By Trevor Shackelford May 5, 2006 -- Electronics For Imaging Inc., (NASDAQ: EFII) announced their first quarter 2006 results recently. The company reported revenues of $134.3 million for the quarter, up 63.7% from $82.0 million reported for the same period in 2005 and down 7.6% from the revenues reported in the fourth quarter of fiscal 2005. GAAP net income for the quarter was $12.5 million, or $0.20 per share, up from a net loss of $0.7 million, or $0.01 per share reported for the same period in 2005 and up from $11.4 million, or $.018 per share reported in the fourth quarter of fiscal 2005. Q1 results include a $9.1 million charge from the amortization of acquisition related intangibles. Contents of this Summary * Quarter Highlights * Segment Performance * Guidance * Raine Radar * Q & A Quarter Highlights • At the end of first quarter, there were 1,754 regular employees, an increase of 31 employees from the end of the fourth quarter of fiscal 2005. • Gross margin for the quarter was 60.7%, up 60 basis points from 60.1% reported in the fourth quarter and down from 64.9% reported in the first quarter of fiscal 2005. • Non-OEM revenue as a percentage of total revenue grew to 47%. • At the end of first quarter of fiscal 2006, cash and cash equivalents were $491 million, compared to $470 million reported at the end of fourth quarter of fiscal 2005. • R&D expenses were 22.3% of total revenue, up from 19.7% reported in the fourth quarter of fiscal 2005. • Sales and marketing expenses were $22.6 million, flat from the fourth quarter of fiscal 2005. • G&A expenses accounted for 6.4% of revenue, up from 6.2% reported in the fourth quarter of fiscal 2005. • Pro forma tax rate for the quarter was 25%. • DSO for the first quarter of fiscal 2006 was 53 days, compared to 42 days reported in the fourth quarter of fiscal 2005. • During the quarter, the company repurchased approximately $7.1 million worth of stock as a part of its stock buyback program. • The VUTEk business, signed a co-development agreement with Codas, a Spanish imaging technology company. Segment Performance 50% of revenue for the quarter came from the Americas, flat from the fourth quarter of fiscal 2005. European revenues accounted for 30% of the total, down from 34% reported in the fourth quarter of fiscal 2005. Revenue from Japan was 10% of the total, up from 8% reported in the fourth quarter of fiscal 2005. The rest of the world accounted for 10% of total revenue, up from 8% reported in the fourth quarter of fiscal 2005. Controllers Segment EFI reported Q1 revenues for the segment of $75.8 million, or 56.4% of total revenue, compared to $88.3 million, or 60.8% of the total revenue reported in the fourth quarter of fiscal 2005. Controller revenue was down 14.2% on a sequential basis and up 17.2% on year-over-year basis. EFI cited normal seasonality for the sequential decline in revenue. EFI saw a strong momentum in the professional and mid range color and office product markets. Professional Printing Applications Segment Q1 revenues for the segment were $18.6 million, or 13.9% of total revenue. Revenues for the segment were up 5% sequentially and 7.2% year-over-year. The company expects revenue for this segment to be down slightly next quarter. Wide Format Digital Ink-jet Products Segment Q1 revenues for the segment were $39.9 million, which represents 29.7% of the total revenue reported in the fiscal quarter of 2006. This is up from $39.3 million, or 27% of total revenue reported last quarter. The company expects that VUTEk product revenue will be flat next quarter. Other Income All other income was $3.7 million, up $0.9 million from the fourth quarter of fiscal 2005. Guidance For the second quarter of fiscal 2006, the company expects revenue in the range of $137 million to $140 million and non-GAAP EPS to be in the range of $0.28 to $0.30. The company expects GAAP EPS to be in the range of $0.14 to $0.16. EFI anticipates that the controller and VUTEk businesses will continue to perform well and edge up during the second quarter although the company expects those gains to be at least partially offset by decreases in the professional printing applications segment. Raine Radar EFI saw large declines in its digital controller business this quarter compared to last. The company is anticipating increases in business from its OEM partners, particularly from Canon and Xerox, which should hopefully lead to a stronger second quarter. Q & A 1. EFI expects that an increase of revenues for the second half of 2006, compared to the second half of 2005, will come from a mix of OEM partners and print engine products. 2. The increase in total CapEx for the second quarter of fiscal 2006 primarily reflects the investment in its Fiery group. The company also invested more in VUTEk than it did last year. 3. The company is still looking to use its cash for possible acquisitions but will continue to buy back more shares with its available cash until it finds an appropriate acquisition target. 4. EFI expects a long-term growth rate would be around 10% with the company expecting to grow high single digits to low double digits for the foreseeable future. 5. The company expects Canon to again become its largest OEM partner, even though its Xerox business continues to remain very strong. 6. EFI said that it will be working to improve VUTEk’s supply chain, and that it will use the available opportunities in this segment to drive gross margin improvement. 7. The company said that the majority of the PPA product revenues were generated from the U.S and most of the VUTEk sales were from off shore. 8. The company provided the effective tax rate as 25% on GAAP basis and intended to maximize the tax opportunity on the off shore sales.