January 27, 2016

EFI Reports Record Revenue for Fourth Quarter, Exceeds Outlook

  • Q4 2015 Revenue Increases 22% to $257 Million (+27% ex-currency)
  • Q4 2015 Non-GAAP EPS Increases 17% (+27% ex-currency)
  • FY2015 Revenue Increases 12% to Record $883 Million (+17% ex-currency)
  • FY2015 Non-GAAP EPS Increases 13% (+24% ex-currency)


FREMONT, Calif., Jan. 27, 2016 (GLOBE NEWSWIRE) -- Electronics For Imaging, Inc. (Nasdaq:EFII), a world leader in customer-focused digital printing innovation, today announced its results for the quarter  and year ended December 31, 2015.  

For the quarter ended December 31, 2015, the Company reported record revenue of $256.5 million, up 22% compared to fourth quarter 2014 revenue of $211.1 million.  Non-GAAP net income was $29.4 million or $0.61 per diluted share, which was reduced by 3 cents due to balance sheet currency translation impact, compared to non-GAAP net income of $25.1 million or $0.52 per diluted share for the same period in 2014, which was reduced by 2 cents due to balance sheet currency translation impact.  GAAP net income was $10.3 million or $0.21 per diluted share, compared to $11.9 million or $0.25 per diluted share for the same period in 2014. 

For the year ended December 31, 2015, the Company reported revenue of $882.5 million, up 12% year-over-year compared to $790.4 million for the same period in 2014.  Non-GAAP net income was $97.9 million or $2.03 per diluted share, compared to non-GAAP net income of $87.1 million or $1.80 per diluted share for the same period in 2014.  GAAP net income was $33.5 million or $0.70 per diluted share, compared to $33.7 million or $0.70 per diluted share for the same period in 2014.

"Our team capped another strong year for EFI by delivering an outstanding quarter despite the continued macro headwinds we have had to overcome all year," said Guy Gecht, CEO of EFI. "As we begin 2016, we remain deeply committed to developing innovative technology to make our customers more competitive and productive." 

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.

Ex-Currency. To better understand trends in our business, we believe that it is helpful to adjust revenue and earnings per share to exclude the impact of year-over-year changes in the translation of foreign currencies into U.S. dollars. This is accomplished by using the exchange rate in effect during the comparable prior period. We refer to this adjusted revenue and earnings per share as "ex-currency." Management believes the ex-currency measure provides investors an additional perspective on year-over-year financial trends. 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. 

About EFI       
EFI™ is a global technology company, based in Silicon Valley, and is leading the worldwide transformation from analog to digital imaging. We are passionate about fueling customer success with products that increase competitiveness and boost productivity. To do that, we develop breakthrough technologies for the manufacturing of signage, packaging, textiles, ceramic tiles, and personalized documents, with a wide range of printers, inks, digital front ends, and a comprehensive business and production workflow suite that transforms and streamlines the entire production process. (www.efi.com)

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", "consider", "continue", "develop", "estimate", "expect", "look", 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 EFI's strategy, plans, expectations regarding its revenue growth, product portfolio, productivity, future opportunities for EFI and its customers, demand for products, 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, potential differences between the results disclosed in this release and EFI's final results when disclosed in its Annual Report on Form 10-K as a result of final adjustments and other developments that may arise between now and the disclosure of the final results, intense competition in each of our businesses, including competition from products developed by EFI's customers;  unforeseen expenses; 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; 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; 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 and are subject to revision until EFI will have filed its annual report on Form 10-K for the fiscal year 2015.  EFI undertakes no obligation to update information contained in this press release.  For further information regarding risks and uncertainties associated with EFI's businesses, please refer to the section entitled "Risk Factors" in the Company's SEC filings, including, but not limited to, its annual report on Form 10-K and its quarterly reports on Form 10-Q, copies of which may be obtained by contacting EFI's Investor Relations Department by phone at 650-357-3828 or by email at 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 and GAAP earnings per diluted share adjusted to exclude certain costs, expenses, and gains. A reconciliation of the adjustments to GAAP results for the three months and years ended December 31, 2015 and 2014 is provided below. In addition, an explanation of how management uses non-GAAP financial information to evaluate its business, the substance behind management's decision to use this non-GAAP financial information, the material limitations associated with the use of non-GAAP financial information, the manner in which management compensates for those limitations, and the substantive reasons management believes that this non-GAAP financial information provides useful information to investors is included under "About our Non-GAAP Net Income and Adjustments" after the tables below.

