ELECTRONICS FOR IMAGING INC - FORM 8-K - EX-99.2

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8-K - FORM 8-K - ELECTRONICS FOR IMAGING INC	d624907d8k.htm
EX-99.1 - EX-99.1 - ELECTRONICS FOR IMAGING INC	d624907dex991.htm

Financials

Marc Olin

Interim CFO

Exhibit 99.2

We Continue to Deliver on Our Growth

Opportunities…

•

Great momentum going into Q4’13

•

Based on Q4’13 guidance, full-year 2013 revenue growth of 10%-11%

•

Based on Q4’13 guidance, full-year 2013 EPS growth of 17%-19%

•

4 years of double digit growth

•

Solid revenue growth drivers

•

Many new product introductions over the past 18 months, more to come

•

Three tuck-in acquisitions closed so far in 2013

•

Record recurring revenue, ink, and software maintenance

•

Active capital management

•

Working capital improvements, growing cash from operations

•

Increased funnel of acquisitions and stock buy-back strategy

This

information

speaks

the

date

hereof

and

not

subject

update.

Historical Revenue Trend & FY 2013 Estimate

Expanding our TAM and Growing Recurring Revenue

Four years of double-digit

revenue growth, record

year in 2012 and expected

record year in 2013

Driving revenue mix and

diversification of portfolio

Recurring revenue growing

at 15% CAGR (‘09 –

’13),

40% of non-Fiery revenue,

26% of total revenue

Revenue ($M)

(1) 2013E based on Q4’13 high end of company’s outlook (Revenue of $186-191M and non-GAAP EPS of $0.42-0.45).

(2) The 2013E information speaks as of the date hereof and is not subject to update.

2013 Recurring Revenue Snapshot

•

Total growing at 10+%,

~26% of total

•

Growing printer install

base and new TAMs drive

higher ink revenue

•

Targeted M&A roll-up

success driving

subscription growth as a

% of total

*Not including inkjet parts

Cost Structure Discipline

•

OPEX efficiencies

driving towards lower %

of revenue

•

OPEX balance between

technology investment

and direct sales

capacity

•

Self-funding growth

initiatives

Non-GAAP OPEX % of Revenue

(2) Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to non-GAAP reconciliation and our use of non-GAAP information.

(1) 2013E based on Q4’13 high end of company’s outlook (Revenue of $186-191M and non-GAAP EPS of $0.42-0.45).

(3) The 2013E information speaks as of the date hereof and is not subject to update.

Continuing Revenue & Profit Expansion

•

15 straight quarters of YoY revenue and non-GAAP EPS growth

•

Growth driven by organic & accretive M&A

(1) 2013E based on Q4’13 high end of company’s outlook (Revenue of $186-191M and non-GAAP EPS of $0.42-0.45).

(3) The 2013E information speaks as of the date hereof and is not subject to update.

(2) Non-GAAP numbers have been adjusted to exclude certain items. See GAAP to non-GAAP reconciliation and our use of non-GAAP information.

Non-GAAP P&L ($M)

2010

2011

2012

2013E

Revenue

504

592

652

721

YoY %

26%

17%

10%

11%

53.8%

56.2%

54.6%

54.7%

OPEX

235

264

277

298

% of Revenue

47%

45%

43%

41%

% of Revenue

7.1%

11.7%

12.1%

13.4%

EPS

0.59

1.12

1.29

1.54

YoY %

90%

15%

19%

Non-GAAP

LT Model

L-T Growth

Gross

Margin

OPEX

Op Margin

Ind. Inkjet

10% -20%

~ 40%

Software

10%-20%

> 72%

Fiery

GDP+

67% -

68%

Total

10+%

53%-

55%

37%-

41%

14%-

16%

Non-GAAP Long-Term Financial Model

Targeting 14-16% Operating Profit Margin

55-57%

40-44%

12-15%

Prior LT model

The 2013E information speaks as of the date hereof and is not subject to update.

