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8-K - 8-K - ELECTRONICS FOR IMAGING INCd95967d8k.htm

Exhibit 99.1

 

For more information:    Investor Relations:
Jeremy Anderson    JoAnn Horne
Sr Director, Finance & Investor Relations    Market Street Partners
EFI    415-445-3235
650-357-3500   

EFI Reports Record Second Quarter Revenue of $203M

Fremont, Calif. – July 20, 2015 – Electronics For Imaging, Inc. (Nasdaq: EFII), a world leader in customer-focused digital printing innovation, today announced its results for the second quarter of 2015.

For the quarter ended June 30, 2015, the Company reported record second quarter revenue of $202.7 million, up 5% compared to second quarter 2014 revenue of $193.0 million. Non-GAAP net income was $22.9 million or $0.48 per diluted share, compared to non-GAAP net income of $21.0 million or $0.44 per diluted share for the same period in 2014. GAAP net income was $7.7 million or $0.16 per diluted share, compared to $6.9 million or $0.14 per diluted share for the same period in 2014.

For the six months ended June 30, 2015, the Company reported revenue of $397.3 million, up 4% year-over-year compared to $381.7 million for the same period in 2014. Non-GAAP net income was $44.4 million or $0.92 per diluted share, compared to non-GAAP net income of $41.3 million or $0.86 per diluted share for the same period in 2014. GAAP net income was $13.0 million or $0.27 per diluted share, compared to $17.0 million or $0.35 per diluted share for the same period in 2014.

“Solid execution by our team led to a record June quarter for EFI, driven by strength across all of our business segments,” said Guy Gecht, Chief Executive Officer of EFI. “We couldn’t ask for a better setup as we begin integrating Reggiani and Matan, which we acquired early in the third quarter. These two acquisitions strengthen EFI’s product offerings and capabilities, and most importantly, strategically expand our TAM as we enter the vast digital textile market.”

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 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)

 

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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”, “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, 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; 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. 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 and six months ended June 30, 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.

 

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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,
 
     2015     2014     2015     2014  

Revenue

   $ 202,721      $ 192,965      $ 397,275      $ 381,653   

Cost of revenue

     94,318        89,192        183,432        174,905   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

  108,403      103,773      213,843      206,748   

Operating expenses:

Research and development

  34,077      33,650      67,788      66,723   

Sales and marketing

  37,133      35,485      74,303      71,789   

General and administrative

  18,337      15,509      35,987      32,356   

Amortization of identified intangibles

  4,557      5,112      9,361      9,982   

Restructuring and other

  931      1,547      1,960      2,641   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  95,035      91,303      189,399      183,491   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

  13,368      12,470      24,444      23,257   

Interest expense

  (4,137   (316   (8,236   (565

Interest income and other income (expense), net

  258      157      (401   280   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

  9,489      12,311      15,807      22,972   

Provision for income taxes

  (1,772   (5,399   (2,853   (5,978
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 7,717    $ 6,912    $ 12,954    $ 16,994   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted EPS calculation

Net income

$ 7,717    $ 6,912    $ 12,954    $ 16,994   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per diluted common share

$ 0.16    $ 0.14    $ 0.27    $ 0.35   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in diluted per share calculation

  48,073      47,987      48,096      48,163   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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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
June 30,
    Six Months Ended
June 30,
 
     2015     2014     2015     2014  

Net income

   $ 7,717      $ 6,912      $ 12,954      $ 16,994   
  

 

 

   

 

 

   

 

 

   

 

 

 

Amortization of identified intangibles

  4,557      5,112      9,361      9,982   

Stock based compensation – Cost of revenue

  748      582      1,685      1,114   

Stock based compensation – Research and development

  2,687      1,931      5,856      4,166   

Stock based compensation – Sales and marketing

  2,184      1,172      4,893      2,583   

Stock based compensation – General and administrative

  4,048      3,968      7,477      8,254   

Restructuring and other

  931      1,547      1,960      2,641   

General and administrative:

Acquisition-related transaction costs

  2,012      169      2,673      674   

Changes in fair value of contingent consideration

  (1,286   (1,037   (1,301   (1,594

Litigation settlements

  10      122      550      237   

Interest income and other income (expense), net

Non-cash interest expense related to our convertible notes

  2,917      —        5,795      —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Tax effect of non-GAAP adjustments

  (3,604   481      (7,550   (3,719
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

$ 22,921    $ 20,959    $ 44,354    $ 41,332   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income per diluted common share

$ 0.48    $ 0.44    $ 0.92    $ 0.86   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in diluted per share calculation

  48,073      47,987      48,096      48,163   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Electronics For Imaging, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     June 30,
2015
     December 31,
2014
 

Assets

     

