EFI Q Earnings Call. April 23, 2015

Transcription

1 EFI Q Earnings Call April 23, 2015

2 Safe Harbor For Forward-Looking Statements Certain statements in this presentation 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, consider, continue, estimate, expect, look, and plan and statements in the future tense are forward looking statements. The statements in this presentation 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, demand for products, 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 taxrelated 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; and any other risk factors that may be included from time to time in the Company s SEC reports. The statements in this presentation are made as of the date of this presentation. EFI undertakes no obligation to update information contained in this presentation. 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 or by at investor.relations@efi.com or EFI s Investor Relations website at 2

3 Q Financial Summary Record 1 st quarter revenue of $195M, +3% YoY (+7% excluding currency impact*) Double-digit growth for Fiery (+10%) Recurring revenue of $56M, up 8% YoY; 29% of total revenue; UV Ink volume up 12% Non-GAAP Gross Margin of 54.7%, -20 bps YoY (+80 bps ex currency impact) Non-GAAP Operating Profit of $28M, up 12%; 14.6% of revenue Non-GAAP EBITDA of $31M, up 12%; 15.9% of revenue Non-GAAP EPS of $0.45 compared to $0.42 in Q Includes a ($0.06) currency loss in Q compared to a $0.02 gain in Q Cash flow from operating activities of $7M for the quarter, up 20% YoY $84M over last twelve months, up 15% YoY Share buyback of $11M drives 0.3M reduction in diluted share count to 47.9M * Currency impact calculated by applying Q average rates to Q Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. 3

4 Q Revenue Impact from Currency Revenue ($M) Q115 Q115 (Using Q114 FX Rates * ) Total Revenue $195 $201 YoY % 3% 7% Industrial Inkjet $88 $93 YoY % 0% 5% Productivity Software $31 $33 YoY % -2% 3% Fiery $76 $76 YoY % 10% 10% Americas $108 $108 YoY % 7% 7% EMEA $60 $66 YoY % -1% 9% APAC $27 $27 YoY % -2% 1% Variance -4 pts -5 pts -5 pts pts -3 pts * Currency impact calculated by applying Q average rates to Q Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. 4

5 Q Guidance Revenue Guidance ($M) Non-GAAP Operating Margin of approximately 14-15% of revenue Non-GAAP EPS of $ , up 5-11% Q215 (Using Current FX Rates) Total Revenue $ YoY % 4-6% Industrial Inkjet YoY % Productivity Software YoY % Fiery YoY % Mid-Single Digit Mid-Single Digit Mid-Single Digit Q215 (Using Q214 FX Rates * ) 8-10% Low-Double Digits ~10% Mid-Single Digit Includes $0.01 impact for the interest payment on the convertible debt * Currency impact calculated by applying Q average rates to Q Guidance. Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. 5

6 Q P&L Summary $M Q Q QoQ % Q YoY % Revenue $ $ (8%) $ % NON-GAAP Operating Profit (15%) % Operating Profit % 14.6% 15.7% -1.1 pts 13.4% +1.2 pts Net Income (15%) % EPS $ 0.45 $ 0.52 (13%) $ % GAAP GAAP Net Income (56%) 10.1 (48%) GAAP EPS $ 0.11 $ 0.25 (56%) $ 0.21 (48%) Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. 6

7 LTM Consolidated P&L Non-GAAP Non-GAAP Consolidated P&L ($M) LTM* Mar 2015 LTM* Mar 2014 YoY % Revenue $ $ % GM % 54.7% 54.5% +20 bps Operating Expenses % Operating Profit % Operating Profit % 14.9% 13.6% +1.3 pts EBITDA % Other Income/Expense (9.7) 2.1 na Tax Rate 19.0% 21.4% -2.4 pts Net Income % EPS $ % Diluted Sharecount (000's) 48,036 48,502 (1%) * Last twelve months ending March 31 of the year indicated Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. 7

8 Q Non-GAAP Key Performance Metrics * * Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. Revenue and Cash Flow from Ops are determined in accordance with GAAP. 8

