Electronics For Imaging's CFO Presents At Barclays Capital Global Technology, Media And Telecommunications Conference (Transcript)

Electronics for Imaging, Inc. (EFII)

Barclays Capital Global Technology, Media and Telecommunications Conference

May 23, 2012 02:20 pm ET

Executives

Vincent Pilette – Chief Financial Officer

Analysts

Presentation

Vincent Pilette

Good afternoon. I’m Vincent Pilette, the Chief Financial Officer of EFI and I’ll quickly run through a few slides, sharing with you both the results we obtained and the product offering we provide to the print industry; and then maybe I will go for a few questions.

A quick brief on the Q1 results that we posted here. We delivered a record March quarter in Q1 2012 - $160 million, growing 14%. And that was our ninth consecutive quarter of double digit growth year-over-year which I think everybody will agree for the print industry is pretty remarkable. We’ve posted record revenue for a lot of our new businesses: that would be the inkjet, the industrial inkjet business; the software business; and then also very strong double-digit growth for our recurring business made of maintenance software revenue and the ink revenue stream.

Over 60% of our business is now direct sales which is a far contrast to a few years ago when it was 100% indirect sales. We’ve delivered very good expansion internationally with more than 50% of the revenue being outside the US, and the US being the first market that (inaudible) in the 1990’s and early 2000’s. And then we’ve delivered $20 million non-GAAP EBITDA, 18% year-over-year. And we guided the tenth quarter of double-digit year-over-year growth, 15% revenue growth for next quarter and twice that for the bottom line – 30% year-over-year growth for non-GAAP EPS.

So our primary mission is really to lead the transformation of analog printing into digital automated color printing. If you look at the print industry it’s a $1.3 trillion industry. Lots of people understand that industry as being in [secular] decline and while maybe that’s true overall there are different departments and market segments that are fast growing and that’s what EFI is focusing on. We’ve developed a unique ecosystem of hardware, software and ink to address that transformation of analog into digital printing, and doing so we transformed our business model from being indirect sales transactional-focused into direct sales or a mix of indirect or direct sales; and a good mix of business models from hardware, software, transactional and non-transactional – focusing really on selling that solution.

We are focusing on favorable market trends within the print industry. If you look at the digital industrial printing, it’s growing steadily. That’s where the iPad or computers or the technology solution will not take over printing – printing on labels, printing for billboards, printing on ceramic where the electronic version will not replace the activity of printing. Marketing professionals have been focusing more on more on the personalized message, driving the variable, data management and really addressing their message to local target audiences.

Color printing jobs have been growing while color/black & white printing in the office has been declining. Professional production color printing jobs have been increasing year-over-year for many quarters now and the jobs are becoming shorter, a faster turnaround time requiring digital and advanced technologies in order to continue to be competitive in that market. And finally, print professionals have looked at more automated solutions to build on the long-term vision of almost a lights-out print manufacturing processes software to automate their print manufacturing processes.

We manage the company in three segments. Industrial inkjet is the first one – about 45% of our revenue stream, really focusing on display graphic driven by the art of form advertising, focusing on labeling and packaging; focusing on now ceramic inkjet printing, and then building UV ink, digital ink for those solutions. We’re the number one worldwide manufacturer for UV digital ink.

The second segment is the product driven software. It’s an ERP solution focusing on automating the business operations within print manufacturing. We provide ERP systems and [work to print] software solutions. And then the third segment is the Fiery branded segment, the digital frontend appliances loaded with software applications to enable color management, different variable data management, increasing the productivity across a printing floor and enabling also mobile printing.

We’ve been able to deliver very strong growth over the last two and a half years focusing on the selected market segments that have growth potential as the print industry transforms. We were able to, as I mentioned, post the ninth consecutive quarter of double digit growth and we’re going for the tenth quarter, and in Q4 of last year we posted our record quarter, the all-time record; and Q1 was a record March quarter. We’ve done that by diversifying the revenue stream and also increasing the direct sales businesses like software and inkjet, businesses that carry recurring revenue streams and building up on that momentum.

And finally, we’ve seen some good operational growth. Our customers are definitely winning with our solutions. We’ve been growing our ink volume 41% the last quarter and we have two and a half years of [whole ink] growth of more than 20% year-over-year for UV ink volume, showing that commercial printers who have migrated toward the industrial inkjet segment and focusing on the digital solutions are gaining very strong momentum.

Lots of people are asking how is that possible in the print industry, and you know, primarily we’ve been very focused on selecting the segments that we are addressing. We’re really focusing on this industrial printing, production printing where professionals have to migrate from analog into digital, and that’s driven by the [auto form] advertising and with the opportunity in labeling and packaging. Other opportunities are in automating the processes, creating online [transfers] – basically using technology and innovative technologies to constantly make money in an overall industry that may be in [secular] decline.

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