shares outstanding: Basic 88,997 88,948 88,888 88,729 Diluted 92,694 92,944 92,449 92,087 KOFAX LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) Nine Months Ended March 31, 2015 2014 Cash flows from operating activities: Net income $ 3,637 $ 4,823

Adjustments to reconcile net income to net cash flows from operating activities:

Depreciation and amortization 10,807 10,817 Share-based compensation expense 4,809 3,253 Other income (2,990 ) (5,445 ) Restructuring payments − (588 ) Changes in operating assets and liabilities: Accounts receivable, net (4,887 ) 13,185 Other assets (584 ) 1,935 Accounts and other payables 6,189 (5,346 ) Deferred revenue 4,384 14,448 Other liabilities (1,126 ) (1,724 ) Deferred income taxes (4,857 ) (729 ) Income taxes payable 414 (913 ) Net cash inflow from operating activities 15,796 33,716 Cash flows from investing activities: Purchase of property and equipment (1,979 ) (2,776 ) Acquisitions of subsidiaries, net of cash acquired (48,450 ) (45,387 ) Interest received 105 77 Net cash used in investing activities (50,324 ) (48,086 ) Cash flows from financing activities: Issue of common stock 212 521 Excess tax benefits on share-based compensation 536 208 Proceeds from initial public offering in the United States − 12,366 Proceeds from EBT shares, net 523 (135 ) Net cash inflow from financing activities 1,271 12,960 Effect of exchange rate changes on cash and cash equivalents (807 ) 1,048 Net decrease in cash and cash equivalents (34,064 ) (362 ) Cash and cash equivalents at the beginning of the year 89,631 93,413 Cash and cash equivalents at the end of the year $ 55,567 $ 93,051 Supplemental cash flow disclosure: Cash paid for income taxes, net $ 3,809 $ 8,447 Cash paid for interest $ 98 $ 437 KOFAX LIMITED UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES (in thousands, except per share amounts) Acquisition Fair Value Adjustment to Revenue Three Months Ended Nine Months Ended March 31, March 31, 2015 2014 2015 2014 Non-GAAP Software License Software License $ 30,243 $ 28,137 $ 89,215 $ 83,082 Acquisition Fair Value Adjustment 698 1,400 1,544 5,102 Total Non-GAAP Software License $ 30,941 $ 29,537 $ 90,759 $ 88,184 Non-GAAP Maintenance Services Maintenance Services $ 33,951 $ 32,584 $ 104,494 $ 98,290 Acquisition Fair Value Adjustment 524 197 1,694 801 Total Non-GAAP Maintenance Services $ 34,475 $ 32,781 $ 106,188 $ 99,091 Non-GAAP Professional Services Professional Services $ 9,818 $ 10,052 $ 28,585 $ 29,096 Acquisition Fair Value Adjustment 39 (136 ) 55 694 Total Non-GAAP Professional Services $ 9,857 $ 9,916 $ 28,640 $ 29,790 Non-GAAP Total Revenue Total Revenue $ 74,012 $ 70,773 $ 222,294 $ 210,468 Acquisition Fair Value Adjustment 1,261 1,461 3,293 6,597 Total Non-GAAP Revenue $ 75,273 $ 72,234 $ 225,587 $ 217,065 Three Months Ended Nine Months Ended Non-GAAP Income from Operations March 31, March 31, 2015 2014 2015 2014 Income (loss) from operations $ (1,708 ) $ 235 $ 2,813 $ 4,221 Acquisition fair value adjustment to revenue 1,261 1,461 3,293 6,597 Share-based compensation expense 2,205 1,387 4,809 3,253 Depreciation and amortization expense 907 1,349 2,774 4,020 Amortization of acquired intangible assets 2,785 2,164 8,033 6,728 Acquisition-related costs 711 504 2,960 400 Other operating expenses 2,392 404 2,567 3,638 Non-GAAP income from operations $ 8,553 $ 7,504 $ 27,249 $ 28,857

Three Months Ended Nine Months Ended Adjusted Diluted Earnings Per Share March 31, March 31, 2015 2014 2015 2014 Net income $ 1,578 $ 626 $ 3,637 $ 4,823 Acquisition fair value adjustment to revenue 1,261 1,461 3,293 6,597 Share-based compensation expense 2,205 1,387 4,809 3,253 Amortization of acquired intangible assets 2,785 2,164 8,033 6,728 Acquisition-related costs 711 504 2,960 400 Net finance, other income and expense, net (443 ) (938 ) (56 ) (1,300 ) Tax effect of above adjustments (2,054 ) (391 ) (6,263 ) (4,228 ) Adjusted net income $ 6,043 $ 4,813 $ 16,413 $ 16,273 Adjusted diluted earnings per share $ 0.07 $ 0.05 $ 0.18 $ 0.17 Diluted shares outstanding 92,694 92,944 92,449 92,087 Reconciliation of Adjusted Cash Flow from Operations Three Months Ended Nine Months Ended March 31, March 31, 2015 2014 2015 2014 Cash inflows from operations $ 10,380 $ 16,098 $ 15,796 $ 33,716 Cash paid for income taxes, net 1,675 3,577 3,809 8,477 Payments under restructuring − − − 588 Adjusted cash inflows from

