: Summary of Q3 Earnings Call By Ann Levine October 24, 2003 – Electronics for Imaging (NASDAQ:EFII) announced third quarter revenues of $97.3 million up from $92.7 million for the same period last year, up 5%. GAAP net income was $13 million for the third quarter compared to $3.6 million during the third quarter of 2002. Earnings per diluted share were $0.24 in the third quarter compared to $0.07 for the same period last year. Proforma net income was $12.8 million in the third quarter compared to $7.5 million for the third quarter of 2002, up 70%. Editor's Note: This earnings call comes a day after the EFI announcement that it has finally completed the long-awaited acquisition of PrintCafé (NASDAQ: PCAF), a leading provider of print management information software. Topics of this summary : * Regional Performance * Segment Performance * Fourth Quarter Outlook * Q & A Regional Performance Japan showed strong results up 77% sequentially and 107% year over year due mainly to design licensing. Of the $19.8 million in revenue in Japan, design licensing was $12 million. Europe witnessed a 4% sequential decline and 4% increase year over year in revenue. The U.S. showed an 8% sequential growth with a year over year decline of 9%. Results reflect strong sales of the newly introduced stand-alone color server, S300. Asia/Pacific region showed a 40% sequential decline in revenues with a 38% year over year decline due to shipping design license products to Japan for re-export as well as lower stand-alone server sales. Segment Performance Stand-Alone Servers in the third quarter accounted for 10% of unit volume and 35% of the revenue; or $34.3 million. EFI anticipated a modest increase in color server products due to the launch of new products and expects a significant uptrend in the fourth quarter. In the Embedded Color segment business, unit volume was 67% of the total and revenue accounted for 42% of the total or $40.8 million. The strength in this area is attributed to the growing demand for color in the corporate environment and the attractiveness of the design licensing business. There is an expected decline in the Embedded Color segment in the fourth quarter. In the Digital Black and White segment, unit volume was 21% and revenue was 10% of the total. Although there is an expectation for color devices to gain market share in certain black and white segments, overall fourth quarter expectations are for an increase in this segment. Fourth Quarter Outlook EFI expects continued growth in the area of design licensing and demand for server products and color imaging. Revenues are expected to be in the $104-107 million range with $8-9 million from Print café. GAAP earnings per share are expected to be $0.02 or less in the fourth quarter. Q & A 1. The company's long-term strategy is to hit operating margin goals in the high teens. EFI is pleased with its server business and design licensing business although there is some seasonality associated with it including a big dip in the first quarter. The integration of Printcafe will have some impact on operating margins as well. Only two-thirds of the acquisition expense will be realized in the fourth quarter. 2. Embedded migration toward design licensing was up 39% of total embedded unit volume from 31% last quarter and revenues in this segment were up 13% compared to 6% last quarter. These numbers include both color, and black and white. Reaching 100% of volume is unlikely. 3. Although EFI announced new partnerships, benefits from these partnerships will most likely not be realized until 2005. 4. Migration as opposed to restructuring is anticipated with the Printcafe sales force. Printcafe sales people will sell both EFI and Printcafe products. 5. EFI's Business Development team is continuing to look at acquisition opportunities and the company is unable to say if an acquisition will take place in one month or one year. There have been no substantial changes in business prices in the market. 6. EFI has seen an increasing adoption of color imaging. Color is closing in on cost, speed and functionally to its' black and white counterpart. Editor's Note: It should be noted that color products make up a small percentage of EFI's overall installed printers. 7. T/R Systems is expected to show seasonality in performance, as their channels are similar to EFI's. It is difficult for the company to predict what is normal for Printcafe's performance due to the acquisition. EFI is trying to assess what the impact the acquisition announcement has had on performance during the last year. 8. Three factors affect cyclical trends including, end users moving to new technology, the technology itself, and the economic situation. EFI stated all three are moving forward in their favor however the strength and impact of these trends is difficult to predict. 9. The margins on design licensing range from 60 points to 85 points with an average in the high 70's. 10. The stand-alone server growth varies tremendously. EFI's expectation is for significant growth. When a new platform is launched there is some growth. After that point, the server provides new engines for partners. 11. Sequential growth in the stand-alone server segment is expected in the fourth quarter followed by a traditional lighter performance in the first quarter of 2004.