EFI Reports All-Time Record Revenue for the Second Quarter of 2013 Revenue of $180M up 10% as More Customers Turn to EFI for a Competitive Edge FOSTER CITY, Calif., July 18, 2013 (GLOBE NEWSWIRE) -- Electronics For Imaging, Inc. (Nasdaq:EFII), a world leader in customer-focused digital printing innovation, today announced its results for the second quarter of 2013. For the quarter ended June 30, 2013, the Company reported record revenue of $180.3 million, up 10% compared to second quarter 2012 revenue of $163.9 million. Second quarter 2013 non-GAAP net income was $18.3 million or $0.38 per diluted share, compared to non-GAAP net income of $14.2 million or $0.30 per diluted share for the same period in 2012. GAAP net income was $9.4 million or $0.20 per diluted share, compared to $7.0 million or $0.15 per diluted share for the same period in 2012. For the six months ended June 30, 2013, the Company reported revenue of $351.7 million, up 9% year-over-year compared to $324.0 million for the same period in 2012. Non-GAAP net income was $34.0 million or $0.71 per diluted share, compared to non-GAAP net income of $28.3 million or $0.60 per diluted share for the same period in 2012. GAAP net income was $17.8 million or $0.37 per diluted share, compared to GAAP net income of $13.2 million or $0.28 per diluted share for the same period in 2012. "We could not have been more delighted with the record results the EFI team delivered in the second quarter as our product innovation continues to drive demand across our three segments," said Guy Gecht, CEO of EFI. "We look to maintain this momentum into the third quarter as customers increasingly turn to EFI to make their businesses more competitive." EFI will discuss the Company's financial results by conference call at 2:00 p.m. PDT today. Instructions for listening to the conference call over the Web are available on the investor relations portion of EFI's website at www.efi.com. About EFI EFI™ (www.efi.com) is a worldwide provider of products, technology, and services leading the transformation of analog to digital imaging. Based in Silicon Valley with offices around the globe, the company's powerful integrated product portfolio includes digital front-end servers; superwide, wide-format, label, and ceramic inkjet presses and inks; production workflow, web-to-print, and business automation software; and office, enterprise, and mobile cloud solutions. These products allow users to produce, communicate and share information in an easy and effective way, and enable businesses to increase their profits, productivity, and efficiency. Safe Harbor for Forward Looking Statements Certain statements in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements other than statements of historical fact including words such as "anticipate", "believe", "estimate", "expect", "consider" and "plan" and statements in the future tense are forward looking statements. The statements in this press release that could be deemed forward-looking statements include statements regarding EFI's strategy, plans, expectations regarding its revenue growth, product portfolio, productivity, future opportunities for EFI and its customers, and any statements or assumptions underlying any of the foregoing. Forward-looking statements are subject to certain risks and uncertainties that could cause our actual future results to differ materially, or cause a material adverse impact on our results. Potential risks and uncertainties include, but are not necessarily limited to, unforeseen expenses; the difficulty of aligning expense levels with revenue; management's ability to forecast revenues, expenses and earnings; any world-wide financial and economic difficulties and downturns; adverse tax-related matters such as tax audits, changes in our effective tax rate or new tax legislative proposals; the unpredictability of development schedules and commercialization of products by the leading printer manufacturers and declines or delays in demand for our related products; changes in the mix of products sold; the uncertainty of market acceptance of new product introductions; intense competition in each of our businesses, including competition from products developed by EFI's customers; challenge of managing asset levels, including inventory and variations in inventory levels; the uncertainty of continued success in technological advances; the challenges of obtaining timely, efficient and quality product manufacturing and supply of components; litigation involving intellectual property rights or other related matters; our ability to successfully integrate acquired businesses; the uncertainty regarding the amount and timing of future share repurchases by EFI and the origin of funds used for such repurchases; the market prices of EFI's common stock prior to, during and after the share repurchases; any disruptions in our operations, the difficulty to retain employees, and additional expenses that we may incur as a result of our relocation from the Foster City campus; the compliance with the new requirements regarding the "conflict minerals," if they are found to be used in our products, and any other risk factors that may be included from time to time in the Company's SEC reports. The statements in this press release are made as of the date of this press release. EFI undertakes no obligation to update information