Electronics For Imaging's Management Presents At 2012 Citi Technology Conference (Transcript)

Electronics for Imaging, Inc. (EFII)

2012 Citi Technology Conference Transcript

September 4, 2012 10:30 AM ET

Executives

Vincent Pilette - Chief Financial Officer

Analysts

Jim Suva - Citigroup

Asiya Merchant - Citigroup

Presentation

Jim Suva - Citigroup

Good morning, everyone. And thank you for joining us here to Citigroup Technology Conference. This session is for Electronics for Imaging. My name is Jim Suva. I’m the IT Hardware and Technology Supply Chain Analyst here at Citi. On the stage we are very pleased to have with us the Chief Financial Officer, Vincent Pilette. Also on our stage is Asiya Merchant, who works with me.

To begin things, Vincent has a handful of slides, about 10 to 15 slides, just to give a brief overview of Electronics for Imaging, as well as some recent results and trends. I already have had a few investors approach me with a questions and my response has been, I think it’s a great opportunity to ask Vincent some questions. So we are going to reserve a majority of the time here for investor’s questions-and-answers.

As a reminder, this is being webcast. So we ask that you raise hand to make sure the microphone get to you. As a warning to let you know, not to be alarmed mid-way during this presentation, I will excuse myself as I hand hosting the keynotes, and I do have to go get some makeup put on, simply to look good, I do need to get a [tan] in between now and the next hour.

Accordingly, I’ll turn it over to wonderful, Vincent, as well as Asiya, and again, thank you for joining us. This is Vincent, the CFO of Electronics for Imaging. Vincent?

Vincent Pilette

Thank you, Jim. I’m coming from California the needs in the [tan] makeup. Good morning, everyone. This morning someone confused Electronics for Imaging with Electronic Arts. So I thought I would use a few slides to quickly give you an overview of what we are doing.

We are a company focus on developing hardware and software solutions for the print industry, and before I go into the market and the structure of the firm, let me just quickly refresh Q2 results.

Q2 finishing in June reported record revenue of $164 million, 16% year-over-year, and for our company it was the 10th consecutive quarter of year-over-year double-digit growth. For company -- technology company it’s not that extraordinary, for technology company addressing the print industry is definitely very good result.

We’ve had record revenue for a many of our segments that we are now have diversified into over the last few years, record revenue for our Inkjet segment, record revenue for our software business, record revenue for our recurring revenue, 10 years ago, if I was a transactional base company today we have about 26% our revenue stream on the recurring basis and that’s also maintenance and ink revenue.

We’ve been growing profit margin and EBITDA faster than revenue. We see here EPS in Q2 up 30% year-over-year versus revenue of 16%. And then, lately, we announced the sales of our headquarter building creating or increasing our cash per share of $3, when the transaction will be close in October we’ll have about $7 per share of cash no debt, 45% of our market cap in cash.

Considering the macro environment, we gave cautionary guidance for Q3 with growth of 2% to 5% and EPS of $0.25 to $0.27.

So we are a niche player. We’re focusing on developing technology solutions for the print industry. The overall print industry is over a trillion dollar is indicative decline, but within that there is lot of activities that are still produced in an analog way and that will move towards the digital way of producing printing, and that’s what, yes, I will be focusing on.

We’ve positioned our portfolio on those growth segments, transformative segments within that print industry and we’ve created an ecosystem of hardware, software, ink and maintenance solution if you want to help print professionals migrate toward those high-end, color on-demand type of print activity.

And we’ve transform our business model from 10 years ago being 100% control for multifunction printers into now being a diversified portfolio focusing on production and industrial printers migrating from analog into digital printing.

The market dynamics we’ve been leveraging over the last few years are three-fold. First, there is a lot of printing activities still migrating from black and white printing, high volume printing into the first analog short run color printing activity and as a result, as request a lot faster turnaround more CPU power, software power for print professional to produce those on-demand print material.

Secondly, there is a lot of industrial aspect of printing, like printing on labels, printing on ceramic, that are still very much analog today that are being transform as new digital solution are being introduced. Those are activity of printing as will not be indicative decline if there is no electronic counterpart if you want like in the up its way if I not or like any somebody do casual printing.

And then the third dynamic is that, commercial printers as industries consolidate have an increasing need for our robust software ERP tailored for their print production environment and have adapted software technology to automate their business processes. Those are the three fundamental market dynamics that we’ve been leveraging.

We organize the company in three segments. The first one is the industrial segment, about 45% of our revenue, long-term gross model of 10% to 15% and we’ve been delivering that for the last two and half years, its mix of printer revenue and ink revenue. Gross margin expanding as we introduce new product into the environment and as the ink revenue is also increasing as they install these increases.

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