by Ann Levine April 21, 2003 - Electronics for Imaging (NASDAQ: EFII) announced strong first quarter results with revenues of $85.7 million over 82.9 million for the first quarter last year. GAAP net income was $5.1 million or $.09 per diluted share for the first quarter which compared to $2.0 million or $.04 per diluted share for the same period in 2002. For the first quarter, pro forma net income was $7.0 million, or $0.13 per fully diluted share, as compared to pro forma net income of $2.7 million, or $0.05 per fully diluted share, in the same period for 2002. As of March 31st, 2003, the company's total assets were $738.9 million, up from $727.1 million reported as of December 31st, 2002. Cash, short term and restricted long-term investments increased $2.0 million to $543.4 million as of March 31, 2003, from the December 31, 2002 balance of $541.4 million. EFI, a Foster City, California-based Company, is one of the leaders in imaging solutions for network printing. EFI delivers high-quality, short-run color and black and white digital printing solutions. EFI's technology offers document management tools, networking and high fidelity color and black and white output contributing to greater productivity and cost efficiency. Topics of the summary include: * Regional Performance * Sector Performance * Product Announcements * Acquisition Discussion * Q & A Regional Performance EFI Chief Financial Officer Joe Cutts, began the conference call by outlining the company's first quarter performance and performance by region. Operations in Japan have shown the greatest growth with sequential growth of 24% and year over year growth of 11%. The success in Japan was due to the launch of new servers and embedded products. In Quarter 2, because the business climate is difficult in Japan, EFI expects a decline in performance to more normalized levels. Europe has shown 12% year over year growth and a 9% decline sequentially due to the seasonality of server shipments. Europe's Quarter 2 market expectations are forecasted to have a stronger showing to offset the decline in Japan. The U.S. showed a 9% decline sequentially and a 4% year over year decline, again due to seasonally reduced server sales. Expectations for Quarter 2 in the U.S. are for a modest improvement due to software and newly launched embedded products. Although the Asia/Pacific region was down 4% sequentially, it showed a 15% year over year growth driven by a strong economic environment. EFI expects Quarter 2 to show a relatively constant performance. Sector Performance Sector performance of Color Stand-Alone servers made up 15% unit volume and 45% of revenue was impacted by seasonally slower sales of high-end servers. The Embedded Color segment made up 50% of total unit volume and 30% of total revenue driven by the launch of new multi-function office products. The Digital Black and White sector made up 29% of total unit volume and 8% of revenue with these numbers driven by the fact of there were no new product introductions since Quarter 4 of 2002. Other products made up 6% of total volume and 17% of revenue. Other products include spare unit components which EFI believes are gaining traction and contributing to the results of this sector. Product/Partnership Announcements President and CEO Guy Gecht began his statement by outlining EFI's 2002 long-term strategy to expand into the professional printing market. The beginning of 2003 shows a success of that strategy by the strong financial showing in the 1st Quarter. Gecht summarized product announcements by stating the company is celebrating the shipment of the 1 millionth Fiery to EFI's long-term customer, Kinko's Corporation. He noted that Kinko's has purchased thousands of the Fiery products over the years. Gecht also announced new server products and partnerships with partners Xerox, Canon, Ricoh and Konica. All new servers with partners include EFI's flexibility and open architecture. At the On Demand conference in NY, EFI demonstrated the upcoming Fiery QX9000. The QX9000 is a super fast controller that will deliver up to 2000 pages per minute of data and color. Also announced was the lasted edition of Velocity software "Exchange" with expected availability in the 3rd Quarter. Printcafé During the conference call, President Gecht outlined activities associated with Printcafe by stating the acquisition would give both printers and customers powerful solutions to meet their printing and technology needs. EFI has filed S4 documentation with the SEC and is awaiting review comments which are expected in the next few weeks. Next step is the shareholders approval of the acquisition. Completion of acquisition is expected in the early 3rd Quarter. Gecht stressed that in addition to shareholder approval, the completion of the deal is subject to uncertainty as there is the possibility that another company, aside from Creo's "bogusly" expressed interest, may have a superior offer. Q& A Summary: 1. Gross margin improvement over the year can be attributed in rank order to 1) software solutions, 2) design license migration, 3) high-end color and, 4) component costs. These improvements vary quarter by quarter but the more recent improvements are driven by design licenses and software. 2. As revenues were up from the previous guidance, the upside geographically was due to Japan's performance which was higher than originally thought. From a product standpoint, the embedded color business also contributed the revenues with the Cannon, Xerox and new office products. Other sources have included new business ventures particularly on the software front. 3. Gross margin increase of 170 basis points was due to software and design licensing. 4. EFI does not anticipate any one of their regional markets will see a pickup, as the climate remains challenging from an economic standpoint in all regions. 5. In response to a question on the SARS contagion, EFI's Japan and Asia/Pacific operations have seen no impact from SARS thus far. 6. An estimate on the profitability from the acquisition of Printcafe could not be stated in precise terms. EFI believes the combination of synergies of the two companies will produce top line growth and bottom line profitability. There will be a period of integration of the two companies for a few Quarters and then EFI will be able to leverage the benefits and drive profitability.