contained in this press release. For further information regarding risks and uncertainties associated with EFI's businesses, please refer to the section entitled "Risk Factors" in the Company's SEC filings, including, but not limited to, its annual report on Form 10-K and its quarterly reports on Form 10-Q, copies of which may be obtained by contacting EFI's Investor Relations Department by phone at 650-357-3828 or by email at email@example.com or EFI's Investor Relations website at www.efi.com. Use of Non-GAAP Financial Information To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income (loss), as the case may be, and earnings per diluted share that are GAAP net income (loss), as the case may be, and GAAP earnings per diluted share adjusted to exclude certain recurring and non-recurring costs, expenses and gains. A reconciliation of the adjustments to GAAP results for the three and six months ended June 30, 2013 and 2012 is provided below. In addition, an explanation of how management uses non-GAAP financial information to evaluate its business, the substance behind management's decision to use this non-GAAP financial information, the material limitations associated with the use of non-GAAP financial information, the manner in which management compensates for those limitations, and the substantive reasons management believes that this non-GAAP financial information provides useful information to investors is included under "About our Non-GAAP Net Income and Adjustments" after the tables below. These non-GAAP measures are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income (loss), as the case may be, or earnings per diluted share prepared in accordance with GAAP. Electronics For Imaging, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2013 2012 2013 2012 Revenue $180,298 $163,901 $351,657 $323,957 Cost of revenue 82,315 74,109 159,814 146,498 Gross profit 97,983 89,792 191,843 177,459 Operating expenses: Research and development 32,092 30,227 63,159 61,126 Sales and marketing 34,512 32,234 67,248 63,151 General and administrative 13,343 11,154 27,041 24,056 Amortization of identified 4,946 4,631 9,873 8,815 intangibles Restructuring and other 1,235 1,167 3,137 2,250 Total operating expenses 86,128 79,413 170,458 159,398 Income from operations 11,855 10,379 21,385 18,061 Interest and other expense, net (422) (1,325) (3,346) (755) Income before income taxes 11,433 9,054 18,039 17,306 Provision for income taxes (2,009) (2,049) (253) (4,067) Net income $9,424 $7,005 $17,786 $13,239 Fully Diluted EPS calculation Net income $9,424 $7,005 $17,786 $13,239 Net income per diluted common $0.20 $0.15 $0.37 $0.28 share Shares used in diluted per share 48,254 47,814 48,149 47,599 calculation Electronics For Imaging, Inc. Reconciliation of GAAP Net Income to Non-GAAP Net Income (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2013 2012 2013 2012 Net income $9,424 $7,005 $ 17,786 $ 13,239 Amortization of identified intangibles 4,946 4,631 9,873 8,815 Stock based compensation – Cost of 382 235 851 533 revenue Stock based compensation – Research 1,671 1,260 3,538 2,824 and development Stock based compensation – Sales and 947 858 1,835 1,614 marketing Stock based compensation – General and 2,798 2,413 6,218 4,462 administrative Restructuring and other 1,235 1,167 3,137 2,250 General and administrative: Acquisition-related transaction costs 672 372 691 824 Change in fair value of contingent (544) (1,404) (806) (1,404) consideration Insurance litigation settlement — (250) — (250) Sublease income related to our (997) — (1,717) — deferred property sale Depreciation expense related to our 410 — 820 — deferred property sale Interest and other expense, net: Interest expense related to our 611 — 1,491 — deferred property sale Relocation expenses related to 34 — 110 — deferred property sale Tax effect of non-GAAP adjustments (3,302) (2,101) (9,789) (4,558) Non-GAAP net income $ 18,287 $ 14,186 $ 34,038 $ 28,349 Non-GAAP net income per diluted common $0.38 $0.30 $0.71 $0.60 share Shares used in per share calculation 48,254 47,814 48,149 47,599 Electronics For Imaging, Inc. Condensed Consolidated Balance Sheets (in thousands) (unaudited) June 30, December 31, 2013 2012 Assets Cash and cash equivalents $290,010 $283,996 Short-term investments 63,550 80,966 Accounts receivable, net 129,262 135,110 Inventories 63,099 58,343 Other current assets 87,959 74,877 Total current assets 633,880 633,292 Property and equipment, net 119,360 86,582 Goodwill 222,398 219,383 Intangible assets, net 72,333 80,244 Other assets 60,768 55,397 Total assets $1,108,739 $1,074,898 Liabilities & Stockholders' equity Accounts payable $70,973 $63,446 Deferred proceeds from property 181,981 180,216 transaction Accrued and other liabilities 120,671 119,174 Income taxes payable 4,616 7,562 Total current liabilities 378,241 370,398 Imputed financing obligation 11,000 — Contingent and other liabilities 9,284 17,742 Deferred tax liabilities 6,629 6,210 Long term taxes payable 33,807 29,755 Total liabilities 438,961 424,105 Total stockholders' equity 669,778 650,793 Total liabilities and stockholders' $1,108,739 $1,074,898 equity Note: In accordance with ASC 805, we revised previously issued financial information to reflect adjustments to the accounting for business acquisitions as if they occurred on the acquisition date. Accordingly, we