October 20, 2011

EFI Reports Q3 2011 Results

Revenue Grows 14% to $147 Million; Seventh Consecutive Quarter of Double-Digit Revenue Growth

FOSTER CITY, Calif., Oct. 20, 2011 (GLOBE NEWSWIRE) -- Electronics For Imaging, Inc. (Nasdaq:EFII), a world leader in customer-focused digital printing innovation, today announced its results for the third quarter of 2011. For the quarter ended September 30, 2011, the Company reported revenue of $147.3 million, up 14% year-over-year compared to third quarter 2010 revenue of $129.0 million.

  • For the third quarter of 2011, non-GAAP net income was $11.6 million or $0.25 per diluted share, compared to non-GAAP net income of $10.7 million or $0.23 per diluted share for the same period in 2010.
  • For the third quarter of 2011, GAAP net income was $6.1 million or $0.13 per diluted share, compared to GAAP net income of $13.4 million or $0.29 per diluted share for the same period in 2010.
  • For the nine months ended September 30, 2011, non-GAAP net income was $36.4 million or $0.76 per diluted share, compared to non-GAAP net income of $14.5 million or $0.31 per diluted share for the same period in 2010.
  • For the nine months ended September 30, 2011, GAAP net income was $16.0 million or $0.34 per diluted share, compared to GAAP net loss of $(0.6) million or $(0.01) per diluted share for the same period in 2010.

"The solid results across all of our business segments and geographies marked EFI's seventh consecutive quarter of double-digit revenue growth, the eighth consecutive quarter of greater than 20% growth in UV ink volume, along with record software and recurring revenues," said Guy Gecht, CEO of EFI. "We are pleased that yet again our results demonstrate that our strategy of targeting the growth segments of print with innovative products that deliver compelling ROI is working."

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 our projections, estimates and strategy, 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 nine months ended September 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 EndedNine Months Ended
 September 30,September 30,
         
 2011201020112010
         
Revenue  $ 147,284  $ 129,049  $ 428,498  $ 358,996
Cost of revenue  64,506  59,056  188,432  169,269
Gross profit  82,778  69,993  240,066  189,727
Operating expenses:        
Research and development  29,473  27,249  85,850  78,207
Sales and marketing  30,137  27,244  88,036  78,491
General and administrative  14,095  9,364  40,550  28,221
Amortization of identified intangibles  2,311  3,351  8,720  9,206
Restructuring and other  604  950  2,316  3,971
Total operating expenses  76,620  68,158  225,472  198,096
Income (loss) from operations  6,158  1,835  14,594  (8,369)
Interest and other income (expense), net  1,363  3,085  4,571  (1,041)
Income (loss) before income taxes  7,521  4,920  19,165  (9,410)
Benefit from (provision for) income taxes  (1,397)  8,437  (3,177)  8,848
Net income (loss)  $ 6,124  $ 13,357  $ 15,988  $ (562)
         
Fully Diluted EPS calculation        
Net income (loss)  $ 6,124  $ 13,357  $ 15,988  $ (562)
Net income (loss) per diluted common share  $ 0.13  $ 0.29  $ 0.34  $ (0.01)
Shares used in diluted per share calculation  47,307  46,856  47,701  45,170
 
 
 
Electronics For Imaging, Inc.
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income
(in thousands, except per share data)
(unaudited)
         
 Three Months EndedNine Months Ended
 September 30,September 30,
         
 2011201020112010
         
Net income (loss)  $ 6,124  $ 13,357  $ 15,988  $ (562)
Excess solvent inventories and related end-of-life purchases —  —  —  2,308
Amortization of identified intangibles  2,311  3,351 8,720 9,206
Stock based compensation expense — Cost of revenue  657  279 1,334 809
Stock based compensation expense — Research and development  1,245  1,261 4,013 3,116
Stock based compensation expense — Sales and marketing  1,027  1,057 3,086 2,964
Stock based compensation expense — General and administrative  2,358  2,312 9,130 5,249
Acquisition-related transaction costs  673  82 1,540 1,169
Change in fair value of contingent consideration  1,476 —  1,476 — 
Restructuring and other  604  950 2,316 3,971
Gain on sale of minority investment in a privately-held company  (2,866) —   (2,866) — 
Tax effect of non-GAAP adjustments  (2,005)  (11,991)  (8,302)  (13,693)
Non-GAAP net income  $ 11,604  $ 10,658  $ 36,435  $ 14,537
         
Non-GAAP net income per diluted common share  $ 0.25  $ 0.23  $ 0.76  $ 0.31
Shares used in per share calculation  47,307  46,856  47,701  46,476
 
 
 
Electronics For Imaging, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
     
 September 30,December 31,
 20112010
     
Assets    
Cash and cash equivalents  $ 97,524  $ 126,363
Short-term investments  105,389  103,300
Accounts receivable, net  91,546  85,453
Inventories  47,271  46,216
Other current assets  38,943  24,317
Total current assets  380,673  385,649
Property and equipment, net  29,950  26,547
Restricted investments  56,850  56,850
Goodwill  156,002  139,517
Intangible assets, net  52,966  49,140
Other assets  43,601  48,878
Total assets  $ 720,042  $ 706,581
     
Liabilities & Stockholders' equity    
Accounts payable  $ 44,059  $ 49,189
Accrued and other liabilities  83,453  70,028
Income taxes payable  2,070  1,182
Total current liabilities  129,582  120,399
Contingent liabilities  2,111  619
Deferred tax liabilities  2,797  1,292
Long term taxes payable  37,122  32,522
Total liabilities  171,612  154,832
Total stockholders' equity  548,430  551,749
Total liabilities and stockholders' equity  $ 720,042  $ 706,581
 
