July 21, 2011

EFI Reports Q2 2011 Results

Revenue Increases 19% Driven by 54% Growth in Software Applications (APPS)

FOSTER CITY, Calif., July 21, 2011 (GLOBE NEWSWIRE) -- Electronics For Imaging, Inc. (Nasdaq:EFII), a world leader in customer-focused digital printing innovation, today announced its results for the second quarter of 2011. For the quarter ended June 30, 2011, the Company reported revenue of $141.2 million, compared to second quarter 2010 revenue of $119.1 million.

  • For the second quarter of 2011, Non-GAAP net income was $11.3 million or $0.23 per diluted share, compared to Non-GAAP net income of $4.0 million or $0.09 per diluted share for the same period in 2010.
  • For the second quarter of 2011, GAAP net income was $3.6 million or $0.07 per diluted share, compared to GAAP net loss of $(2.5) million or $(0.06) per diluted share for the same period in 2010.
  • For the six months ended June 30, 2011, Non-GAAP net income was $24.8 million or $0.51 per diluted share, compared to Non-GAAP net income of $3.9 million or $0.08 per diluted share for the same period in 2010.
  • For the six months ended June 30, 2011, GAAP net income was $9.9 million or $0.20 per diluted share, compared to GAAP net loss of $(13.9) million or $(0.31) per diluted share for the same period in 2010.

"EFI again delivered a solid quarter with double-digit revenue growth in all three segments, record recurring revenues, the third consecutive quarter of double-digit operating margin, and strong cash generation," said Guy Gecht, Chief Executive Officer. "Our results reflect our focus on the fastest growing segments of the printing industry, and our ability to provide business process automation that allows our customers to more efficiently run their businesses. With new innovative inkjet products beginning to ship this quarter, we believe that our Company is well positioned to maintain our growth momentum into the third quarter."

Separately, the Company announced that Fred Rosenzweig, EFI's President, has informed the Company that he intends to retire following the completion of the 2011 fiscal year. Mr. Rosenzweig will take on a transitional part time role during the first eight months of 2012. The Company has no plans to replace Mr. Rosenzweig in his current role.

"We can't be more thankful to Fred for his outstanding contribution to EFI in over 18 years," said Mr. Gecht. "While it is always hard to say goodbye to a great individual like Fred, we could not ask for better timing for this transition when the Company's business and trajectories are strong and the management team is complete, experienced and eager to take on future growth opportunities."

EFI will discuss the Company's financial results by conference call at 2:00 p.m. PDT today. Instructions for listening to the conference call over the Web are available on the investor relations portion of EFI's website at www.efi.com.

About EFI       

EFI (www.efi.com) is a world leader in customer-focused digital printing innovation. EFI's award-winning solutions, integrated from creation to print, deliver increased performance, cost savings and productivity. The company's product portfolio includes Fiery® digital color print servers; VUTEk® super-wide digital inkjet printers, UV and solvent inks; Rastek UV wide-format inkjet printers; Jetrion® industrial inkjet printing systems; print production workflow and business process automation software; and corporate printing solutions.

The Electronics For Imaging, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7332

Safe Harbor for Forward Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements other than statements of historical fact including words such as "anticipate", "believe", "estimate", "expect", "consider" and "plan" and statements in the future tense are forward looking statements. The statements in this press release that could be deemed forward-looking statements include statements regarding growth prospects, market positioning, short and long term opportunities, and any statements or assumptions underlying any of the foregoing.

Forward-looking statements are subject to certain risks and uncertainties that could cause our actual future results to differ materially, or cause a material adverse impact on our results. Potential risks and uncertainties include, but are not necessarily limited to, unforeseen expenses; the difficulty of aligning expense levels with revenue; management's ability to forecast revenues, expenses and earnings; 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 our OEM partners' products and declines or delays in demand for our related products; changes in the mix of products sold; the uncertainty of market acceptance of new product introductions; intense competition in each of our businesses, including competition from products developed by EFI's customers; 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 components supplying; litigation involving intellectual property rights or other related matters; our ability to successfully integrate acquired businesses; and any other risk factors that may be included from time to time in the Company's SEC reports.

The statements in this press release are made as of the date of this press release. EFI undertakes no obligation to update information contained in this press release. For further information regarding risks and uncertainties associated with EFI's businesses, please refer to the section entitled "Factors That Could Adversely Affect Performance" in the Company's SEC filings, including, but not limited to, its annual report on Form 10-K and its quarterly reports on Form 10-Q, copies of which may be obtained by contacting EFI's Investor Relations Department by phone at 650-357-3828 or by email at investor.relations@efi.com or EFI's Investor Relations website at www.efi.com.

