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Printcafe Reports Q2 Loss: Sales down 26%

Friday, August 15, 2003

Press release from the issuing company

August 15, 2003 – (WhatTheyThink.com – by Gail Nickel-Kailing) -- Printcafe Software released their quarterly report (Form 10Q) with the SEC yesterday. Following is a summary of the filing. Revenues for Printcafe’s second quarter, ended June 30, 2003, were $9.1 million, down 26% from $12.2 million in the same quarter last year. The net lost for the quarter was $4.6 million or $(0.42) per share basic and diluted. For the six-month period, through June 30, revenue was $18.5 million, down 23% from $23.9 million for the same period last year. The weighted average number of shares used to compute the loss per share was 10,896,000. Details from the 10Q: • License and subscription revenue for the three months ended June 30, 2003, was $2.4 million, a 58% decrease from license and subscription revenue of $5.7 million for the quarter ended June 30, 2002. License and subscription revenue for the six months ended June 30, 2003, was $5 million, a 56% decrease from license and subscription revenue of $11.3 for the six months ended June 30, 2002. The decrease in license and subscription revenue was attributed to uncertainty surrounding the pending acquisition that was announced early in the first quarter as well as overall economic conditions. • Maintenance revenue for the three months ended June 30, 2003, was $5.6 million, a 4% increase from maintenance revenue of $5.4 million for the quarter ended June 30, 2002. Maintenance revenue for the six months ended June 30, 2003, was $11.3 million, a 5% increase from maintenance revenue of $10.8 million for the six months ended June 30, 2002. • Professional services and other revenue for the three months ended June 30, 2003, was $1.1 million, a 4% decrease from professional services and other revenue of $1.15 million for the quarter ended June 30, 2002. Professional services and other revenue for the six months ended June 30, 2003 was $2.2 million, a 17% increase from professional services and other revenue of $1.9 million for the six months ended June 30, 2002. • Cost of revenue for the quarter ended June 30, 2003, was $2.1 million, a 22% decrease from cost of revenue of $2.7 million for the quarter ended June 30, 2002. Cost of revenue for the six months ended June 30, 2003, was $4.4 million, an 18% decrease from cost of revenue of $5.4 million for the six months ended June 30, 2002. Cost of revenue as a percentage of revenue increased from 22% and 23% for the three and six months ended June 30, 2002, respectively, to 23% and 24% for the three and six months ended June 30, 2003. This increase is mainly attributable to the shift in the product mix as a higher percentage of revenue was provided by professional services in 2003 as compared to 2002. These services have a higher cost of goods sold as compared to licenses and subscriptions. • Sales and marketing expenses for the quarter ended June 30, 2003, were $4.4, million, a 3% decrease from sales and marketing expenses of $4.6 million for the quarter ended June 30, 2002. Sales and marketing expenses for the six months ended June 30, 2003, were $8.6, a 1% increase from sales and marketing expenses of $8.52 for the six months ended June 30, 2002. The decrease in the second quarter was primarily due to reduced marketing expenditures mainly related to the user conference. The increase for the six months of 2003 compared to 2002 was mainly a result salary increases for employees. Sales and marketing expenses as a percentage of revenue increased from 38% and 36% for the three months and six months ended June 30, 2002, respectively, to 49% and 47% for the three and six months ended June 30, 2003, respectively, primarily due to a decrease in revenues. • Research and development expenses for the quarter ended June 30, 2003, were $2.97 million, a 4% decrease from research and development expenses of $3.1 million for the quarter ended June 30, 2002. Research and development expenses for the six months ended June 30, 2003, were $6 million, a 2% decrease from research and development expenses of $6.1 million for the six months ended June 30, 2002. These decreases were mainly the result of small reductions in personnel offset by increased salary costs. Research and development expenses as a percentage of revenue increased from 25% and 26% for the three and six months ended June 30, 2002, respectively, to 33% for each of the three and six months ended June 30, 2003, resulting primarily from a decrease in revenue. • General and administrative expenses for the quarter ended June 30, 2003, were $2.7 million, an increase of 83% from general and administrative expenses of $1.2 million for the quarter ended June 30, 2002. General and administrative expenses for the six months ended June 30, 2003, were $5.6 million, an increase of 74% from general and administrative expenses of $3.2 million, for the six months ended June 30, 2002. The increase in absolute dollars was primarily due to merger related fees of approximately $1.8 million in the first half of 2003 that include investment banking, legal and accounting fees, expenses associated with being a public company that were not incurred during the first half of 2002 and additional bad debt expense recognized during the second quarter mainly resulting from uncertainty surrounding the merger with EFI. General and administrative expenses as a percentage of revenue increased from 12% and 13% for the three and six months ended June 30, 2002, respectively, to 29% and 30% for the three and six months ended June 30, 2003. The increase as a percentage of revenue resulted from these additional costs combined with the decrease in revenue. • Cash and cash equivalents are $6.98 million, down from $8.8 million December 31, 2002. The company believes that amount based on current levels of operations and anticipated growth, cash from operations, together with cash currently available, will be sufficient to fund operations through January 1, 2004. If Printcafe does not complete the merger with EFI or complete a similar transaction with a third party, they do not expect to have sufficient cash to repay the $14.2 million of outstanding debt which becomes due in January 2004 without securing additional debt or equity financing. The company does not expect that additional debt or equity financing would be available. Legal Proceedings. • On February 19, 2003, Creo Inc. requested a temporary restraining order with respect to (a) Triggering the stockholders' rights plan adopted by the Printcafe. (b) Enforcing any action taken or to be taken by Printcafe "with the intent or effect of impeding the operation of market forces in an open bidding contest for shares of Printcafe." (c) Taking any steps or actions to enforce the fee provided for in a letter agreement that Printcafe entered into with EFI. (d) Taking any steps or any actions to enforce an option the Printcafe granted to EFI. (e) Taking any steps or actions to enforce the no solicitation provisions of the standby credit letter that the Printcafe entered into with EFI. (f) Engaging in any "conduct intended to cause or having the effect of causing Printcafe to forgo the opportunity to explore and enter into economically more favorable transactions." (g) Entering into, or purporting to enter into, a merger agreement between EFI and Printcafe before the court finally rules on the action. On February 21, 2003, the court denied Creo's request for a temporary restraining order. The matter is still pending in the Delaware Chancery Court with respect to the other relief sought by Creo. Printcafe believes that the lawsuit is completely without merit and intends to vigorously defend itself. If this lawsuit is resolved unfavorably to Printcafe, they may not be able to complete the merger with EFI. • On June 25, 2003, a securities class action complaint was filed against Printcafe, alleging that the defendants made false and misleading statements in connection with the Company's initial public offering and subsequent press releases. The company believes that the lawsuit is completely without merit and intends to vigorously defend itself. To date, the company has not been required to file a response to the complaint and has not done so. The company cannot predict with certainty the likely outcome of the action or the likely value of any of the related claims. Line of Credit • On February 13, 2003, the Printcafe entered into an agreement with EFI for a standby credit facility in the amount of $11 million plus a working capital facility that will provide up to an additional $3 million under certain circumstances. Under the terms of the standby credit facility, EFI is obligated to disburse up to $11 million to the Printcafe in the event that certain amounts under the company's existing credit facilities become due and payable as a result of any action taken by Printcafe in order to facilitate the proposed business combination with EFI. All loans made under this facility bear interest at the rate of 8% per annum payable on January 2, 2004. With certain exceptions, the maturity date would be accelerated if a business combination with EFI is not consummated on or before August 31, 2003.

 

 

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