OREANDA-NEWS. Electronics For Imaging, Inc. (Nasdaq:EFII), a world leader in customer-focused digital printing innovation, today announced its results for the first quarter of 2016. 

For the quarter ended March 31, 2016, the Company reported record first quarter revenue of $234.1 million, up 20% compared to first quarter 2015 revenue of $194.6 million.  Non-GAAP operating income was $33.5 million compared to $28.3 million for the same period in 2015.  Non-GAAP net income was $26.3 million or $0.55 per diluted share, which includes an unfavorable balance sheet currency translation impact of $0.01 per share, compared to non-GAAP net income of $21.4 million or $0.45 per diluted share for the same period in 2015.  GAAP operating income was $6.7 million compared to $11.1 million for the same period in 2015.  GAAP net income was $1.9 million or $0.04 per diluted share, compared to $5.2 million or $0.11 per diluted share for the same period in 2015. 

"Our team's execution drove another quarter of solid performance across the EFI portfolio, led by good growth in our Industrial Inkjet segment," said Guy Gecht, CEO of EFI.  "At the upcoming drupa tradeshow we expect to introduce entirely new platforms in every segment of our business, including an expansion into the vast packaging space.  We expect products based on these powerful and versatile new platforms to fuel our growth in the coming years."

About EFI       

EFI™ is a global technology company, based in Silicon Valley, and is leading the worldwide transformation from analog to digital imaging. We are passionate about fueling customer success with products that increase competitiveness and boost productivity. To do that, we develop breakthrough technologies for the manufacturing of signage, packaging, textiles, ceramic tiles, and personalized documents, with a wide range of printers, inks, digital front ends, and a comprehensive business and production workflow suite that transforms and streamlines the entire production process. (

           
Electronics For Imaging, Inc.   
Condensed Consolidated Statements of Operations   
(in thousands, except per share data)   
(unaudited)   
           
    Three Months Ended  
    March 31,  
           
      2016       2015    
           
Revenue   $   234,133     $   194,554    
Cost of revenue       115,761         89,114    
Gross profit       118,372         105,440    
Operating expenses:          
Research and development     37,178       33,711    
Sales and marketing     41,574       37,170    
General and administrative     20,980       17,650    
Amortization of identified intangibles       9,229         4,804    
Restructuring and other       2,715         1,029    
Total operating expenses       111,676         94,364    
Income from operations       6,696         11,076    
Interest expense       (4,358 )       (4,099 )  
Interest income and other expense, net       (221 )       (659 )  
Income before income taxes       2,117         6,318    
Provision for income taxes       (263 )       (1,081 )  
Net income   $   1,854     $   5,237    
           
Diluted EPS calculation          
Net income   $   1,854     $   5,237    
Net income per diluted common share   $   0.04     $   0.11    
Shares used in diluted per share calculation        47,923         47,856    
           
             
Electronics For Imaging, Inc.   
Reconciliation of GAAP Net Income to Non-GAAP Net Income   
(in thousands, except per share data)   
(unaudited)   
             
  Three Months Ended  
  March 31,  
          Ex-Currency  
    2016       2015       2016    
             
Net income $   1,854     $   5,237     $   1,854    
Amortization of identified intangibles     9,229         4,804         9,229    
Ex-currency adjustment                 (483 )  
Stock based compensation — Cost of revenue     1,035         937         1,035    
Stock based compensation — Research and development     4,740         3,169         4,740    
Stock based compensation — Sales and marketing     2,879         2,710         2,879    
Stock based compensation — General and administrative     5,637         3,429         5,637    
Restructuring and other     2,715         1,029         2,715    
General and administrative:            
Acquisition-related transaction costs     478         661         478    
Changes in fair value of contingent consideration     (205 )       (15 )       (205 )  
Litigation settlements   320         540         320    
Interest income and other expense, net            
Non-cash interest expense related to our convertible notes   3,004         2,878         3,004    
Foreign exchange fluctuation related to contingent consideration     507               507    
Balance sheet currency remeasurement impact               702    
Tax effect of non-GAAP adjustments     (5,904 )       (3,946 )       (5,945 )  
Non-GAAP net income $   26,289     $   21,433     $   26,467    
             
Non-GAAP net income per diluted common share $   0.55     $   0.45     $   0.55    
Shares used in diluted per share calculation     47,923         47,856         47,923    
                         
         
Electronics For Imaging, Inc.   
Reconciliation of GAAP Income from Operations to Non-GAAP Income from Operations  
(in thousands, except per share data)   
(unaudited)   
         
  Three Months Ended  
  March 31,  
         
    2016       2015    
         
Income from operations $   6,696     $   11,076    
                 
Amortization of identified intangibles   9,229       4,804    
Stock based compensation — Cost of revenue     1,035         937    
Stock based compensation — Research and development     4,740         3,169    
Stock based compensation — Sales and marketing     2,879         2,710    
Stock based compensation — General and administrative     5,637         3,429    
Restructuring and other   2,715         1,029    
General and administrative:        
Acquisition-related transaction costs     478         661    
Changes in fair value of contingent consideration     (205 )       (15 )  
Litigation settlements     320         540    
                 
Non-GAAP income from operations $   33,524     $   28,340    
         
         
Electronics For Imaging, Inc.   
Condensed Consolidated Balance Sheets   
(in thousands)   
(unaudited)   
         