9 Revenue by Segment & Region Revenue ($M) Q Q QoQ % Q YoY % Industrial Inkjet (14%) 87.9 (0%) % of Total 45% 48% 47% Productivity Software (10%) 31.7 (2%) % of Total 16% 17% 17% Fiery % % % of Total 39% 35% 36% Americas (10%) % % of Total 55% 57% 54% EMEA (4%) 60.5 (1%) % of Total 31% 30% 32% APAC (6%) 27.2 (2%) % of Total 14% 13% 14% Japan (13%) % % of Total 4% 4% 3% APAC ex Japan (3%) 21.4 (13%) % of Total 10% 9% 11% EFI $ $ (8%) $ % 9

10 LTM Revenue by Segment & Region LTM* LTM* Revenue ($M) YoY % Mar 2015 Mar 2014 Inkjet % % of Total 48% 49% Productivity Software % % of Total 16% 16% Fiery % % of Total 36% 35% Americas % % of Total 56% 56% EMEA % % of Total 31% 29% APAC (1%) % of Total 14% 15% Japan % % of Total 4% 3% APAC ex Japan (12%) % of Total 10% 12% EFI $ $ % * Last twelve months ending March 31 of the year indicated 10

11 Gross Margin by Business Segment Non-GAAP Non-GAAP Gross Margin % Q Q QoQ % Q YoY % Industrial Inkjet 33.8% 36.7% -290 bps 37.3% -350 bps Productivity Software 72.1% 73.3% -120 bps 72.1% - bps Fiery 71.7% 69.9% +180 bps 69.3% +240 bps EFI 54.7% 54.4% +30 bps 54.9% -20 bps Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. 11

12 Operating Expenses Non-GAAP Non-GAAP Operating Expenses ($M) Q Q QoQ % Q YoY % Research & Development (4%) 30.8 (1%) % of Revenue 15.7% 15.1% +60 bps 16.3% -60 bps Sales & Marketing (6%) 34.9 (1%) % of Revenue 17.7% 17.3% +40 bps 18.5% -80 bps General & Administrative (2%) % % of Revenue 6.7% 6.3% +40 bps 6.6% +10 bps EFI (5%) 78.2 (0%) % of Revenue 40.1% 38.7% +140 bps 41.5% -140 bps Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. 12

13 Q GAAP to Non-GAAP Opex Bridge Operating Expenses ($M) GAAP Stock Based Comp Exp Amort of Identifited Intangibles Acquisition Related Transaction Costs Restructuring and Other Special Items* Non-GAAP Research & Development 33.7 (3.2) % of Revenue 17.3% (1.6%) % Sales & Marketing 37.2 (2.7) % of Revenue 19.1% (1.4%) % General & Administrative 17.7 (3.5) - (0.7) - (0.5) 13.0 % of Revenue 9.1% (1.8%) - (0.4%) - (0.3%) 6.7% Amortization of Intangibles (4.8) % of Revenue 2.5% - (2.5%) Restructuring & Other (1.0) - - % of Revenue 0.5% (0.5%) - - EFI 94.4 (9.4) (4.8) (0.7) (1.0) (0.5) 78.0 % of Revenue 48.5% (4.7%) (2.5%) (0.4%) (0.5%) (0.3%) 40.1% * Consists primarily of litigation settlements.. Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. 13

14 Consolidated P&L Non-GAAP Non-GAAP Consolidated P&L ($M) Q Q QoQ % Q YoY % Revenue $ $ (8%) $ % GM % 54.7% 54.4% +30 bps 54.9% -20 bps Operating Expenses (5%) 78.2 (0%) Operating Profit (15%) % Operating Profit % 14.6% 15.7% -1.1 pts 13.4% +1.2 pts EBITDA (13%) % Other Income/Expense (1.9) (2.2) na (0.1) na Tax Rate 19.0% 19.0% - pts 19.0% - pts Net Income (15%) % EPS $ 0.45 $ 0.52 (13%) $ % Diluted Sharecount (000's) 47,856 48,118 (1%) 48,357 (1%) Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. 14

15 Q GAAP to Non-GAAP P&L Bridge GAAP to Non-GAAP Bridge ($M) GAAP Stock Based Comp Exp Amort of Identified Intangibles Acquisition Related Transaction Costs Restructuring and Other Special Items* Non-GAAP Revenue $ $ Cost of Sales 89.1 (0.9) GM % 54.2% 54.7% Operating Expenses (Gains) 94.4 (9.4) (4.8) (0.7) (1.0) (0.5) 78.0 Operating Profit % 5.7% 14.6% Other Income/Expense (4.8) 2.9 (1.9) Pre-Tax Income Tax Rate 17.1% 19.0% Net Income EPS $ 0.11 $ 0.45 Diluted Sharecount (000's) 47,856 47,856 * Consists of litigation settlements and non-cash interest expense (other income/expense). Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & our description of our use of non-gaap information. 15