 
 
Electronics For Imaging, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
     
 Nine months ended
 September 30,
 20112010
     
Cash flows from operating activities:    
Net income (loss)   $ 15,988  $ (562)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation and amortization  14,413  15,758
Deferred taxes  (247)  (2,369)
Stock-based compensation  17,563  12,138
Other non-cash charges and adjustments  7,988  6,660
Gain on sale of minority investment in a privately-held company  (2,866) — 
Changes in operating assets and liabilities  (9,994)  (12,729)
Net cash provided by operating activities  42,845  18,896
     
Cash flows from investing activities:    
Purchases of short-term investments  (75,178)  (74,171)
Proceeds from sales and maturities of short-term investments  71,896  73,879
Purchases, net of proceeds from sales, of property and equipment  (7,687)  (2,847)
Businesses purchased, net of cash acquired  (28,966)  (16,448)
Proceeds from sale of minority investment in a privately-held company  2,866 — 
Proceeds from acquired business investment 713 — 
Net cash used for investing activities  (36,356)  (19,587)
     
Cash flows from financing activities:    
Proceeds from issuance of common stock  8,088  5,879
Purchases of treasury stock and net settlement of restricted stock, including transaction costs  (45,055)  (2,948)
Repayment of acquired business debt (210) — 
Excess tax benefit from stock-based compensation  1,872  404
Net cash provided by (used for) financing activities  (35,305)  3,335
     
Effect of foreign exchange rate changes on cash and cash equivalents  (23)  159
Increase (decrease) in cash and cash equivalents  (28,839)  2,803
Cash and cash equivalents at beginning of year  126,363  106,067
Cash and cash equivalents at end of period  $ 97,524  $ 108,870
 
 
 
Electronics For Imaging, Inc.
Revenue by Operating Segment and Geographic Area
(in thousands)
(unaudited)
         
 Three Months EndedNine Months Ended
 September 30,September 30,
         
Revenue by Operating Segment2011201020112010
 Fiery  $ 66,353  $ 60,966  $ 203,303  $ 172,892
 Inkjet  59,411  52,232  167,689  146,261
 APPS  21,520  15,851  57,506  39,843
 Total  $ 147,284  $ 129,049  $ 428,498  $ 358,996
         
Revenue by Geographic Area        
 Americas  $ 84,935  $ 75,676  $ 241,980  $ 208,016
 EMEA  46,589  37,550  133,770  105,539
 APAC  15,760  15,823  52,748  45,441
 Japan 7,267  10,988  28,587  32,936
 ROW  8,493  4,835  24,161  12,505
 Total  $ 147,284  $ 129,049  $ 428,498  $ 358,996

 

About our Non-GAAP Net Income and Adjustments

Use of Non-GAAP Financial Information

To supplement our consolidated financial results prepared in accordance with GAAP, we use non-GAAP measures of net income (loss) 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

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 and 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, sale of a non-strategic minority investment in a private company, acquisition-related transaction costs, and costs to integrate such acquisitions into our business.

  • 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 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.
  • Restructuring and other consists of:

          -- Restructuring related charges. We have incurred restructuring charges as we reduced 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.

  • Acquisition-related transaction costs associated with businesses acquired during the periods reported and anticipated transactions.
  • Change in fair value of contingent consideration. Our management has determined that when analyzing the operating results of an acquired entity, we should focus on the total return provided by the investment (i.e., operating profit generated from the acquired entity compared to the purchase price paid, including the final amounts paid for contingent consideration) without taking into consideration any expenses recognized post-acquisition related to the change in the fair value of the contingent consideration. Our management determined that because the final purchase price paid for an acquisition necessarily reflects the accounting value assigned to both contingent consideration and to the intangible assets, when analyzing the operating results of an acquisition in subsequent periods, we should exclude the GAAP impact of any adjustments to the fair value of acquisition-related contingent consideration to its financial results. We believe this approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the impact of this adjustment. For the quarter ended September 30, 2011, we have excluded approximately $1.5 million from our non-GAAP results related to the change in the fair value of the Radius acquisition contingent consideration.
  • Gain on sale of minority investment in a privately held company. Other investments, included within other assets, consist of equity and debt investments in privately-held companies that develop products, markets, and services that are considered to be strategic to us. Each of these investments had been fully impaired in prior years. On September 1, 2011, we sold one of these investments for $2.9 million because it was no longer considered to be strategic. 
  • Tax effect of non-GAAP adjustments.
  • After excluding the items described above, we apply the principles of ASC 740 to estimate the non-GAAP income tax provision in each jurisdiction in which we operate.
  • We have excluded interest accrued on prior year tax reserves of $0.1 and $0.4 million for the three and nine months ended September 30, 2011, respectively, and $0.1 and $0.4 million for the three and nine months ended September 30, 2010, respectively, as well as other tax benefits of $0.4 million for the three and nine months ended September 30, 2011. 
     
  • We have excluded the recognition of previously unrecognized tax benefits of $8.4 million from our non-GAAP net income for the three and nine months ended September 30, 2010 to facilitate comparability of our operating performance between the periods. These tax benefits primarily resulted from the release of previously unrecognized tax benefits resulting from the expiration of U.S. federal statutes of limitations.

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.

CONTACT: 
Vincent Pilette

         Chief Financial Officer

         EFI

         650-357-3500

         

         Investor Relations:

         JoAnn Horne

         Market Street Partners

         415-445-3235


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