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income and earnings per diluted share that are GAAP net income (loss) and GAAP earnings per diluted share adjusted to exclude certain recurring and non-recurring costs, expenses and gains. A reconciliation of the adjustments to GAAP results for the three and six months ended June 30, 2011 and 2010 is provided below. In addition, an explanation of the ways in which management uses non-GAAP financial information to evaluate its business, the substance behind management's decision to use this non-GAAP financial information, the material limitations associated with the use of non-GAAP financial information, the manner in which management compensates for those limitations, and the substantive reasons management believes that this non-GAAP financial information provides useful information to investors is included under "About our Non-GAAP Net Income and Adjustments" after the tables below.

These non-GAAP measures are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income (loss) or earnings per diluted share prepared in accordance with GAAP. 

Electronics For Imaging, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
         
 2011201020112010
         
Revenue  $ 141,162  $ 119,117  $ 281,215  $ 229,947
Cost of revenue  62,585  58,154  123,927  110,212
Gross profit  78,577  60,963  157,288  119,735
 Operating expenses:        
 Research and development  28,905  24,829  56,376  50,958
 Sales and marketing  29,651  26,144  57,899  51,247
 General and administrative  13,298  8,879  26,455  18,856
 Amortization of identified intangibles  2,989  2,928  6,409  5,857
 Restructuring and other  366  1,010  1,713  3,021
 Total operating expenses  75,209  63,790  148,852  129,939
Income (loss) from operations  3,368  (2,827)  8,436  (10,204)
         
 Interest and other income (expense), net  812  (1,813)  3,208  (4,127)
Income (loss) before income taxes  4,180  (4,640)  11,644  (14,331)
Benefit from (provision for) income taxes  (565)  2,098  (1,780)  411
 Net income (loss)  $ 3,615  $ (2,542)  $ 9,864  $ (13,920)
         
Fully Diluted EPS calculation        
Net income (loss)  $ 3,615  $ (2,542)  $ 9,864  $ (13,920)
 Net income (loss) per diluted common share  $ 0.07  $ (0.06)  $ 0.20  $ (0.31)
Shares used in diluted per share calculation  48,458  45,173  48,365  44,936
 
 
Electronics For Imaging, Inc.
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income
(in thousands, except per share data)
(unaudited)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
         
 2011201020112010
         
Net income (loss)  $ 3,615  $ (2,542)  $ 9,864  $ (13,920)
Excess solvent inventories and related end-of-life purchases —   2,308 —  2,308
Amortization of identified intangibles  2,989  2,928 6,409 5,856
Stock based compensation expense — Cost of revenue  441  275 677 529
Stock based compensation expense — Research and development  1,890  745 2,767 1,855
Stock based compensation expense — Sales and marketing  1,174  954 2,059 1,907
Stock based compensation expense — General and administrative  3,599  1,293 6,772 2,937
Acquisition-related transaction costs  266  460 866 1,088
Restructuring and other  366  1,010 1,714 3,021
Tax effect of non-GAAP adjustments  (3,012)  (3,431)  (6,297)  (1,704)
Non-GAAP net income  $ 11,328  $ 4,000  $ 24,831  $ 3,877
         
Non-GAAP net income per diluted common share  $ 0.23  $ 0.09  $ 0.51  $ 0.08
Shares used in per share calculation  48,458  46,523  48,365  46,431
 
 
Electronics For Imaging, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
 June 30,
2011
December 31,
2010
     
Assets    
Cash and cash equivalents  $ 117,093  $ 126,363
Short-term investments  114,771  103,300
Accounts receivable, net  87,540  85,453
Inventories  46,665  46,216
Other current assets  33,193  24,317
 Total current assets  399,262  385,649
Property and equipment, net  28,810  26,547
Restricted investments  56,850  56,850
Goodwill  143,396  139,517
Intangible assets, net  47,038  49,140
Other assets  46,045  48,878
 Total assets  $ 721,401  $ 706,581
     
Liabilities & Stockholders' equity    
Accounts payable  $ 45,189  $ 49,189
Accrued and other liabilities  78,131  70,028
Income taxes payable  1,428  1,182
 Total current liabilities  124,748  120,399
Contingent liability  999  619
Deferred tax liabilities  1,330  1,292
Long term taxes payable  35,721  32,522
 Total liabilities  162,798  154,832
Total stockholders' equity  558,603  551,749
 Total liabilities and stockholders' equity  $ 721,401  $ 706,581
 
 
Electronics For Imaging, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 Six months ended
June 30,
 20112010
Cash flows from operating activities:    
Net income (loss)   $ 9,864  $ (13,920)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation and amortization  10,302  10,329
Deferred taxes  (768)  (1,937)
Stock-based compensation  12,276  7,228
Other non-cash charges and adjustments  4,692  3,731
Changes in operating assets and liabilities  (4,448)  6,574
Net cash provided by operating activities  31,918  12,005
Cash flows from investing activities:    
Purchases of short-term investments  (66,460)  (55,585)
Proceeds from sales and maturities of short-term investments  54,417  57,490
Purchases, net of proceeds from sales, of property and equipment  (4,849)  (1,395)
Businesses purchased, net of cash acquired  (11,044)  (2,397)
Proceeds from acquired business investment 713 — 
Net cash used for investing activities  (27,223)  (1,887)
Cash flows from financing activities:    
Proceeds from issuance of common stock  4,119  3,090
Purchases of treasury stock and net settlement of restricted stock, including transaction costs  (19,189)  (2,236)
Repayment of acquired business debt (210) — 
Excess tax benefit from stock-based compensation  1,218  380
Net cash provided by (used for) financing activities  (14,062)  1,234
Effect of foreign exchange rate changes on cash and cash equivalents  97  (59)
Increase (decrease) in cash and cash equivalents  (9,270)  11,293
Cash and cash equivalents at beginning of year  126,363  106,067
Cash and cash equivalents at end of period  $ 117,093  $ 117,360
 