16 Key Balance Sheet Figures Key Balance Sheet Figures ($M) Q Q Q Total Cash & Investments $ 607 $ 617 $ 316 Cash Conversion Cycle (CCC) Accounts Receivable (net) $ 170 $ 155 $ 144 DSO Inventory, net $ 82 $ 72 $ 71 Inventory Turns Total Assets $ 1,312 $ 1,305 $ 982 Convertible Debt $ $ $ - 16

17 Key Cash and Valuation Metrics Cash Metrics ($M) Q Q QoQ % Q YoY % Cash Flow From Operations $ 7.1 $ 35.6 (80%) $ % LTM* Cash Flow From Operations % % Cash Per Share (1%) % Valuation Metrics Enterprise Value (EV)** $ 1,685.0 $ 1,729.0 (3%) $ 1,779.0 (5%) EV Multiple of LTM EBITDA (5%) 16.2 (19%) EV Multiple of LTM Cash Flow From Operations (4%) 24.5 (18%) EV Multiple of LTM Revenue (3%) 2.4 (11%) * Last 12 months ending the third calendar month of the quarter indicated ** Calculated using closing common stock share price on last trading day of the quarter indicated 1 Calculated using gross cash balance 17

18 Appendix

19 Convertible Debt Offering Summary Issuer: Electronics For Imaging, Inc. Security: Convertible Senior Notes due 2019 Ranking: Senior Unsecured Maturity 5 years Call Protection: Non-Call 5 Years Coupon: 0.75% Conversion Premium: 22.5% Size: $300MM Greenshoe: $45MM Approximate Conversion Price (1) $52.72 Approximate Shares Underlying Convertible 6.5MM Bond Hedge Strike (%) / Bond Hedge Cost ($) 22.5% / $63.9MM Warrant Strike (%) / Warrant Proceeds ($) 60% / $34.5MM Net Premium / % of Proceeds $29.4MM / 8.52% Net Proceeds $308MM Effective Pre-tax Interest Rate on Proceeds (incl. BH+W Cost) 2.58% Effective After-tax Interest Rate on Proceeds (2) 1.50% Offering: 144A / One-Day Marketed Bookrunners: Morgan Stanley and Goldman Sachs Notes 1. Reference price of $ Assumes 23% tax rate This information is current as of April 23, 2015 and is not subject to update. 19

20 Convertible Debt Share Count Impact Share Price Impact to Diluted Sharecount (000's) $ Price at Offering Date $ $ $ $ % Conversion Premium $ $ $ % Hedged Conversion Premium No share count dilution until the stock exceeds the 22.5% conversion premium amount of $

21 2014 Revenue by Business Segment Revenue ($M) Q Q Q Q Industrial Inkjet $ 87.9 $ 93.9 $ 95.5 $ $ YoY Change 10% 7% 10% 3% 7% Productivity Software YoY Change 14% 8% 18% 3% 10% Fiery YoY Change 9% 7% 9% 16% 10% Total Revenue $ $ $ $ $ YoY Change 10% 7% 11% 7% 9% 21

22 2013 Revenue by Business Segment 22

23 2012 Revenue by Business Segment 23

24 2014 Gross Margin by Business Segment Non-GAAP Non-GAAP Gross Margin % Q Q Q Q Industrial Inkjet 37.3% 38.5% 39.5% 36.7% 38.0% YoY Change -250 bps -150 bps -30 bps -190 bps -150 bps Productivity Software 72.1% 72.1% 72.3% 73.3% 72.5% YoY Change +20 bps +110 bps +80 bps -10 bps +50 bps Fiery 69.3% 67.4% 69.4% 69.9% 69.0% YoY Change +230 bps - bps +190 bps +210 bps +160 bps Total Gross Margin 54.9% 54.1% 55.4% 54.4% 54.7% YoY Change -10 bps -50 bps +80 bps +40 bps +10 bps Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & the description of our use of non-gaap information in the press release for the relevant period. 24