have increased goodwill and accrued and other liabilities by $1.1 million at December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of Cretaprint, OPS, and Technique. Electronics For Imaging, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2013 2012 Cash flows from operating activities: Net income $17,786 $13,239 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,343 13,110 Deferred taxes (7,714) 1,281 Tax benefit (release) from employee stock 2,474 (367) plans Excess tax benefit from stock-based (2,637) (495) compensation Stock-based compensation 12,442 9,433 Provisions for inventory obsolescence 2,361 2,122 Provisions for bad debts and sales-related 2,169 199 allowances Contingent consideration payment related to (618) — business acquired Other non-cash charges and adjustments 627 1,494 Changes in operating assets and liabilities 444 (21,636) Net cash provided by operating activities* 41,677* 18,380 Cash flows from investing activities: Purchases of short-term investments (17,781) (28,542) Proceeds from sales and maturities of 34,513 36,193 short-term investments Purchases, net of proceeds from sales, of (27,324) (3,801) property and equipment Businesses purchased, net of cash acquired (4,533) (44,533) Proceeds from notes receivable of acquired — 5,216 businesses Net cash used for investing activities (15,125) (35,467) Cash flows from financing activities: Proceeds from issuance of common stock 7,906 15,041 Purchases of treasury stock (17,838) (9,456) Repayment of acquired business debt (1,620) (6,666) Contingent consideration payments related to (9,998) (252) businesses acquired Excess tax benefit from stock-based 2,637 495 compensation Net cash used for financing activities (18,913) (838) Effect of foreign exchange rate changes on (1,625) (308) cash and cash equivalents Increase (decrease) in cash and cash 6,014 (18,233) equivalents Cash and cash equivalents at beginning of 283,996 120,058 year Cash and cash equivalents at end of period $290,010 $101,825 * If we excluded $5.5 million of taxes paid related to the sale of our corporate headquarters facility, then our net cash provided by operating activities would be $47.2 million for the six months ended June 30, 2013 Electronics For Imaging, Inc. Revenue by Operating Segment and Geographic Area (in thousands) (unaudited) Three Months Ended Six Months Ended June 30, June 30, Revenue by Operating Segment 2013 2012 2013 2012 Industrial Inkjet $88,003 $79,820 $168,306 $154,912 Productivity Software 28,509 25,722 56,238 49,791 Fiery 63,786 58,359 127,113 119,254 Total $180,298 $163,901 $351,657 $323,957 Revenue by Geographic Area Americas $100,516 $82,725 $194,414 $164,906 EMEA 49,984 51,560 100,030 106,686 APAC 29,798 29,616 57,214 52,365 Japan 5,815 7,867 13,034 14,819 APAC, ex Japan 23,983 21,749 44,180 37,546 Total $180,298 $163,901 $351,658 $323,957 About our Non-GAAP Net Income and Adjustments Use of Non-GAAP Financial Information To supplement our condensed consolidated financial results prepared in accordance with GAAP, we use non-GAAP measures of net income and earnings per diluted share that are GAAP net income and GAAP earnings per diluted share adjusted to exclude certain recurring and non-recurring costs, expenses, and gains. We believe that the presentation of non-GAAP net income and non-GAAP earnings per diluted share provides important supplemental information regarding non-cash expenses and significant recurring and non-recurring items that we believe are important to understanding financial and business trends relating to our financial condition and results of operations. Non-GAAP net income and non-GAAP earnings per diluted share are among the primary indicators used by management as a basis for planning and forecasting future periods and by management and our Board of Directors to determine whether our operating performance has met specified targets and thresholds. Management uses non-GAAP net income and non-GAAP earnings per diluted share when evaluating operating performance because it believes the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending on the Company's activities and other factors, facilitates comparability of the Company's operating performance from period to period. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our business and the valuation of our Company. Use and Economic Substance of Non-GAAP Financial Measures We compute non-GAAP net income and non-GAAP earnings per diluted share by adjusting GAAP net income and GAAP earnings per diluted share to remove the impact of recurring amortization of acquisition-related intangibles and stock-based compensation expense, as well as restructuring-related and non-recurring charges and gains and the tax effect of these adjustments. Such non-recurring charges and gains include acquisition-related transaction expenses and the costs to integrate such acquisitions into our business, changes in the fair value of contingent consideration, corporate headquarters relocation expenses, and imputed interest expense and depreciation, net of accrued sublease income, related to the sale of our corporate headquarters facility and related land. These excluded items are described below: *Recurring charges and gains, including: *Amortization of acquisition-related intangibles. Intangible assets acquired to date are being amortized on a straight-line