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Exhibit 99.1

 

For more information:       Investor Relations:
Marc Olin       JoAnn Horne
Chief Financial Officer       Market Street Partners
EFI       415-445-3235
650-357-3500      

EFI Reports Record Third Quarter with Revenue of $179M, Up 16%

Double-Digit Growth in All Business Segments Accelerates Profit Expansion and Cash Generation

Foster City, Calif. – October 17, 2013 – Electronics For Imaging, Inc. (Nasdaq: EFII), a world leader in customer-focused digital printing innovation, today announced its results for the third quarter of 2013.

For the quarter ended September 30, 2013, the Company reported record third quarter revenue of $178.8 million, up 16% compared to third quarter 2012 revenue of $154.1 million. Third quarter 2013 non-GAAP net income was $18.7 million or $0.39 per diluted share, up 41% and 39%, respectively, compared to non-GAAP net income of $13.3 million or $0.28 per diluted share for the same period in 2012. GAAP net income was $16.1 million or $0.33 per diluted share, up 20% and 18%, respectively, compared to $13.4 million or $0.28 per diluted share for the same period in 2012.

For the nine months ended September 30, 2013, the Company reported revenue of $530.5 million, up 11% year-over-year compared to $478.0 million for the same period in 2012. Non-GAAP net income was $52.8 million or $1.09 per diluted share, up 27% and 25%, respectively, compared to non-GAAP net income of $41.7 million or $0.87 per diluted share for the same period in 2012. GAAP net income was $33.9 million or $0.70 per diluted share, also up 27% and 25%, respectively, compared to GAAP net income of $26.7 million or $0.56 per diluted share for the same period in 2012.

“The EFI team delivered a very strong third quarter and a terrific increase in profitability,” said Guy Gecht, CEO of EFI. “With breakthrough products across our portfolio, we expect the demand to continue as EFI’s innovation helps customers around the globe win new business and boost productivity.”

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 worldwide provider of products, technology, and services leading the transformation of analog to digital imaging. Based in Silicon Valley with offices around the globe, the company’s powerful integrated product portfolio includes digital front-end servers; superwide, wide-format, label, and ceramic inkjet presses and inks; production workflow, web-to-print, and business automation software; and office, enterprise, and mobile cloud solutions. These products allow users to produce, communicate and share information in an easy and effective way, and enable businesses to increase their profits, productivity, and efficiency.

 

1


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 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, 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 products by the leading printer manufacturers 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 supply of components; litigation involving intellectual property rights or other related matters; our ability to successfully integrate acquired businesses; 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 disruptions in our operations, the difficulty to retain employees, and additional expenses that we may incur as a result of our relocation from the Foster City campus; the compliance with the new requirements regarding the “conflict minerals,” if they are found to be used in our products, 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 “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 (loss), as the case may be, and earnings per diluted share that are GAAP net income (loss), as the case may be, 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, 2013 and 2012 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 (loss), as the case may be, or earnings per diluted share prepared in accordance with GAAP.

 

2


Electronics For Imaging, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2013      2012      2013     2012  

Revenue

   $ 178,823       $ 154,074       $ 530,480      $ 478,031   

Cost of revenue

     81,610         70,997         241,424        217,495   
  

 

 

    

 

 

    

 

 

   

 

 

 

Gross profit

     97,213         83,077         289,056        260,536   

Operating expenses:

          

Research and development

     32,021         29,068         95,180        90,194   

Sales and marketing

     34,885         30,329         102,133        93,480   

General and administrative

     10,468         12,775         37,509        36,831   

Amortization of identified intangibles

     4,767         4,619         14,640        13,434   

Restructuring and other

     960         2,280         4,097        4,530   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total operating expenses

     83,101         79,071         253,559        238,469   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income from operations

     14,112         4,006         35,497        22,067   

Interest and other income (expense), net

     882         1,555         (2,464     800   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income before income taxes

     14,994         5,561         33,033        22,867   

Benefit from income taxes

     1,147         7,850         894        3,783   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 16,141       $ 13,411       $ 33,927      $ 26,650   
  

 

 

    

 

 

    

 

 

   

 

 

 

Fully Diluted EPS calculation

          

Net income

   $ 16,141       $ 13,411       $ 33,927      $ 26,650   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income per diluted common share

   $ 0.33       $ 0.28       $ 0.70      $ 0.56   
  

 

 

    

 

 

    

 

 

   

 

 

 

Shares used in diluted per share calculation

     48,622         48,009         48,387        47,670   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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Electronics For Imaging, Inc.