Cash and cash equivalents

   $ 238,472       $ 298,133   

Short-term investments

     375,242         318,599   

Accounts receivable, net

     170,334         155,421   

Inventories

     74,469         72,132   

Other current assets

     40,739         34,422   
  

 

 

    

 

 

 

Total current assets

  899,256      878,707   

Property and equipment, net

  88,410      86,197   

Goodwill

  240,711      245,443   

Intangible assets, net

  52,590      62,571   

Other assets

  35,114      31,642   
  

 

 

    

 

 

 

Total assets

$ 1,316,081    $ 1,304,560   
  

 

 

    

 

 

 

Liabilities & Stockholders’ equity

Accounts payable

$ 75,015    $ 86,940   

Accrued and other liabilities

  112,562      105,110   

Income taxes payable and deferred tax liabilities

  6,225      1,759   
  

 

 

    

 

 

 

Total current liabilities

  193,802      193,809   

Convertible senior notes, net

  290,556      284,818   

Imputed financing obligation related to build-to-suit lease

  12,973      12,472   

Noncurrent contingent and other liabilities

  4,676      5,440   

Noncurrent deferred tax liabilities

  1,221      3,820   

Noncurrent income taxes payable

  15,480      15,512   
  

 

 

    

 

 

 

Total liabilities

  518,708      515,871   

Total stockholders’ equity

  797,373      788,689   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

$ 1,316,081    $ 1,304,560   
  

 

 

    

 

 

 

 

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Electronics For Imaging, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

     Six Months Ended  
     June 30,  
     2015     2014  

Cash flows from operating activities:

    

Net income

   $ 12,954      $ 16,994   

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

    

Depreciation and amortization

     15,411        14,806   

Deferred taxes

     (7,766     (5,951

Tax benefit from employee stock plans

     —          5,054   

Excess tax benefit from stock-based compensation

     (342     (6,647

Stock-based compensation

     18,559        16,117   

Non-cash settlement of vacation liabilities by issuing restricted stock units (“RSUs”)

     1,353          

Provision for inventory obsolescence

     2,289        2,759   

Non-cash accretion of interest expense on convertible notes and imputed financing obligation

     6,239        491   

Other non-cash charges and gains

     3,183        114   

Changes in operating assets and liabilities, net of effect of acquired businesses

     (20,160     (10,356
  

 

 

   

 

 

 

Net cash provided by operating activities

  31,720      33,381   
  

 

 

   

 

 

 

Cash flows from investing activities:

Purchases of short-term investments

  (179,058   (40,483

Proceeds from sales and maturities of short-term investments

  121,623      56,392   

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

  (8,721   (10,610

Businesses purchased, net of cash acquired

  16      (6,585
  

 

 

   

 

 

 

Net cash used for investing activities

  (66,140   (1,286
  

 

 

   

 

 

 

Cash flows from financing activities:

Proceeds from issuance of common stock

  4,910      11,415   

Purchases of treasury stock and net share settlements

  (26,501   (60,761

Contingent consideration payments related to businesses acquired

  (2,702   (2,060

Other

  (83   (519

Excess tax benefit from stock-based compensation

  342      6,647   
  

 

 

   

 

 

 

Net cash used for financing activities

  (24,034   (45,278
  

 

 

   

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

  (1,207   46   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

  (59,661   (13,137

Cash and cash equivalents at beginning of period

  298,133      177,084   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 238,472    $ 163,947   
  

 

 

   

 

 

 

 

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Electronics For Imaging, Inc.

Revenue by Operating Segment and Geographic Area

(in thousands)

(unaudited)

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2015      2014      2015      2014  

Revenue by Operating Segment

           

Industrial Inkjet

   $ 95,642       $ 93,899       $ 183,249       $ 181,843   

Productivity Software

     33,684         30,760         64,791         62,453   

Fiery

     73,395         68,306         149,235         137,357   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 202,721    $ 192,965    $ 397,275    $ 381,653   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue by Geographic Area

Americas

$ 108,220    $ 101,567    $ 215,934    $ 202,548   

EMEA

  65,129      66,899      125,257      127,440   

APAC

  29,372      24,499      56,084      51,665   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 202,721    $ 192,965    $ 397,275    $ 381,653   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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 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.

These excluded items are described below:

 

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

 

    Stock-based compensation expense of $9.7 and $19.9 million during the three and six months ended June 30, 2015, respectively, consists of $9.7 and $18.6 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 six months ended June 30, 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 the acquisitions of Reggiani and Matan, which closed on July 1, 2015.

 

    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.

 

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    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 $0.2 million during the six months ended June 30, 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.

 

    The long-term average tax rate assumes that the U.S. federal research and development tax credit will be retroactively re-enacted as of January 1, 2015.

 

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