10-15%

66-68%

> 70%

Prior LT model

LT Mix

Revenue$

Mix

GM$

Mix

Industrial Inkjet

> 50%

~40%

Software

> 15%

~20%

Fiery

< 35%

~40%

Total

100%

Prior LT model

< 40%

~45%

Reflecting M&A oppt,

raising long-term Industrial

Inkjet revenue growth target

to 10-20%

Modifying the GM profile to

reflect the scaling of the

Inkjet & Software

businesses

Leveraging the scaling of

the business to reduce

Opex as a % of revenue

Raising EFI long-term

operating profit margin

range to 14-16% of revenue

Raising long-term Inkjet &

Software Revenue & GM

Mix

~10%

Balance Sheet Optimization

Growing Cash from Operations

Key Metrics

Q3'10

Q3'11

Q3'12

Q3'13

Days Sales Outstanding

61.0

57.2

73.4

64.9

Inventory Turns

5.5

5.4

4.4

Working Capital (Days)

61.0

61.8

74.6

56.4

LTM Cash Flow from Operations*

% of LTM Operating Profit

109%

110%

71%

92%

Total Cash and Investments

207

203

193

363

Total Debt

Total Assets

685

720

831

1,154

* Excluding $5.5 million of taxes paid in Q1 2013 related to the sale of our corporate headquarters facility, the net

cash provided by operating activities would be $28.1 million for the three months ended March 31, 2013.

* Last 12 months ending the third calendar month of the quarter indicated

Capital Allocation 3 Year Strategy

Future cash

flow

~$365M

Cash

Balance

M&A Upside to

$1B FY16 Target

Up to $200M –

Share Buyback

$100-150M –

M&A to Reach $1B Revenue

$50-100M –

Ongoing Operations

Safe Harbor for Forward Looking Statements

The information included in this presentation contains 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

presentation that could be deemed forward-looking statements include statements related to the Company’s expected

fourth quarter and fiscal year 2013 operating results, statements regarding the Company’s strategy, plans, expectations

regarding its revenue growth, earnings per share, operating expenses, gross margin, operating margin, market share,

product portfolio, product mix, future opportunities for the Company and its customers, demand for and adoption of

technology and products, expected completion of its share repurchase program and any statements or assumptions

underlying any of the foregoing.

Forward-looking statements are subject to certain risks and uncertainties that could cause the Company’s 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 the Company’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 complete acquisitions or integrate acquired

businesses; the uncertainty regarding the amount and timing of future share repurchases by the Company and the

origin of funds used for such repurchases; the market prices of the Company’s common stock prior to, during and after

the share repurchases; any disruptions in the Company’s operations, the difficulty to retain employees, and additional

expenses that the Company may incur as a result of its relocation from the Foster City campus; the compliance with the

new requirements regarding the “conflict minerals,” if they are found to be used in the Company’s products, and any

other risk factors that may be included from time to time in the Company’s SEC reports.

Readers are cautioned not to place undue reliance on the forward-looking statements included in the information

included in this presentation. The Company undertakes no obligation to update information contained in this

presentation. For further information regarding risks and uncertainties associated with the Company’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 the

Company’s Investor Relations Department by phone at 650-357-3828 or by email at investor.relations@efi.com or the

Company’s Investor Relations website at www.efi.com.

Appendix

Reconciliation of GAAP to Non-GAAP

Notes:

•

This information is current as of October 31, 2013 and is not subject to update.

•

Non-GAAP numbers have been adjusted to exclude certain items.

GAAP to Non-GAAP Reconciliation ($M)

Q112

Q212

Q312

Q412

FY12

Q113

Q213

Q313

Q413

FY13

GAAP

Net Income (Loss)

6.2

7.0

13.4

56.6

26.7

8.4

9.4

16.1

33.9

EPS

0.13

0.15

$0.28

1.19

0.55

0.17

0.20

$0.33

0.70

ADJUSTMENTS

COGS: Stock Based Compensation Expense

0.3

0.2

0.3

0.4

1.2

0.4

0.5

1.3

OPEX: Stock Based Compensation Expense

4.4

4.5

4.6

5.0

18.5

6.2

5.4

5.8

17.4

OPEX: Amortization of Identified

Intangibles

4.2

4.6

5.2

18.6

4.9

4.8

14.6

OPEX: Acquisition-Related Transaction

Costs

0.4

1.0

2.2

0.7

0.1

0.8

OPEX: Litigation Settlement

(0.3)

0.5

0.2

(3.3)

OPEX: Change in FV of Contingent

Consideration

(1.4)

(0.3)

(0.5)

0.4

(0.4)

OPEX: Restructuring and Other

1.1

1.2

2.3

1.3

5.9

1.9

1.2

1.0

4.1

OPEX: Building Sale Related

(0.2)

(0.3)

(0.6)

(1.5)

OI&E: Interest on Building Sale

(0.6)

0.9

0.6

0.5

2.0

Tax Effect of Non-GAAP Adjustments

(2.4)

(2.0)

(12.8)

(48.9)

(66.1)

(6.3)

(3.2)

(6.6)

(16.1)

NON-GAAP

Non-GAAP Net Income (Loss)

14.2

13.3

19.8

41.7

15.8

18.3

18.7

52.8

Non-GAAP EPS

0.30

$0.28

0.42

0.87

0.33

0.38

$0.39

1.09

About our Non-GAAP Net Income and

Adjustments

Notes:

•

This information is current as of October 31, 2013 and is not subject to update.