basis. Post-acquisition non-competition agreements are amortized over their term. *Stock-based compensation expense recognized in accordance with ASC 718, Stock-based Compensation. *Non-recurring charges and gains, including: *Restructuring and other consists of: -- Restructuring charges incurred as we consolidate the number and size of our facilities and, as a result, reduce the size of our workforce. -- Acquisition-related executive deferred compensation costs, which are dependent on the continuing employment of a former shareholder of an acquired company, are being amortized on a straight-line basis. -- Expenses incurred to integrate businesses acquired during the periods reported and anticipated acquisitions. *Acquisition-related transaction costs associated with businesses acquired during the periods reported and anticipated transactions. *Changes in fair value of contingent consideration. Our management determined that we should analyze the total return provided by the investment when evaluating operating results of an acquired entity. The total return consists of operating profit generated from the acquired entity compared to the purchase price paid, including the final amounts paid for contingent consideration without considering any post-acquisition adjustments related to changes in the fair value of the contingent consideration. Because our management believes the final purchase price paid for the acquisition reflects the accounting value assigned to both contingent consideration and to the intangible assets, we exclude the GAAP impact of any adjustments to the fair value of acquisition-related contingent consideration from the operating results of an acquisition in subsequent periods. We believe this approach is useful in understanding the long-term return provided by our acquisitions and that investors benefit from a supplemental non-GAAP financial measure that excludes the impact of this adjustment. *Imputed net expenses related to sale of building and land. On November1, 2012, we sold the 294,000 square foot building located at 303 Velocity Way in Foster City, California, which serves as our corporate headquarters, along with approximately fouracres of land and certain other assets related to the property, to Gilead Sciences, Inc. for $179.7 million. We will continue to use the facility for up to one year for which rent is not required to be paid. This constitutes a form of continuing involvement that prevents gain recognition. Until we vacate the building, the proceeds from the sale will be recognized as deferred proceeds from property transaction on our condensed consolidated balance sheet, which is currently $182.0 million, including imputed interest costs. Imputed interest expense and depreciation of $1.0 million, net of accrued sublease income and capitalized interest, has been accrued as of June 30, 2013. *Expenses incurred during the period related to the upcoming relocation of our corporate headquarters facility. *Pursuant to a settlement executed in April 2012, we received an additional $0.3 million in insurance proceeds, net of legal fees and costs, related to our previously disclosed settlement of the shareholder derivative litigation concerning our historical option granting practices. *Tax effect of non-GAAP adjustments *After excluding the items described above, we apply the principles of ASC 740, Income Taxes, to estimate the non-GAAP income tax provision in each jurisdiction in which we operate. *To facilitate comparability of our operating performance between 2013 and 2012, we have excluded the following from our non-GAAP net income: -- Tax charge of $0.3 million resulting from the filing of tax returns by foreign subsidiaries for periods prior to their acquisition by EFI for the six months ended June 30, 2013. -- Tax benefit of $3.2 and $0.2 million from the retroactive renewal of both the 2012 U.S. federal research and development tax credit and certain international tax provisions, respectively, on January2, 2013, for the six months ended June 30, 2013. The tax benefit for these items had been previously recognized in our non-GAAP net income for the year ended December 31, 2012 -- Interest expense accrued on prior year tax reserves of $0.1 million for the three months ended June 30, 2013 and 2012, respectively, and $0.2 million for the six months ended June 30, 2013 and 2012, respectively, as well as other tax benefits of $0.3 million for the three and six months ended June 30, 2013. Usefulness of Non-GAAP Financial Information to Investors These non-GAAP measures are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income or earnings per diluted share prepared in accordance with GAAP. Non-GAAP financial measures have limitations as they do not reflect certain items that may have a material impact upon our reported financial results. We expect to continue to incur expenses of a nature similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income and non-GAAP earnings per diluted share should not be construed as an inference that these costs are unusual, infrequent, or non-recurring. CONTACT: Vincent Pilette Chief Financial Officer EFI 650-357-3500 Investor Relations: JoAnn Horne Market Street Partners 415-445-3235 Electronics For Imaging, Inc. Logo
EFI Reports All-Time Record Revenue for the Second Quarter of 2013
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