EFI Announces Preliminary Results for Fourth-Quarter 2018

Yesterday, Electronics For Imaging (EFI) announced preliminary financial results its fourth quarter, the three months that ended on December 31, 2018:

  • Revenues are expected to be between $255 million to $257 million,
  • GAAP (Generally Accepted Accounting Principles) earnings per share for the period are expected to be $(0.20)-$0.00, while non-GAAP earnings per share are expected to be $0.45-$0.47, and
  • Cash flow from operating activities is expected to be $30 million to $33 million for the quarter or approximately 93-98 percent of non-GAAP net income for the full year.

EFI  indicated that its results were affected by weakening economic conditions experienced across its direct businesses, with customers delaying spending on capital equipment and software, which materially reduced EFI’s close rates at the end of the fourth quarter.

EFI CEO Bill Muir commented: “Late in the quarter we began seeing a substantial shift in buying behavior versus the prior year in many of the industries we serve. This was felt most significantly in the Americas. Customers became increasingly concerned about economic trends and many decided to defer capital expenditures until they had greater clarity on the economic environment. Though we entered the quarter with a robust pipeline and our Inkjet sales progress through mid-December was tracking ahead of the prior year, the last few weeks of the quarter were exceptionally weak.”

EFI reported that the majority of the revenue shortfall was in its Industrial Inkjet business, which declined approximately 5-6 percent year-over-year. Display Graphics and Building Materials, which were expected to be weak in the quarter, were down more significantly than anticipated. As expected, there was strong demand for EFI’s new mid-range Display Graphics products, which sold out, and again weakness at the high end of the portfolio. However, there was greater than anticipated softness around more mature hybrid products. The competitive advantage offered by the newest products outweighed some economic concerns, but not enough to make up the shortfall from the mature hybrid products.

In Building Materials, the shortfall was primarily in China, along with other developing economies, with deals pushed out due to the weak construction industry. Textile was also below plan, with weakness in converting the pipeline during December. EFI Nozomi revenue was approximately $65 million for the full year, with some customers delaying decisions until 2019, with concerns about capex spending cited as a significant reason. EFI continues to expect that Nozomi will achieve revenues of $120 million for its complete fiscal 2019 year.

Productivity Software declined approximately 6-7 percent year-over-year, due to “pushed deals” and a significantly lower fourth-quarter close rate. The Americas were the main source of the weakness for Software, with currency also a factor for delays in Latin America deal closings.

EFI revenues derives from sales of its Fiery controllers are expected to be largely in line with guidance, at approximately $60 million.

EFI believes that the majority of its un-closed deals across all of the business units “remain in the pipeline” and were not lost to competition.

EFI CEO Muir commented: “While I am very disappointed in the quarter, I remain confident in our market positioning and new product portfolio. One example is our BOLT printer, which was very well received by the textile industry when it was introduced in October. I continue to be encouraged by the large number of packaging companies actively evaluating Nozomi, as they look to leverage the new opportunities that digital technology brings to their business, in what we expect will be a $9 billionmarket for equipment and ink.”

During the quarter, EFI also completed steps to enhance its capital structure, including issuing a $150 million convertible bond and, on January 2, 2019, closed on a $150 million revolving credit facility.

Muir continued, “As I learn more about our industry and spend time with customers, I see so many opportunities, but I also see gaps in our execution. The industry is consolidating, and our customer base increasingly comprises larger and more complex organizations. In my first few months with EFI, it has become clear that our go-to-market approach has not sufficiently evolved to meet the growing needs and expectations of many of our customers. Additionally, the results of the quarter reinforce the need for comprehensive strength across our product portfolio; gaps such as those we are currently experiencing in the high-end of Display Graphics only exacerbate revenue headwinds.

“I am firmly committed to addressing the robustness of our portfolio, augmenting our go-to- market approach, and improving the customer experience. Initiatives to address these areas have already kicked off, and I look forward to providing detail around our plans at our Investor Day in May. I am confident we will see substantial progress from our efforts late in the year, allowing us to deliver the results our customers, shareholders and employees deserve,” concluded Muir.

Preliminary and Fourth Quarter Conference Calls

EFI will host a conference call to discuss these preliminary fourth quarter results on January 15, 2019 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).

It will also host its quarterly conference call to discuss fourth quarter and 2018 results on January 30, 2019 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).

The conference calls will be webcast, and investors will be able to access the webcast at the Investor Relations, Events & Presentations portion of EFI’s web site at http://ir.efi.com/.

A replay of the webcast will be available online at the website following the conclusion of the conference call.

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