25 2013 Gross Margin by Business Segment Non-GAAP Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & the description of our use of non-gaap information in the press release for the relevant period. 25

26 2012 Gross Margin by Business Segment Non-GAAP Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to Non-GAAP reconciliation & the description of our use of non-gaap information in the press release for the relevant period. 26

27 Reconciliation of GAAP to Non-GAAP GAAP to Non-GAAP Reconciliation ($M) Q114 Q214 Q314 Q414 FY14 Q115 Q215 Q315 Q415 FY15 YTD GAAP Net Income (Loss) EPS $ 0.21 $ 0.14 $0.10 $ 0.25 $ 0.70 $ 0.11 $ - $ - $ - $ 0.11 ADJUSTMENTS COGS: Stock Based Compensation Expense OPEX: Stock Based Compensation Expense OPEX: Amortization of Identified Intangibles OPEX: Acquisition-Related Transaction Costs OPEX: Litigation Settlement OPEX: Change in FV of Contingent Consideration (0.6) (1.0) (0.6) (1.6) (3.8) OPEX: Restructuring and Other OPEX: Building Sale Related OPEX: Gain on Sale of Building and Land OI&E: Non-cash Interest Expense Tax Effect of Non-GAAP Adjustments NON-GAAP (4.2) 0.5 (2.8) (5.5) (12.0) (4.0) (4.0) Non-GAAP Net Income (Loss) $ 20.4 $ 21.0 $ 20.6 $ 25.1 $ 87.1 $ 21.4 $ - $ - $ - $ 21.4 Non-GAAP EPS $ 0.42 $ 0.44 $0.43 $ 0.52 $ 1.80 $ 0.45 $ - $ - $ - $ 0.45 Non-GAAP numbers have been adjusted to exclude certain items. 27

28 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 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 noncash expenses and significant 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 our activities and other factors, facilitates comparability of our 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 amortization of acquisition-related intangibles, stock-based compensation expense, restructuring and other expenses, acquisition-related transaction expenses, costs to integrate such acquisitions into our business, changes in the fair value of contingent consideration, litigation settlement charges, and non-cash interest expense related to our 0.75% convertible senior notes ( Notes ). We use a constant non-gaap tax rate of 19%, which we believe reflects the long term average tax rate based on our international structure and geographic distribution of revenue and profit. These excluded items are described below: o Intangible assets acquired to date are being amortized on a straight-line basis. o Stock-based compensation expense of $10.2 million consists of $8.8 million of stock-based compensation expense recognized in accordance with ASC 718, Stock Compensation and the non-cash settlement of $1.4 million of vacation liabilities settled through the issuance of RSUs, which is not included in the GAAP presentation of our stock-based compensation expense. o o Restructuring and other expenses consist of: Restructuring charges incurred as we consolidate the number and size of our facilities and, as a result, reduce the size of our workforce. Expenses incurred to integrate businesses acquired during the periods reported. Acquisition-related transaction costs associated with businesses acquired during the periods reported and anticipated transactions. o 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 acquisitionrelated 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. 28

29 About our Non-GAAP Net Income and Adjustments (continued) o Non-cash interest expense on our Notes. Our Notes may be settled in cash on conversion. We are required to separately account for the liability (debt) and equity (conversion option) components of the Notes in a manner that reflects our non-convertible debt borrowing rate. Accordingly, for GAAP purposes, we are required to amortize a debt discount equal to the fair value of the conversion option as interest expense on our $345 million of 0.75% convertible senior notes that were issued in a private placement in September 2014 over the term of the Notes. o Litigation settlements. We settled, or accrued reserves related to, several litigation claims of $0.6 and $0.1 million during the three months ended March 31, 2015 and 2014, respectively. o Tax effect of non-gaap adjustments are as follows: o We use a constant non-gaap tax rate of 19%, which we believe reflects the long term average tax rate based on our international structure and geographic distribution of revenue and profit. The long-term average tax rate is calculated in accordance with the principles of ASC 740, Income Taxes, after excluding the tax effect of the non-gaap items described above, to estimate the non-gaap income tax provision in each jurisdiction in which we operate. o The long-term average tax rate assumes that the U.S. federal research and development tax credit will be retroactively re-enacted as of January 1, 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 in that 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. 29