EFI Earnings Fall Short of Analyst Expectations Despite Doubling from Last Year: Summary of Second Quarter 2006 Earnings Call August 9, 2006 -- EFI (NASDAQ: EFII) announced their second quarter results recently. The company’s revenue was $137.3 million, 38.7% higher than the $99 million reported for the second quarter last year. For the six months ending in June revenue was $271.6 million, up 50% compared to $181 million for the same period last year. Non-GAAP net income was $18.2 million or $0.28 per diluted share in the second quarter, up 127% from $8 million, or $0.14 per diluted share in the same period a year ago. Gross profit in the second quarter was $82.5 million compared to $61.7 million in the same quarter a year ago. Contents of this Summary * Quarter Highlights * Segment Performance * Guidance * Raine Radar * Q & A Quarter Highlights • GAAP operating expenses for Q2 were $76.8 million, compared to $70 million in Q1. • Non-GAAP operating expenses for Q2 were $62.6 million, compared to $61.1 million in Q1. • The company spent $28.6 million (20.8% of revenue) on research and development in Q1, compared to $29.9 million (22.3% of revenue) in Q2. • The company spent $24.9 million (18.1% of revenue) on sales and marketing in Q1, compared to $22.5 million (16.8% of revenue) in Q2. • The company spent $9.1 million (6.6% of revenue) on G&A in Q1, compared to $8.7 million (6.4% of revenue) in Q2. • Net income per diluted share was $0.18 in the second quarter, compared to a net loss of $0.61 in the second quarter one year ago. Segment Performance Controller Products Segment Second quarter revenue for the segment was $75.7 million, up almost 9.8% from $68.9 million reported for the second quarter of fiscal 2005. For the six months ending in June revenues were $151.5 million, up 13.4% compared to $133.5 million reported in the first six months of 2005. Wide Format Digital Inkjet Products Segment Second quarter revenue for the segment was $42.4 million, up almost 265% from $11.6 million reported for the second quarter of fiscal 2005. For the six months ending in June revenues were $82.2 million, up 609% compared to $11.6 million reported in the first six months of 2005. Professional Printing Applications Segment Second quarter revenue for the segment was $19.1 million, up almost 3.8% from $18.4 million reported for the second quarter of fiscal 2005. For the six months ending in June revenues were $37.8 million, up 5.5% compared to $35.8 million reported in the first six months of 2005. Guidance For the second half of 2006, the company expects revenues in the range of $290 million to $300 million. For the third quarter the company expects revenues in the range of $140 million to $143 million. In the third quarter, the company expects non-GAAP earnings per share of $0.30-$0.32. The company plans to align the manufacturing and distribution of several product lines with its controller business. Raine Radar Second quarter earnings for the quarter stayed within the company’s guidance, although they fell $0.02 short of analyst expectations. One reason for this was delays in some of the new product introductions. This impact was minimized by the performance of the company’s existing products, and looking forward, this should continue to improve. Q & A 1. EFI recorded revenue gains in all geographic areas. In North America revenues were $70.7 million, compared to $56.4 million in the same quarter a year ago. In Europe revenues were $39.8 million, compared to $26 million in the same quarter a year ago. In Japan revenues were $14.4 million, compared to $11.1 million in the same quarter a year ago. In the rest of the world revenues were $12.4 million, compared to $5.3 million in the same quarter a year ago. 2. CEO Guy Gecht believes that the VUTEk line will be very important in the continued growth of the company. 3. The company is making an effort to improve on customer service by being “closer” to the customer." They very much want to build relationships that allow them to improve their bottom line while at the same time providing their customers with exactly what they need. 4. The company believes that they will have a strong Q3 and second half of the year because of the pushback of revenues that were expected in Q2 due to timing issues related to some controller product introductions. 5. In the controller products market, demand is expected to remain consistent, but management stated they could not give any forecasts based on suspected demand from outside sources.