operations

$ 12,055 $ 19,675 $ 19,605 $ 42,751 Income Statements - Non-GAAP Three Months Ended Nine Months Ended March 31, March 31, 2015 2014 2015 2014 Non-GAAP Software licenses $ 30,941 $ 29,537 $ 90,759 $ 88,184 Non-GAAP Maintenance services 34,475 32,781 106,188 99,091 Non-GAAP Professional services 9,857 9,916 28,640 29,790 Non-GAAP Total revenue 75,273 72,234 225,587 217,065 Cost of software licenses (1) 2,344 1,950 6,570 7,613 Cost of maintenance services (1) 5,381 5,080 15,564 14,688 Cost of professional services (1) 8,388 7,920 23,952 23,313 Research and development (1) 9,779 9,617 28,664 27,486 Sales and marketing (1) 31,329 30,282 93,850 86,978 General and administrative (1) 9,499 9,881 29,738 28,130 Non-GAAP operating costs and expenses 66,720 64,730 198,338 188,208 Non-GAAP income from operations $ 8,553 $ 7,504 $ 27,249 $ 28,857

(1) Excludes depreciation, amortization and share-based compensation expenses

Definition of Non-GAAP Measures

Non-GAAP Revenue – We defined Non-GAAP revenue as revenue, as reported under GAAP, increased to include revenue that is associated with our historic acquisitions that has been excluded from reported results for a limited period due to the effects of purchase accounting. In accordance with GAAP purchase accounting, an acquired company’s deferred revenue at the date of acquisition is subject to a fair value adjustment which generally reduces the deferred amount and revenues recognized subsequent to an acquisition. We include non-GAAP revenue to allow for more complete comparisons to the financial results of our historical operations, forward looking guidance and the financial results of peer companies. We believe these adjustments are useful to management and investors as a measure of the ongoing performance of the business. Additionally, although acquisition-related revenue adjustments are nonrecurring, we may incur similar adjustments in connection with future acquisitions. At times when we are communicating with our shareholders, analysts and other parties we refer to Non-GAAP Revenue as Adjusted Revenue.

Non-GAAP Income from Operations – We define non-GAAP income from operations as income/(loss) from operations, as reported under GAAP, excluding the effect of Acquisition fair value adjustment to revenue, Share-based compensation expense, Depreciation expense, Amortization of acquired intangible assets, Acquisition-related costs, and Other operating expense, net. Share-based compensation expense, Depreciation expense and Amortization of acquired intangible assets in our non-GAAP income from operations reconciliation represent non-cash charges which are not considered by management in evaluating our operating performance. Acquisition-related costs consist of: (i) costs directly attributable to our acquisition strategy and the evaluation, consummation and integration of our acquisitions (composed substantially of professional services fees including legal, accounting and other consultants and to a lesser degree to our personnel whose responsibilities are devoted to acquisition activities), and (ii) transition compensation costs (composed substantially of contingent payments for shares that are treated as compensation expense and retention payments that are anticipated to become payable to employees, as well as severance payments to employees whose positions were made redundant). These acquisition-related costs are not considered to be related to the continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. Other operating expense, net represents items that are not necessarily related to our recurring operations and which therefore are not, under GAAP, included in other expense lines. Accordingly, we exclude those amounts when assessing non-GAAP income from operations. At times when we are communicating with our shareholders, financial analysts and other parties we refer to non-GAAP income from operations as adjusted EBITDA.

We assess non-GAAP income from operations as a percentage of total non-GAAP revenue and by doing so we are able to evaluate the relative performance of our revenue growth compared to the expense growth for those items included in non-GAAP income from operations. This measure allows management and our Board of Directors to compare our performance against that of other companies in our industry that may be of different sizes.

At times when we are communicating with our shareholders, financial analysts and other parties, we refer to adjusted income from operations as a percentage of revenues as EBITDA margin.

Non-GAAP diluted earnings per share – Non-GAAP diluted earnings per share is calculated using GAAP net income/(loss) excluding the effect of Acquisition fair value adjustment to revenue, Share-based compensation expense, Amortization of intangible assets, Acquisition-related costs, Net Interest-Other Income and Expense, and the related tax effect, divided by weighted average fully diluted shares outstanding. Therefore, we include this non-GAAP measure in order to provide a more complete comparison of our earnings per share from one period to another. At times when we are communicating with our shareholders, financial analysts and other parties we refer to Non-GAAP diluted earnings per share as Adjusted EPS.

Non-GAAP Cash Flows from Operations - We define Non-GAAP cash flows from operations as cash flows from operations as reported under GAAP, adjusted for income taxes paid or received and payments under restructurings. Income tax payments are included in this reconciliation as the timing of cash payments and receipts can vary significantly from year-to-year based on a number of factors, including the influence of acquisitions on our consolidated tax attributes. Payments for restructurings relate to a specific activity that is not part of ongoing operations. At times when we are communicating with our shareholders, financial analysts and other parties we refer to Non-GAAP cash flows from operations as Adjusted cash flows from operations.

Kofax® LimitedMedia Contact:Colleen Edwards, +1 (949) 783-1582Vice President, Corporate Communicationscolleen.edwards@kofax.comorInvestor Contact:MKR Group Inc.Todd Kehrli, +1 (323) 468-2300kfx@mkr-group.com

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