 
Electronics For Imaging, Inc.
Revenue by Operating Segment and Geographic Area
(in thousands)
(unaudited)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
         
Revenue by Operating Segment2011201020112010
 Fiery  $ 64,586  $ 56,397  $ 136,950  $ 111,926
 Inkjet  57,244  50,190  108,279  94,028
 APPS  19,332  12,530  35,986  23,993
 Total  $ 141,162  $ 119,117  $ 281,215  $ 229,947
         
Revenue by Geographic Area        
 Americas  $ 82,854  $ 69,718  $ 157,046  $ 132,340
 EMEA  42,643  36,581  87,181  67,989
         
 Japan  9,499  8,854  21,320  21,948
 ROW   6,166  3,964  15,668  7,670
 APAC  15,665  12,818  36,988  29,618
 Total  $ 141,162  $ 119,117  $ 281,215  $ 229,947
         
         
Revenue in the Fiery and APPS operating segments for the three and six months ended June 30, 2010 has been revised to conform to the presentation used for the three and six months ended June 30, 2011, reflecting the reclassification of proofing software revenue from the APPS to the Fiery operating segment. Total revenue reported for the three and six months ended June 30, 2010 has not changed.


About our Non-GAAP Net Income and Adjustments

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income and earnings per diluted share that are GAAP net income (loss) and GAAP earnings per diluted share adjusted to exclude certain recurring and non-recurring costs, expenses and gains. 

We believe that the presentation of non-GAAP net income and non-GAAP earnings per diluted share provides important supplemental information regarding non-cash expenses, significant recurring and non-recurring items that we believe are important to understanding our financial, and business trends relating to our financial condition and results of operations. Non-GAAP net income and non-GAAP earnings per diluted share are among the primary indicators used by management as a basis for planning and forecasting future periods and by management and our board of directors to determine whether our operating performance has met specified targets and thresholds. Management uses non-GAAP net income and non-GAAP earnings per diluted share when evaluating operating performance because it believes that the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending upon the Company's activities and other factors, facilitates comparability of the Company's operating performance from period to period. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our business and the valuation of our Company.

Use and Economic Substance of Non-GAAP Financial Measures used by EFI

We compute non-GAAP net income and non-GAAP earnings per diluted share by adjusting GAAP net income (loss) and GAAP earnings per diluted share to remove the impact of recurring amortization of acquisition-related intangibles, stock-based compensation expense, as well as restructuring related and non-recurring charges and gains and the tax effect of these adjustments. Such non-recurring charges and gains include end-of-life inventory purchase and related obsolescence, asset impairment charges, acquisition-related transaction costs, and costs to integrate such acquisitions into our business. Examples of these excluded items are:

  • Recurring charges and gains, including:
  • Amortization of acquisition-related intangibles. Intangible assets acquired to date are being amortized on a straight-line basis.
  • Stock-based compensation expense is recognized in accordance with FASB Accounting Standards Codification, Topic 718, Stock Compensation.
  • Non-recurring charges and gains, including:
  • Excess solvent inventories and related end-of-life purchases.
  • Acquisition-related transaction costs associated with businesses acquired during the periods reported and anticipated transactions.
  • Restructuring and Other consists of:

          -- Restructuring related charges. We have incurred restructuring charges as we reduce the number and size of our facilities and the size
              of our workforce.

          -- Asset impairment costs consist primarily of a facility closure and the write-off of a private minority investment.

          -- Expenses incurred to integrate businesses acquired during the periods reported.

  • Tax effect of non-GAAP adjustments. After adjusting to exclude the items described above, we apply the principles of ASC 740, Income Taxes, to estimate the non-GAAP income tax provision in each jurisdiction in which we operate. 

Usefulness of Non-GAAP Financial Information to Investors

These non-GAAP measures are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income (loss) or earnings per diluted share prepared in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. We expect to continue to incur expenses of a nature similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income and non-GAAP earnings per diluted share should not be construed as an inference that these costs are unusual, infrequent or non-recurring.

For more information on the non-GAAP adjustments, please see the table captioned "Reconciliation of GAAP Net Income to non-GAAP Net Income" included in this press release.

CONTACT: Vincent Pilette

         Chief Financial Officer

         EFI

         650-357-3500

         

         Investor Relations:

         JoAnn Horne

         Market Street Partners

         415-445-3235


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