EFI posts strong Q2 and announces $180m HQ sale

Simon Nias
Thursday, July 26, 2012

Electronics For Imaging (EFI) more than doubled its second quarter pre-tax profit following strong double digit growth in both its Industrial Inkjet and Productivity Software business units.

The Foster City, California-based business posted a pre-tax profit of $9.1m (£5.9m) for the quarter to 30 June, up 117% year-on-year, on group sales that were up 16% at $163.9m.

However, while revenue from Industrial Inkjet and Productivity Software (previously referred to as APPS) rose 39% to $79.8m and 33% to $25.7m respectively, Fiery revenue declined 9.6% to $58.4m.

EFI chief executive Guy Gecht attributed this to the cyclical nature of the Fiery business, where revenues are reliant on sales of OEM partners production print equipment. Gecht said that the quarter had been characterised by soft sales across all OEM partners and product lines.

"Unlike with our direct businesses we don't have the ability to accelerate time to market of new products [and] as we won't see an uptick in new products until late this year we expect Fiery revenues to be down roughly 20% in the September quarter," he added.

Gecht said that one new product from one of EFI's OEM partners would ship towards the end of the year, with further launches expected from the rest of EFI's partners in the first half of 2013.

Discussing the results on the firm's Q2 analysts conference call, Gecht said that the key takeaway from the second quarter was that the strong growth in EFI's direct businesses had "more than offset the weakness in Fiery".

However, he added: "We anticipate that even 20-25% growth for our inkjet and software will not offset the current pressure on Fiery results [and] we are taking steps to more closely align our expenses with our revenue expectations."

Following a successful Drupa, Gecht said that the sales funnel in EFI's direct sales businesses was "in record shape" but that this would be offset in the coming quarter by the cyclical nature of the Fiery business and by macro economic and currency headwinds.

"Taking all factors into account we expect revenue growth of 2-3%," added Gecht.

Meanwhile, the firm is set to boost its already healthy cash balance, which currently stands at $101.8m, after entering an agreement to sell its Foster City headquarters to Gilead Sciences for $180m.

The transaction is expected to close in October 2012 and, as part of the agreement, EFI will continue to occupy the building for up to 12 months after closing as it searches for a new headquarters in the San Francisco Bay Area.

Gecht told analysts that the Board would explore all options in relation to cash usage, including a share buyback, dividend payments, and further acquisitions. On the last point Gecht said that EFI "continued to be active" in pursuit of the right deals.

Any future deals will likely mirror those of the recent past in terms of being smaller companies that will allow EFI to strengthen its presence in existing segments or to expand geographically.

The benefit of the group's acquisition-led expansion into emerging markets such as Brazil, China and Australia could be seen in its Q2 results, where revenues from Asia Pacific shot up 89% from a relatively low base to $29.6m.

EMEA sales also grew 20.9% - largely based on Drupa, where EFI introduced a range of new products, including the Vutek QS2 Pro UV printer - to $51.6m, while revenue from the Americas remained flat at around $83m.


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