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

Electronics For Imaging, Inc.        
Condensed Consolidated Statements of Operations        
(in thousands, except per share data)        
(unaudited)        
         
 Three Months Ended Years Ended 
 December 31, December 31, 
                 
  2015   2014   2015   2014  
                 
Revenue$256,544  $211,100  $882,513  $790,427  
Cost of revenue 127,288   96,908   423,129   360,690  
Gross profit 129,256   114,192   459,384   429,737  
Operating expenses:        
Research and development 37,451   34,169   141,364   134,732  
Sales and marketing 42,222   39,481   156,339   147,383  
General and administrative 18,587   16,959   72,797   66,932  
Amortization of identified intangibles 8,390   5,407   26,510   20,673  
Restructuring and other 3,187   916   5,731   6,578  
Total operating expenses 109,837   96,932   402,741   376,298  
Income from operations 19,419   17,260   56,643   53,439  
Interest expense (4,494)  (4,152)  (17,364)  (5,859) 
Interest income and other expense, net (711)  (845)  (1,757)  (5,493) 
Income before income taxes 14,214   12,263   37,522   42,087  
Provision for income taxes (3,885)  (348)  (3,982)  (8,373) 
Net income$10,329  $11,915  $33,540  $33,714  
         
Diluted EPS calculation        
Net income$10,329  $11,915  $33,540  $33,714  
Net income per diluted common share$0.21  $0.25  $0.70  $0.70  
Shares used in diluted per share calculation 48,447   48,118   48,150   48,406  
         


Electronics For Imaging, Inc.       
Reconciliation of GAAP Net Income to Non-GAAP Net Income       
(in thousands, except per share data)       
(unaudited)       
        
 Three Months Ended Years Ended
 December 31, December 31,
                
  2015   2014   2015   2014 
                
Net income$10,329  $11,915  $33,540  $33,714 
Amortization of identified intangibles 8,390   5,407   26,510   20,673 
Stock based compensation — Cost of revenue 481   668   2,951   2,562 
Stock based compensation — Research and development 1,657   2,336   9,910   8,818 
Stock based compensation — Sales and marketing 1,141   3,001   7,926   7,070 
Stock based compensation — General and administrative 2,705   4,905   14,637   17,611 
Restructuring and other 3,187   916   5,731   6,578 
General and administrative:       
Acquisition-related transaction costs 1,258   275   5,494   1,501 
Changes in fair value of contingent consideration 295   (1,590)  (2,135)  (3,810)
Litigation settlements 15    584   897 
Interest income and other expense, net       
Non-cash interest expense related to our convertible notes 2,997   2,832   11,781   3,497 
Tax effect of non-GAAP adjustments (3,020)  (5,545)  (18,990)  (12,051)
Non-GAAP net income$29,435  $25,120  $97,939  $87,060 
        
Non-GAAP net income per diluted common share$0.61  $0.52  $2.03  $1.80 
Shares used in diluted per share calculation 48,447   48,118   48,150   48,406 
        


Electronics For Imaging, Inc.    
Reconciliation of Revenue and Non-GAAP Revenue Ex-Currency    
Reconciliation of Non-GAAP Net Income to Non-GAAP Net Income Ex-Currency    
(in thousands, except per share data)    
(unaudited)    
     
     
 Three Months Year 
 Ended Ended 
     
 December 31, 2015 
     
Revenue$256,544  $882,513  
Ex-Currency Adjustments 12,439   41,746  
Non-GAAP revenue ex-currency$268,983  $924,259  
     
     
     
Non-GAAP net income$29,435  $97,939  
Ex-Currency Adjustments 2,658   9,143  
Non-GAAP net income ex-currency$32,093  $107,082  
     
     
Non-GAAP net income per diluted common share$0.61  $2.03  
Ex-Currency Adjustments 0.05   0.19  
Non-GAAP net income per diluted common share ex-currency$0.66  $2.22  
     
Shares used in diluted per share calculation 48,447   48,150  
      

 

Electronics For Imaging, Inc.     
Condensed Consolidated Balance Sheets     
(in thousands)     
(unaudited)     
      
