Attached files

file filename
8-K - FORM 8-K - ELECTRONICS FOR IMAGING INCd36868d8k.htm

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 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. – January 27, 2016 – 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.

 

1


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.

 

2


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   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

3


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   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

4


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   
  

 

 

    

 

 

 

 

5


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.

 

6


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 liabllities 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   
  

 

 

   

 

 

 

 

7


Electronics For Imaging, Inc.

Revenue by Operating Segment and Geographic Area

(in thousands)

(unaudited)

 

     Three Months Ended      Years Ended  
     December 31,      December 31,  
             2015                      2014                      2015                      2014          

Revenue by Operating Segment

           

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   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

8


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.

 

9


    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.

 

10