By Trevor Shackelford May 9, 2006 -- Presstek Inc. (NASDAQ: PRST) announced their first quarter 2006 earnings recently. The company’s consolidated revenue for the first quarter was $70.6 million, an increase of $1.3 million, up almost 2% from the fourth quarter of 2005. Consolidated net income for the quarter was $2.7 million, or $0.08 per basic and diluted share, compared to net income of $2.4 million, or $0.07 per basic and diluted share in the previous quarter. Presstek experienced record operating profit of $3.9 million in the first quarter, up 18% from the prior quarter, which posted an operating profit of $3.3 million. Executive Vice President and CFO Moosa E. Moosa commented that the record results were due to strong digital consumable sales growth, managing their expense of wealth, and a strong focus on fundamentals. Contents of this Summary * Quarter Highlights * Segment Performance * Raine Radar * Q & A Quarter Highlights • Gross margin for the quarter was 29.2%, slightly lower than the 30.2% gross margin posted in the previous quarter. • Operating income for the quarter was $3.9 million, up $0.6 million, or 18%, and operating margin as a percentage of sales was 5.5% compared to 4.7% last quarter and 3.1% reported a year ago. • Operating expenses were $16.4 million, down $1.2 million or 7% in the first quarter, compared to $17.6 million in quarter 4 2005. • EBITDA for the quarter was $6.4 million, up from $6.2 million reported in the previous quarter. • Revenue from the Presstek Europe business was a record $12.8 million in the first quarter of 2006, up 5% from the previous quarter. • Debt-Net-Of-Cash at the end of quarter continues to be strong at $28.8 million, down from $29.9 million at the end of 2005. • Lasertel reported external sales of $1.2 million in the first quarter of 2006, compared to $0.7 million in the same quarter last year. • Digital Product Revenues consisted of 66% of total revenue, compared to only 63% in the previous quarter and 58% in 2005. Segment Performance Equipment Digital equipment revenue for the quarter was $20.1 million, up 8% from the fourth quarter of 2005. DI press equipment revenue for the quarter was $11.2 million, up 6% from the fourth quarter of 2005. The analog to digital shift continued in the first quarter. In the first quarter of 2005, the company had a digital to analog mix of 57% and 43% respectively. In the first quarter the digital to analog mix was 66% and 34% respectively. The company executives fully expect the mix to be 75% digital and 25% analog by the end of 2006. Lasertel The company’s Lasertel subsidiary reported sales of $1.3 million to external customers in the fourth quarter of 2005. In the first quarter of 2006, sales dropped to $1.2 million, a decline of 8%. The subsidiary also reported a loss of $0.8 million in the first quarter. The company stated that although there was a loss in the first quarter, they have secured a substantial order backlog that should strengthen second quarter sales. President and CEO Edward Marino said they have also secured a government contract that should give them a solid start for the next quarter. Raine Radar Although the Lasertel division continues to operate in the red, the overall performance of the company has been outstanding. Revenues and profits continue to grow, and the company’s financials continue to strengthen. So far, the company has had a great deal of success migrating its customers to its digital platform. Although not without bumps, the smoothness of this transition is something other companies in the industry should take note of. Q & A 1. Presstek successfully landed multiple customer commitments for its products at the IPEX 2006 exhibition, which took place from April 4th to 11th in Birmingham, UK. 2. Extensive field-testing with the Anthem Pro chemistry-free plate is complete and the feedback from the beta clients was extremely positive. 3. The relationship with Ryobi is very solid and will continue to flourish. Presstek is one of Ryobi’s largest graphics customers. 4. The government contract issued to Lasertel should take in effect in the Q2, boosting its sales volume. 5. Presstek had a very strong presence at the IPEX show in Europe, and gained many new customers. 6. Annualized revenue per employee in 2006 is estimated to be $300,000. Last year revenue per employee was $260,000. 7. Marino explained that the key strategic priorities were to gain market penetration, improve on productivity, and strengthen European presence. 8. The company said that 30% of its consumables volume is done via the Internet. 9. Presstek sold 141 CTP units in Q1 2006. In Q4 2005 they sold 121 units and in the same period a year ago only 115 units. 10. Digital equipment revenue was up 8% from Q4 2005 and up 32% from the same period a year ago. 11. The company expects that its R&D spending will probably step up slightly during 2006. 12. Company executives were positive that gross margins for Lasertel would bounce back from the production cutovers and inventory reductions.