 December 31, December 31,  
  2015   2014   
      
Assets     
Cash and cash equivalents$164,091  $298,133   
Short-term investments 333,276   318,599   
Accounts receivable, net 194,715   155,421   
Inventories 104,813   72,132   
Other current assets 33,177   17,264   
Total current assets 830,072   861,549   
Property and equipment, net 97,779   86,197   
Goodwill 338,793   245,443   
Intangible assets, net 135,552   62,571   
Other assets 55,300   48,810   
Total assets$1,457,496  $1,304,570   
      
Liabilities & Stockholders' equity     
Accounts payable$113,490  $86,940   
Accrued and other liabilities 124,181   105,110   
Income taxes payable and deferred tax liabilities 3,593   1,714   
Total current liabilities 241,264   193,764   
Convertible senior notes, net 296,485   284,818   
Imputed financing obligation related to build-to-suit lease 13,106   12,472   
Noncurrent contingent and other liabilities 52,132   5,440   
Noncurrent deferred tax liabilities 19,003   3,875   
Noncurrent income taxes payable 11,312   15,512   
Total liabilities 633,302   515,881   
Total stockholders' equity 824,194   788,689   
Total liabilities and stockholders' equity$1,457,496  $1,304,570   
      
      
      
      
Deferred Taxes. ASU 2015-17, Balance Sheet Classification of Deferred Taxes, issued in November 2015, removes the requirement to classify the current and noncurrent amounts of deferred income tax assets and liabilities and requires noncurrent classification. We have elected to early adopt this standard, which has resulted in the reclassification of deferred tax assets and liabilities of $17.2 and $0.1 million, respectively, from current to noncurrent as of December 31, 2014. 
      

 

Electronics For Imaging, Inc.     
Condensed Consolidated Statements of Cash Flows     
(in thousands)     
(unaudited)     
      
  Years Ended 
  December 31, 
      
   2015   2014  
Cash flows from operating activities:     
Net income $33,540  $33,714  
Adjustments to reconcile net income to net cash provided by operating activities:     
Depreciation and amortization  40,124   31,099  
Deferred taxes  (7,384)  (5,836) 
Tax benefit from employee stock plans  5,368   8,491  
Excess tax benefit from stock-based compensation  (3,256)  (9,789) 
Stock-based compensation, net of cash settlements  32,388   36,061  
Non-cash settlement of vacation liabilities by issuing restricted stock units ("RSUs")  1,353     
Provision for inventory obsolescence  5,193   6,300  
Provision for bad debts and sales-related allowances  7,536   7,408  
Contingent consideration payments related to businesses acquired     (3,428) 
Non-cash accretion of interest expense on convertible notes and imputed financing obligation  12,957   4,433  
Other non-cash charges and gains  3,844   (3,608) 
Changes in operating assets and liabilities, net of effect of acquired businesses  (66,561)  (22,504) 
Net cash provided by operating activities  65,102   82,341  
      
Cash flows from investing activities:     
Purchases of short-term investments  (328,911)  (281,962) 
Proceeds from sales and maturities of short-term investments  311,508   139,185  
Purchases, net of proceeds from sales, of property and equipment  (18,449)  (15,900) 
Businesses purchased, net of cash acquired  (74,766)  (21,980) 
Net cash used for investing activities  (110,618)  (180,657) 
      
Cash flows from financing activities:     
Proceeds from issuance of common stock  11,450   16,317  
Proceeds from issuance of convertible notes, net of issuance cost payments  (58)  336,365  
Purchase of convertible note hedges     (63,928) 
Proceeds from issuance of warrants     34,535  
Purchases of treasury stock and net share settlements  (76,447)  (101,095) 
Repayment of debt assumed through business acquisitions  (22,534)  (564) 
Contingent consideration payments related to businesses acquired  (4,093)  (10,594) 
Excess tax benefit from stock-based compensation  3,255   9,789  
Net cash provided by (used for) financing activities  (88,427)  220,825  
      
Effect of foreign exchange rate changes on cash and cash equivalents  (99)  (1,460) 
Decrease in cash and cash equivalents  (134,042)  121,049  
Cash and cash equivalents at beginning of period  298,133   177,084  
Cash and cash equivalents at end of period $164,091  $298,133  
      


Electronics For Imaging, Inc.       
Revenue by Operating Segment and Geographic Area      
(in thousands)       
(unaudited)       
        
