Gail Kailing February 6, 2003 -- Tuesday, February 4, 2003, Printcafe Software, Inc. (NASDAQ: PCAF) announced revenue of $11.3 million for its fourth quarter ended December 31, 2002, which equaled the $11.3 million of revenue recorded in the fourth quarter of 2001. Earnings before interest, taxes, depreciation, amortization, non-cash charges, other expense and restructuring charges (EBITDA) for the fourth quarter of 2002 were $316,000, compared to $167,000 computed on the same basis in the prior year period. Printcafe’s pro forma net loss for the fourth quarter of 2002 was $678,000, or $(0.06) per share, compared to a pro forma net loss of $2.2 million in the fourth quarter of 2001, or $(0.20) per share. The company's revenue for the year ended December 31, 2002 was $46.5 million, an 11% increase compared to the $41.9 million recorded in 2001. Gross margins improved to 78% during 2002 compared to 72% for 2001. EBITDA for the year ended December 31, 2002 was $1.0 million compared to an EBITDA loss of $8.7 million recorded in 2001. The Company's pro forma net loss for the year ended December 31, 2002 was $5.6 million, or $(0.53) per share, compared to a pro forma net loss of $17.8 million, or $(1.67) per share, for 2001. Highlights of Earnings Announcement - Fifth quarter of positive EBITDA, expenses down, gross margin up - Unsolicited offers to acquire Printcafe - Acquisition of printChannel - New markets - EBITDA This is the first full year of EBITDA profitability for Printcafe – reflecting the last 5 quarters. Revenue up, G&A down, gross margin up, sales & marketing costs down – good trends. - Offers to acquire Printcafe Printcafe management is not able to comment on the offers to acquire the company. The special independent committee of the board of directors has found legal counsel and a financial advisor to review the alternatives to maximize Printcafe shareholder value. - printChannel acquisition Printcafe acquired the assets and intellectual property of printChannel, Inc., and 100 new printer subscribers with 1350 corporate web sites. - New markets Signed two new buy-side contracts: Commonwealth Bank of Australia, and Cingular Wireless. With Hagen OA’s multi-language, multi-currency functionality, now have added users in the UK and Dominican Republic. Don’t Ask/Don’t Tell – Call Details 1. Printcafe could not comment on the two separate unsolicited offers to acquire the company. The Schedule 13-D filed by Creo indicates that Creo believes it now holds over 55% of Printcafe’s outstanding stock. The company has offered to acquire the remaining shares with Creo stock, while EFI has doubled the Creo offer and will pay for all outstanding shares with cash or exchange stock. 2. Sales breakdown by segment: - Small commercial printers 15% - Medium commercial printers 31% - Large commercial printers 30% - On-demand/retail printers 7% - Publication printers 6% - Buy-side 11% 3. Printcafe expects to have amortized the purchases of the companies rolled up in 2000 by the end of Q1 2003. That should considerably reduce amortization expenses going forward. 4. Financials: - Revenue is up 11% to $46.5 million for 2002. - Gross margin is up to 78% from 72%. The target for 2003 is 85%. - Pro-forma loss for 2002 was $5.6 million as opposed to a loss of $17.8 million in 2001. - Cash balance at the end of the year: $8.8 million. - Current debt – $20.7 million, with balloon payments of about $14.5 million due in January 2004, target to resolve the debt issue in early 2003. - DSO (Day Sales Outstanding) is 103, much higher than the targeted 75-80 days, two new customers have extended payments. 5. Quarter in Review - Buy-side business is more active, two new clients. The sales cycle is 9-12 months. - PrintSmith is dominant in its segment with 20-40 new customers added monthly. - Use of the PrintSmith storefront is expected to grow. - The PSI group is moving to Pittsburgh to integrate with other development and QA groups. There are a number of new customers. Should be no restructuring costs other than to move a few people from Connecticut to Pennsylvania. The lease on the facility is up, and there are around 10 people affected, though the final number that will be relocated is not yet known. - Over a dozen existing customers have upgraded to Logic SQL – the cost runs around $25K. - Hagen OA has been successful for large multi-plant customers. In addition to the French version, Hagen OA comes in a Spanish language version, which has brought in a new Latin American customer. - Growth in the publication printing market is slow, and new products will be released in late 2003. - Auto-Count now runs on “off the shelf” hardware rather than a proprietary system. That has taken Printcafe’s margins from 50% to 90%. - Printcafe will use the newly acquired printChannel technology for the next generation e-commerce printer web site. - PrinterSite Internal is sales force technology and a growth driver. - PrintFlow automated scheduling – providing significant benefits for users, must be as efficient as possible under increasing price pressure. - Revenue from subscriptions: 11% on buy-side, 3% on printer side – total 14% of revenue from subscriptions. - Deferred revenue – 70% is maintenance, 30% is subscriptions 6. Growth Markets - New markets – procurement solution for the Global 2000, 2 new deals, a number of pilots - Only about 30 of the Global 2000 use a print procurement system. - Printcafe has been able to show 20-30% range of savings. - Shared cost – print buyer and printer share cost of subscription. - Average subscription - $600K/year. - Number of pilots in progress, after pilot is concluded takes 1-2 months to complete the contract. - Existing markets – 50,000 print facilities in the US, 125,000 worldwide – most do not have workflow tools or ERP systems - Printcafe wins 8 out of 10 ERP deals it competes on. - Will continue to offer five different products, systematic targeting can beat a general solution in this market. - 95%+ annual maintenance renewals. - No dominant ERP vendor in Europe or South America - Add-on opportunities – all 8000 existing customers can use at least 1 additional product, from a $5000 web site to a $100,000 machine interface for a full plant. 7. The Future - When the economy recovers, the company will return to historical growth rates. - Targeting 20% pretax operating income. - Targeting 85% gross margin. - Investigating the commercialization of patents.