Reconciliation of GAAP Net Income to Non-GAAP Net Income

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
        

Net income

   $ 16,141      $ 13,411      $ 33,927      $ 26,650   
  

 

 

   

 

 

   

 

 

   

 

 

 

Amortization of identified intangibles

     4,767        4,619        14,640        13,434   

Stock based compensation – Cost of revenue

     484        293        1,335        826   

Stock based compensation – Research and development

     1,986        1,365        5,524        4,189   

Stock based compensation – Sales and marketing

     1,303        790        3,138        2,404   

Stock based compensation – General and administrative

     2,494        2,457        8,712        6,919   

Restructuring and other

     960        2,280        4,097        4,530   

General and administrative:

        

Acquisition-related transaction costs

     145        384        836        1,208   

Change in fair value of contingent consideration

     403        —          (403     (1,404

Litigation settlements

     (3,277     506        (3,277     255   

Sublease income related to our deferred property sale

     (1,022     —          (2,739     —     

Depreciation expense related to our deferred property sale

     410        —          1,230        —     

Interest and other income (expense), net:

        

Interest expense related to our deferred property sale

     308        —          1,799        —     

Relocation expenses related to deferred property sale

     236        —          346        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Tax effect of non-GAAP adjustments

     (6,591     (12,797     (16,380     (17,355
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

   $ 18,747      $ 13,308      $ 52,785      $ 41,656   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income per diluted common share

   $ 0.39      $ 0.28      $ 1.09      $ 0.87   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation

     48,622        48,009        48,387        47,670   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

4


Electronics For Imaging, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     September 30,      December 31,  
     2013      2012  

Assets

     

Cash and cash equivalents

   $ 200,730       $ 283,996   

Short-term investments

     161,904         80,966   

Accounts receivable, net

     126,083         135,110   

Inventories

     73,739         58,343   

Other current assets

     94,976         74,877   
  

 

 

    

 

 

 

Total current assets

     657,432         633,292   

Property and equipment, net

     141,051         86,582   

Goodwill

     225,552         219,456   

Intangible assets, net

     68,350         80,244   

Other assets

     61,105         55,397   
  

 

 

    

 

 

 

Total assets

   $ 1,153,490       $ 1,074,971   
  

 

 

    

 

 

 

Liabilities & Stockholders’ equity

     

Accounts payable

   $ 81,277       $ 63,446   

Deferred proceeds from property transaction

     182,870         180,216   

Accrued and other liabilities

     130,339         119,247   

Income taxes payable

     5,809         7,562   
  

 

 

    

 

 

 

Total current liabilities

     400,295         370,471   

Imputed financing obligation

     11,267         —    

Contingent and other liabilities

     9,398         17,742   

Deferred tax liabilities

     6,691         6,210   

Long term taxes payable

     33,513         29,755   
  

 

 

    

 

 

 

Total liabilities

     461,164         424,178   

Total stockholders’ equity

     692,326         650,793   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 1,153,490       $ 1,074,971   
  

 

 

    

 

 

 

Note: In accordance with ASC 805, we revised previously issued financial information to reflect adjustments to the accounting for business acquisitions as if they occurred on the acquisition date. Accordingly, we have increased goodwill and accrued and other liabilities by $1.2 million at December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of Cretaprint, OPS, and Technique.

 

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Electronics For Imaging, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

     Nine Months Ended
September 30,
 
     2013     2012  

Cash flows from operating activities:

    

Net income

   $ 33,927      $ 26,650   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     21,479        19,558   

Deferred taxes

     (13,996     1,317   

Tax benefit from employee stock plans

     6,958        281   

Excess tax benefit from stock-based compensation

     (7,130     (1,186

Stock-based compensation

     18,708        14,338   

Provisions for inventory obsolescence

     3,939        2,574   

Provisions for bad debts and sales-related allowances

     5,252        1,689   

Contingent consideration payment related to business acquired

     (619     —     

Other non-cash charges and adjustments

     271        1,897   

Changes in operating assets and liabilities

     (10,849     (41,508
  

 

 

   

 

 

 

Net cash provided by operating activities

     57,940        25,610   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of short-term investments

     (120,821     (34,611

Proceeds from sales and maturities of short-term investments

     39,379        50,851   

Purchases, net of proceeds from sales, of property and equipment

     (32,725     (5,319

Businesses purchased, net of cash acquired

     (4,533     (45,133

Proceeds from notes receivable of acquired businesses

     —          5,216   
  

 

 

   

 

 

 

Net cash used for investing activities

     (118,700     (28,996
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock

     11,980        18,557   

Purchases of treasury stock and net settlement of restricted stock

     (28,852     (18,392

Repayment of acquired business debt

     (1,693     (6,817

Contingent consideration payments related to businesses acquired

     (9,998     (382

Excess tax benefit from stock-based compensation

     7,130        1,186   
  

 

 

   

 

 

 

Net cash used for financing activities

     (21,433     (5,848
  

 

 

   

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

     (1,073     46   
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (83,266     (9,188

Cash and cash equivalents at beginning of year

     283,996        120,058   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 200,730      $ 110,870   
  

 

 

   

 

 

 

Note: If we excluded $5.5 million of taxes paid related to the sale of our corporate headquarters facility, then our net cash provided by operating activities would be $63.4 million for the nine months ended September 30, 2013.

 

6


Electronics For Imaging, Inc.