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, litigation settlement charges and credits, corporate headquarters relocation

expenses, and imputed interest expense and depreciation, net of accrued sublease income and capitalized interest, related to the sale of our corporate headquarters

facility and related land.

These excluded items are described below:

•

Recurring charges and gains, including:

o

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.

o

Stock-based compensation expense recognized in accordance with ASC 718, Stock-based Compensation.

•

Non-recurring charges and gains, including:

o

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.

o

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 each 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.

About our Non-GAAP Net Income and

Adjustments (continued)

Notes:

•

This information is current as of October 31, 2013 and is not subject to update.

o

Imputed net expenses related to sale of building and land. On November 1, 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 four acres 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 until November 1, 2013, 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 $182.9 million, including imputed interest costs. Imputed interest expense and depreciation, net of accrued sublease

income, of $1.5 million has been accrued at September 30, 2013, related to the deferred property transaction, partially offset by capitalized

interest of $0.9 million related to the Fremont facility.

o

Expenses incurred during the period related to the upcoming relocation of our corporate headquarters facility.

o

In conjunction with our acquisition of Cretaprint, which closed on January 10, 2012, we assumed a contingent liability related to the alleged

infringement of certain patents owned by Jose Vicente Tomas Claramonte, the President of Kerajet. Because the former owners of Cretaprint

agreed to indemnify EFI against any potential liability in the event that Mr. Claramonte were to prevail in his action against Cretaprint, we

accrued a contingent liability based on a reasonable estimate of the legal obligation that was probable as of the acquisition date and we accrued

a contingent asset based on the portion of any liability for which the former Cretaprint owners would indemnify EFI. The net obligation accrued in

the opening balance sheet on the acquisition date was EU 2.5 million (or approximately $3.3 million). The Spanish Court of Appeal reached a

final determination on July 15, 2013, which resulted in EFI having no liability related to any potential infringement of the Claramonte patent.

Because this matter is no longer subject to appeal, we have reversed this liability by recognizing a credit against general and administrative

expense during the three months ended September 30, 2013.

o

During the third quarter of 2012, we incurred $0.5 million in settlement of a dispute with the lessor of a facility in the U.K., which was partially

offset by the receipt, during the second quarter of 2012, of 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 stock option granting practices.

•

Tax effect of non-GAAP adjustments

o

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. The expected annual non-GAAP income tax rate for the three and nine months ended September 30,

2012, assumed the achievement of the operational efficiencies related to our foreign operations that were implemented during the fourth quarter

of 2012.

o

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

nine months ended September 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 January 2, 2013, for the nine months ended September 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.

•

We excluded the recognition of previously unrecognized tax benefits from our non-GAAP net income of $3.2 million for the three and

nine months ended September 30, 2013 and $9.7 million for the three and nine months ended September 30, 2012 to facilitate

comparability of our operating performance between the periods. These tax benefits primarily resulted from the release of previously

unrecognized tax benefits resulting from the expiration of U.S. federal statutes of limitations.

•

Interest expense accrued on prior year tax reserves of $0.1 and $0.3 million for the three and nine months ended September 30, 2013

and 2012, respectively, as well as other tax benefits of $0.3 million for the nine months ended September 30, 2013.

About our Non-GAAP Net Income and

Adjustments (continued)

Usefulness of Non-GAAP Financial Information to Investors

Notes:

•

This information is current as of October 31, 2013 and is not subject to update.

Certain variables used in calculating non-GAAP net income and non-GAAP earnings per diluted share cannot be accurately estimated on a forward-looking basis.

These variables include [acquisition-related transaction expenses and the costs to integrate such acquisitions into our business and changes in the fair value of

contingent consideration. Because these items will not be known to us until a future period, we are unable to provide information about the most directly

comparable GAAP financial measures. The impact of these excluded items will cause the non-GAAP financial measures to differ materially from the comparable

GAAP financial measures. These non-GAAP financial measures have certain shortcomings, including but not limited to the risk and uncertainties outlined in the

Safe Harbor for Forward Looking Statements section of this presentation.

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.

ELECTRONICS FOR IMAGING INC - FORM 8-K - EX-99.2 - November 8, 2013

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