Electronics for Imaging (Nasdaq: EFI) recently announced first quarter results of $106.7 million in revenues, or a 25% increase over revenues of $85.7 million for the same period last year. Pro forma net income was $12.3 million or $0.22 per diluted share. For the same period last year, pro formal net income was $7.0 million or $0.13 per diluted share. GAAP net income was $11 million or $0.20 per diluted share for the first quarter as compared to $5.1 million of $0.09 per diluted share for the first quarter of 2003.

Topics of this summary:

  • Regional Performance
  • Segment Performance
  • New Branding
  • Outlook
  • Q & A

Regional Performance

The America's showed an increase of $59.0 million in revenues, a 38% year over year increase and 7% increase sequentially. Performance in the America's was due to the acquisition and performance of PrintCafe and the positive results in the server business. European revenues were $30.4 million a 5.8% increase year over year and 3.1% increase sequentially. Growth was fueled by server activity and professional printing applications with embedded products the main driver. Revenues in Japan increased $13.4 million with a 38.1% year over year increase and a 19.2% decline sequentially. Strong sales in design-licensing products were a direct contributor to results. Asia/Pacific revenues were $3.8 million a 14.5% decline year over year and a 21% sequential increase. A fall off in embedded black and white products contributed to the decline while there was significant server growth.

Segment Performance

The Server Segment was 27.7% of unit volume and 47.6% of revenue or $50.8 million. The first quarter recorded a return to more normal level of demand as compared to the fourth quarter of 2003. Embedded Products made up 71.3% of unit volume and 29.2% of revenue, or $31.2 million in the first quarter. The segment benefited from the steady growth in color across EFI's lineup. Professional Printing Applications was 14.4% of revenue or $15.4 million, exceeding EFI's expectations. The Miscellaneous segment contributed 1% volume and grew 13% sequentially with revenue of $9.4 million. This segment includes spare components and the newly acquired ADS. Although the deal on ADS closed in February, revenues were nominal for the quarter.

New Branding

EFI announced it will no longer go by the name of Electronics for Imaging but become known only as the initials EFI. The old name was thought not to encompass the company's broad range and their product portfolio. The new name and brand was announced in January of this year. The company's new tag line is essential to print.


Although EFI will experience higher expenses in the second quarter, the outlook is for revenues of $109 million and earnings per share of $0.23.

Q & A

  1. Although EFI experienced a good first quarter from a revenue standpoint, the second quarter outlook is conservative as company officials made a decision not to take all the revenue to the bottom line and instead invest in the company's future. This decision was made to take advantage of current opportunities and ensure new products get to market in order to realize future revenue opportunities.
  2. The payoff for EFI's current investment decisions is expected in increased performance in the back half of the year. Traditionally the company experiences a flat first and second quarter, although EFI is predicting a slight increase in revenue for second quarter at $109 million. Sizable jumps are expected from the second to third quarters of 2004.
  3. Drupa is the talk of many earnings calls this season and analysts have modeled an upswing in EFI's revenues after drupa from Q2 to Q3. EFI would not comment on the traditional performance pause ahead of drupa but CEO Guy Gecht commented that overall customer response to EFI's products and services has been good and EFI sees the opportunity for much business in the next 24 months.
  4. In the Professional Printing segment, products did well across the board with PrintCafe offering the biggest success contributing to over ½ of the category. PrintCafe contributed over half of the $15 million in revenues as recorded in the to the Professional Printing segment.
  5. PrintCafe is returning to original run rate levels since the acquisition, as there is an increased level of activity, more sales activity, and an increased number of jobs coming into printer's shops.
  6. The impact of design licensing on the top line during the first quarter was similar to the previous quarter at $5.5 million.
  7. EFI would not comment during today's call on growth opportunities and future acquisitions. CEO Gecht sees tremendous opportunities with EFI's current portfolio, however, if an acquisition made sense, the company would pursue it if it added value to the operation. Gecht reiterated the company is not indicating it will not consider acquisitions, however the management team is currently focused on execution.
  8. Capital expenditures were $1.4 million during the first quarter. Depreciation and amortization was $6 million
  9. The second quarter should be considered the high water mark as far as expenditures and not the usual run rate for expenditures at EFI. The second quarter is a peak for a number of reasons including increased advertising and marketing expenses for drupa and Connect, the two trade shows that will occur during the quarter. Q3 and Q 4 will trim back down in expenditures.
  10. The F/X impact on top line of operations is small as most of EFI's business in invoiced in U.S. dollars. Only 3% of business is invoiced in local currency. On the bottom line there was a couple hundred thousand dollar impact due to revaluation of the balance sheet.
  11. EFI still plans to exit 2004 with a 25% operating margin. The back half of the year should have a positive effect.
  12. Although the design-licensing pipeline goes in fits and starts, the win pipeline is larger than it has ever been. Additionally, embedded products are moving towards a design license model.