Revenue by Operating Segment and Geographic Area

(in thousands)

(unaudited)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2013      2012      2013      2012  

Revenue by Operating Segment

           

Industrial Inkjet

   $ 87,117       $ 79,096       $ 255,423       $ 234,008   

Productivity Software

     28,532         24,252         84,770         74,043   

Fiery

     63,174         50,726         190,287         169,980   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 178,823       $ 154,074       $ 530,480       $ 478,031   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue by Geographic Area

           

Americas

   $ 102,393       $ 86,445       $ 296,806       $ 251,351   

EMEA

     52,189         41,137         152,219         147,823   

APAC

     24,241         26,492         81,455         78,857   

Japan

     4,349         7,471         17,383         22,290   

APAC, ex Japan

     19,892         19,021         64,072         56,567   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 178,823       $ 154,074       $ 530,480       $ 478,031   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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 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 and significant recurring and non-recurring 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 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 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 acquisition-related transaction expenses and the costs to integrate such acquisitions into our business, changes in the fair value of contingent consideration, litigation settlement charges and credits, corporate headquarters relocation expenses, and imputed interest expense and depreciation, net of accrued sublease income and capitalized interest, related to the sale of our corporate headquarters facility and related land.

These excluded items are described below:

 

    Recurring charges and gains, including:

 

    Amortization of acquisition-related intangibles. Intangible assets acquired to date are being amortized on a straight-line basis. Post-acquisition non-competition agreements are amortized over their term.

 

    Stock-based compensation expense recognized in accordance with ASC 718, Stock-based Compensation.

 

    Non-recurring charges and gains, including:

 

    Restructuring and other 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.

 

    Acquisition-related executive deferred compensation costs, which are dependent on the continuing employment of a former shareholder of an acquired company, are being amortized on a straight-line basis.

 

    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 each 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.

 

8


    Imputed net expenses related to sale of building and land. On November 1, 2012, we sold the 294,000 square foot building located at 303 Velocity Way in Foster City, California, which serves as our corporate headquarters, along with approximately four acres of land and certain other assets related to the property, to Gilead Sciences, Inc. for $179.7 million. We will continue to use the facility until November 1, 2013, for which rent is not required to be paid. This constitutes a form of continuing involvement that prevents gain recognition. Until we vacate the building, the proceeds from the sale will be recognized as deferred proceeds from property transaction on our condensed consolidated balance sheet, which is currently $182.9 million, including imputed interest costs. Imputed interest expense and depreciation, net of accrued sublease income, of $1.5 million has been accrued at September 30, 2013, related to the deferred property transaction, partially offset by capitalized interest of $0.9 million related to the Fremont facility.

 

    Expenses incurred during the period related to the upcoming relocation of our corporate headquarters facility.

 

    In conjunction with our acquisition of Cretaprint, which closed on January 10, 2012, we assumed a contingent liability related to the alleged infringement of certain patents owned by Jose Vicente Tomas Claramonte, the President of Kerajet. Because the former owners of Cretaprint agreed to indemnify EFI against any potential liability in the event that Mr. Claramonte were to prevail in his action against Cretaprint, we accrued a contingent liability based on a reasonable estimate of the legal obligation that was probable as of the acquisition date and we accrued a contingent asset based on the portion of any liability for which the former Cretaprint owners would indemnify EFI. The net obligation accrued in the opening balance sheet on the acquisition date was EU 2.5 million (or approximately $3.3 million). The Spanish Court of Appeal reached a final determination on July 15, 2013, which resulted in EFI having no liability related to any potential infringement of the Claramonte patent. Because this matter is no longer subject to appeal, we have reversed this liability by recognizing a credit against general and administrative expense during the three months ended September 30, 2013.

 

    During the third quarter of 2012, we incurred $0.5 million in settlement of a dispute with the lessor of a facility in the U.K., which was partially offset by the receipt, during the second quarter of 2012, of an additional $0.3 million in insurance proceeds, net of legal fees and costs, related to our previously disclosed settlement of the shareholder derivative litigation concerning our historical stock option granting practices.

 

    Tax effect of non-GAAP adjustments

 

    After excluding 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. The expected annual non-GAAP income tax rate for the three and nine months ended September 30, 2012, assumed the achievement of the operational efficiencies related to our foreign operations that were implemented during the fourth quarter of 2012.

 

    To facilitate comparability of our operating performance between 2013 and 2012, we have excluded the following from our non-GAAP net income:

 

    Tax charge of $0.3 million resulting from the filing of tax returns by foreign subsidiaries for periods prior to their acquisition by EFI for the nine months ended September 30, 2013.

 

    Tax benefit of $3.2 and $0.2 million from the retroactive renewal of both the 2012 U.S. federal research and development tax credit and certain international tax provisions, respectively, on January 2, 2013, for the nine months ended September 30, 2013. The tax benefit for these items had been previously recognized in our non-GAAP net income for the year ended December 31, 2012.

 

    We excluded the recognition of previously unrecognized tax benefits from our non-GAAP net income of $3.2 million for the three and nine months ended September 30, 2013 and $9.7 million for the three and nine months ended September 30, 2012 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.

 

9


    Interest expense accrued on prior year tax reserves of $0.1 and $0.3 million for the three and nine months ended September 30, 2013 and 2012, respectively, as well as other tax benefits of $0.3 million for the nine months ended September 30, 2013.

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 or earnings per diluted share prepared in accordance with GAAP. Non-GAAP financial measures have limitations as 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.

 

10