By Ann Levine August 5, 2003 - Electronics for Imaging, Inc (EFI) (NASDAQ: EFII) announced second quarter revenues of $88.7 million or a 6% increase from the $83.9 million in revenues for the same period last year. Pro forma income was $9.2 million or $0.17 per diluted share. For the same period last year, Pro forma net income was $3.2 million or $.06 per diluted share. Topics of this summary: * Regional Performance * Investor Meeting Overview * Printcafe * Q & A Regional Performance * The greatest area of improvement was in Japan which showed 15% sequential growth due to the success of embedded color products and design license products. Expectations for the third quarter are for modest increases despite the economic conditions. * European operations showed a 1% sequential decline and 10% year over year growth. The third quarter will show a fall-off due to the traditionally slow summer market. * In the US, there was 2% sequential growth and 5% year over year growth due to strong sales of several embedded products. The expectation in the US is for a strong sequential third quarter driven by stand-alone server products, embedded color products and software growth. * Asia/Pacific showed 17% revenue growth due to server sales and a 30% year over year growth. The expectation in this region is that the third quarter will show a slight decline. Investor Meeting Overview The global printing industry is experiencing a number of pain points. EFI's strategy has been to resolve those pain points by providing the commercial print industry with products that reduce costs, increase productivity and leverage their current infrastructure. The introduction of high-end Fiery is positioned to help the commercial print market transition from analog to digital. Profit margins continue to increase each quarter due to expanding sales and design licensing. EFI will continue to focus on their stand-alone server business and expect this business to expand in the third quarter as new products enter the market in the second half of 2003. Printcafe EFI expects to close the acquisition of Printcafe in mid-September 2003. The SEC is currently conducting an extensive review of the S4 filing. EFI has responded to the SEC's final questions and, with shareholder approval, anticipates a final go-ahead shortly. With the acquisition, EFI will benefit from Printcafe's direct sales force and gain valuable customer feedback to up-sell and cross-sell. Executives maintain that the acquisition of Printcafe fits into EFI's long-term growth plan. EFI continues to look at opportunities for synergetic acquisitions that will enhance their product offering that best drive software solutions. Q & A 1. The company's guidance was considered very conservative. Even though EFI has experience with strong margins from the embedded color business and conversion to design licensing, Printcafe will add not only to margins, but also expenses. Expenses will continue to edge up as EFI invests in new opportunities. Printcafe will have no impact on the bottom line, but top line impact is uncertain. EFI restated their guidance at numbers the company believes are achievable. 2. EFI has seen the color migration into the mid and low-end range. When customers retire older technology, many are making the change to color as there is not much difference in the price. 3. OEM inventory is similar to the levels it has been in the last couple quarters. Some products in their inventory are close to zero. 4. Although an exact number for customer products could not be identified, a strong second half is expected with many new products launched such as new platforms, new engines and new enterprise solutions. 5. Status of the sales structure is divided between OEM sales and Solution sales teams; to develop partnerships and distribution channels. The Printcafe acquisition will add to these areas of expertise. 6. EFI has received encouraging feedback on their intelligent device management initiative, even though the product has not yet been launched. Early signs show demand but launch is a few months away. 7. The company does not have currency issues related to the sale of its products as most business is conducted in US dollars. 8. Color had a strong quarter and was 20% of the overall volume. There is still some opportunity to increase black and white volume, as there are some design license products in the pipeline. 9. Unimobile still fits into EFI's strategy and the company will continue to use it more as a mobility technology for the rest of the quarter. 10. EFI expects the server segment of the business to show growth from Q2 to Q3 and from Q3 to Q4 from new products and platforms. Embedded color segment will show additional upside in Q3 and in Q4 will probably stay relatively stable. 11. EFI's goal is to continue to drive the gross margins of 65% even with the acquisition of Printcafe; but it is too early to predict at this point. 12. Geographic performance did not show any surprises and levels were as expected. The extra strength in Japan was noteworthy, but it is misleading. There was good activity all around. EFI does expect seasonality of slow summer sales in Europe to affect performance in that sector.