 Three Months Ended Years Ended
 December 31, December 31,
        
Revenue by Operating Segment 2015   2014   2015   2014 
Industrial Inkjet$141,890  $101,855  $447,705  $379,170 
Productivity Software 38,853   34,668   135,350   130,743 
Fiery 75,801   74,577   299,458   280,514 
Total$256,544  $211,100  $882,513  $790,427 
        
Revenue by Geographic Area       
Americas$136,549  $119,736  $473,599  $438,421 
EMEA 85,912   62,893   291,103   244,545 
APAC 34,083   28,471   117,811   107,461 
Total$256,544  $211,100  $882,513  $790,427 
        
        


About our Non-GAAP Net Income and Adjustments

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared in accordance with GAAP, we use non-GAAP measures of net income and earnings per diluted share that are GAAP net income and GAAP earnings per diluted share adjusted to exclude certain 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 and significant items that we believe are important to understanding 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 the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending on our activities and other factors, facilitates comparability of our 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 and GAAP earnings per diluted share to remove the impact of amortization of acquisition-related intangibles, stock-based compensation expense, restructuring and other expenses, acquisition-related transaction expenses, costs to integrate such acquisitions into our business, changes in the fair value of contingent consideration, litigation settlement charges, and non-cash interest expense related to our 0.75% convertible senior notes ("Notes").  We use a constant non-GAAP tax rate of 19%, which we believe reflects the long term average tax rate based on our international structure and geographic distribution of revenue and profit.

 Ex-Currency. To better understand trends in our business, we believe that it is helpful to adjust revenue and earnings per share to exclude the impact of year-over-year changes in the translation of foreign currencies into U.S. dollars. This is accomplished by using the exchange rate in effect during the comparable prior period. We refer to this adjusted revenue and earnings per share as "ex-currency." Management believes the ex-currency measure provides investors an additional perspective on year-over-year financial trends. 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. 

These excluded items are described below:

  • Intangible assets acquired to date are being amortized on a straight-line basis.

  • Stock-based compensation expense of $6.0 and $35.4 million during the three months and year ended December 31, 2015, respectively, consists of $6.0 and $34.1 million of stock-based compensation expense recognized in accordance with ASC 718, Stock Compensation and the non-cash settlement of $1.4 million of vacation liabilities settled through the issuance of RSUs during the year ended December 31, 2015, which is not included in the GAAP presentation of our stock-based compensation expense.

  • Restructuring and other expenses consists of:

    • Restructuring charges incurred as we consolidate the number and size of our facilities and, as a result, reduce the size of our workforce.

    • 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.

  • Changes in fair value of contingent consideration. Our management determined that we should analyze the total return provided by the investment when evaluating operating results of an acquired entity. The total return consists of operating profit generated from the acquired entity compared to the purchase price paid, including the final amounts paid for contingent consideration without considering any post-acquisition adjustments related to changes in the fair value of the contingent consideration. Because our management believes the final purchase price paid for the acquisition reflects the accounting value assigned to both contingent consideration and to the intangible assets, we exclude the GAAP impact of any adjustments to the fair value of acquisition-related contingent consideration from the operating results of an acquisition in subsequent periods. We believe this approach is useful in understanding the long-term return provided by our acquisitions and that investors benefit from a supplemental non-GAAP financial measure that excludes the impact of this adjustment.

  • Non-cash interest expense on our Notes. Our Notes may be settled in cash on conversion. We are required to separately account for the liability (debt) and equity (conversion option) components of the Notes in a manner that reflects our non-convertible debt borrowing rate. Accordingly, for GAAP purposes, we are required to amortize a debt discount equal to the fair value of the conversion option as interest expense on our $345 million of 0.75% convertible senior notes that were issued in a private placement in September 2014 over the term of the Notes.

  • Litigation settlements. We settled, or accrued reserves related to, several litigation claims of $0.6 and $0.9 million during the years ended December 31, 2015 and 2014, respectively.

  • Tax effect of non-GAAP adjustments are as follows:

    • We use a constant non-GAAP tax rate of 19%, which we believe reflects the long term average tax rate based on our international structure and geographic distribution of revenue and profit. The long-term average tax rate is calculated in accordance with the principles of ASC 740, Income Taxes, after excluding the tax effect of the non-GAAP items described above, to estimate the non-GAAP income tax provision in each jurisdiction in which we operate.

For more information:
Marc Olin
Chief Financial Officer
EFI
650-357-3500

Investor Relations:
JoAnn Horne
Market Street Partners 
415-445-3235


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