Increased Digital Sales Drive Presstek to Record Revenue: Summary of Second Quarter 2006 Earnings Call August 8, 2006 -- Presstek Inc. (NASDAQ: PRST) announced their second quarter 2006 earnings recently. The company’s consolidated revenue for the second quarter was $74.2 million, an increase of 5% from the prior quarter, and 6% from the second quarter of 2005. Consolidated net income for the quarter was $2.7 million, or $0.08 per diluted share, which is up 17% from $2.3 million in the corresponding quarter of 2005. President and CEO Edward J. Marino commented that the company's consolidated revenue in the second quarter of 2006 was driven by strong digital sales. He also stated that the strong growth trends developing in their digital product lines clearly demonstrated the growing market acceptance of Presstek's digital technology. Contents of this Summary * Quarter Highlights * Segment Performance * Raine Radar * Q & A Quarter Highlights • Gross margin for the quarter was 28%, slightly lower than the 29% gross margin posted in the previous quarter. • Operating income for the quarter was $2.7 million, up $0.4 million, or 17% from the $2.3 million reported a year ago. • Operating expenses were $17.0 million, down from $17.8 million in the corresponding quarter last year. • Consolidated digital revenue is up 10% from the prior quarter, and 24% from the corresponding quarter last year. • Consolidated equipment revenue of $27.4 million is up 16% from the prior quarter, and 29% from the corresponding quarter last year. • Revenue at Presstek Europe was up 28% from the prior quarter, and 135% from the corresponding quarter last year. • Debt-net-of-cash at the end of the quarter was $24.9 million, down from $28.8 million at the end of the first quarter. • The company's Lasertel subsidiary reported external revenue of $1.9 million up 58% from the prior quarter, and 159% from the corresponding quarter last year. • Digital product revenues consisted of 69% of total revenue, compared to only 66% in the previous quarter. Segment Performance Equipment Digital equipment revenue for the quarter was up 38% from the previous quarter and 117% for the corresponding quarter in 2005. Digital consumable revenue was up 10% from the prior quarter, and 12% from the corresponding quarter last year. DI (direct imaging) press products led digital sales, increasing 38% over the previous quarter. Service costs were higher by approximately $0.6 million as a result of higher infrastructure costs to equip technicians with the latest technology tools. During the quarter, some less profitable service contracts were replaced with a time and materials model which should be more profitable in the long run. Lasertel The company’s Lasertel subsidiary reported sales of $1.9 million to external customers in the second quarter of 2006. This is up 58% from last quarter and 159% for the second quarter of 2006. Guidance The company expects third quarter revenue to be approximately equal to the second quarter due to normal seasonality. For the year, the company expects to achieve its revenue growth target of 10%. Raine Radar Presstek continues to see growth in its revenues and profits as its quick transition to digital continues. For future growth, the company is looking forward to international expansion, particularly in Europe, as well as continued strength in its digital product lines to drive the company forward. Q & A 1. The margin impact on the product side as a result of the shortfall in the service business was 1.2%. In reviewing the product groups as a whole, the margin on the equipment product line was flat from last quarter. However, the consumer side was up 2%. 2. The margins on the service side are down temporarily while the current structure moves to a new system. Gross margins are anticipated to increase to normal levels by the Q3 and improve more by the Q4. 3. CTP unit sales were down to 110 units in the second quarter from 140 last quarter, however press sales were in high demand and increased. 4. Presstek would like to ramp up the production from last year's four units per month to their goal of five units per month but is hindered by a quarter lag in production for the DI units themselves due to the high demand for DI units. 5. Out of Q2’s 64 DPI press units sold, 55 were direct sales by Presstek, and the other nine were by OEM partners. For example, when Ryobi puts its own brand on a press, Presstek does not produce the entire unit and only receives partial revenue from the sale. Presstek still feels that Q2 was a big step forward from the previous quarter. 6. Presstek believes it initially makes an average of $30,000 in consumables per DI machine a year, and approximately $60,000 when they hit their stride. 7. Presstek stated the larger DI presses will not be a 2007 product but the smaller, entry-level machine will be available in 2007. 8. Presstek agrees that their 10% revenue increase predicted for the year will need a guided September quarter and $82 million in Q4 as opposed to last year's $69 million. 9. Presstek’s comments on stock performance are that they are unhappy with market value; when they look at it from the inside out, they see a strong business. They believe that the value of the company is being driven by good, solid fundamentals and that the value of stock will be realized over the next couple of years. 10. Analog consumables picked up in Q1 and dropped down in Q2 to levels of 2005 Q4. The drop was approximately $500,000. 11. Presstek G&A will be back to normal after a drop in Q2 from Q1. 12. Presstek’s gross margin of 120 basis point impact does include the $600,000 invested in communications. The total impact on the service side is 1.2% and includes the revenue impact and cost impact. 13. Presstek’s strategy of digital penetration is working, and growth of digital sales has lifted the top line; they are on track with the June layout and will continue to move forward in impacting the new digital technologies.