  March 31,   December 31,  
    2016       2015    
         
Assets        
Cash and cash equivalents $   190,156     $   164,091    
Short-term investments     281,471         333,276    
Accounts receivable, net     205,447         193,121    
Inventories     121,666         106,378    
Other current assets     36,375         30,148    
Total current assets     835,115         827,014    
Property and equipment, net     101,079         97,779    
Goodwill     344,369         338,793    
Intangible assets, net     133,730         135,552    
Other assets     50,738         51,013    
Total assets $   1,465,031     $   1,450,151    
         
Liabilities & Stockholders' equity        
Accounts payable $   110,775     $   113,541    
Accrued and other liabilities     126,199         123,192    
Income taxes payable and deferred tax liabilities     3,592         3,594    
Total current liabilities     240,566         240,327    
Convertible senior notes, net     294,065         290,734    
Imputed financing obligation related to build-to-suit lease     13,738         13,480    
Noncurrent contingent and other liabilities     55,374         51,101    
Deferred tax liabilities     20,240         19,003    
Noncurrent income taxes payable     11,650         11,312    
Total liabilities     635,633         625,957    
Total stockholders' equity     829,398         824,194    
Total liabilities and stockholders' equity $   1,465,031     $   1,450,151    
         

Debt Issuance Costs. ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt, which is consistent with the presentation of debt discounts and premiums. Retrospective application is required, which resulted in the reclassification of $5.8 million of debt issuance costs from other current assets and other assets to be a direct reduction of convertible senior notes, net, in our Condensed Consolidated Balance Sheet as of December 31, 2015.

           
Electronics For Imaging, Inc.  
Condensed Consolidated Statements of Cash Flows  
(in thousands)  
(unaudited)  
             
      Three Months Ended  
      March 31,  
             
        2016       2015    
Cash flows from operating activities:          
Net income    $   1,854     $   5,237    
Adjustments to reconcile net income to net cash provided by operating activities:          
      Depreciation and amortization     13,008       7,803    
  Deferred taxes     (3,894 )     (5,066 )  
  Tax benefit (expense) from employee stock plans     43       (155 )  
  Excess tax benefit from stock-based compensation     (164 )     (127 )  
  Stock-based compensation, net of cash settlements       11,538       8,892    
  Provision for inventory obsolescence       2,272       1,450    
  Provision for (releases of) bad debts and sales-related allowances       4,140       (1,080 )  
  Non-cash accretion of interest expense on convertible notes and imputed financing obligation        3,273       3,097    
  Other non-cash charges and gains       2,878       (306 )  
Changes in operating assets and liabilities, net of effect of acquired businesses       (26,147 )     (12,662 )  
Net cash provided by operating activities       8,801         7,083    
             
Cash flows from investing activities:          
  Purchases of short-term investments     (58,323 )     (162,363 )  
  Proceeds from sales and maturities of short-term investments     110,417       70,123    
  Purchases, net of proceeds from sales, of property and equipment     (5,213 )     (4,915 )  
  Businesses purchased, net of cash acquired     (7,982 )     (10 )  
Net cash provided by (used for) investing activities       38,899         (97,165 )  
             
Cash flows from financing activities:          
  Proceeds from issuance of common stock     4,909       4,864    
  Purchases of treasury stock and net share settlements     (23,092 )     (13,539 )  
  Repayment of debt assumed through business acquisitions and debt issuance costs   (4,492 )     (79 )  
  Contingent consideration payments related to businesses acquired     (1,443 )     (2,032 )  
  Excess tax benefit from stock-based compensation       164         127    
Net cash used for financing activities       (23,954 )       (10,659 )  
             
  Effect of foreign exchange rate changes on cash and cash equivalents       2,319         (1,652 )  
  Decrease in cash and cash equivalents       26,065         (102,393 )  
  Cash and cash equivalents at beginning of period       164,091         298,133    
Cash and cash equivalents at end of period   $   190,156     $   195,740    
             
           
Electronics For Imaging, Inc.   
Revenue by Operating Segment and Geographic Area  
(in thousands)   
(unaudited)   
           
    Three Months Ended  
    March 31,  
           
Revenue by Operating Segment     2016       2015    
Industrial Inkjet   $   125,798     $   87,607    
Productivity Software       32,540         31,107    
Fiery       75,795         75,840    
Total   $   234,133     $   194,554    
           
Revenue by Geographic Area          
Americas   $   120,266     $   107,714    
EMEA       83,583         60,128    
APAC       30,284         26,712    
Total   $   234,133     $   194,554    
           
Revenue Ex-Currency Adjustment     $   4,185          
Total   $   238,318     $   194,554    
           

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 operating income, non-GAAP net income, and non-GAAP earnings per diluted share provides important supplemental information regarding non-cash 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 operating income, 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 operating income, 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 operating income, non-GAAP net income, and non-GAAP earnings per diluted share by adjusting GAAP operating income, 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.

Ex-Currency.  To better understand trends in our business, we believe it is helpful to adjust our statement of operations to exclude the impact of year-over-year changes in the translation of foreign currencies into U.S. dollars. This is a non-GAAP measure that is calculated by adjusting revenue, non-GAAP operating income, and non-GAAP net income by using historical exchange rates in effect during the comparable prior year period and removing the balance sheet currency remeasurement impact from interest income and other expense, net, including removal of any hedging gains and losses. We refer to these adjustments as "ex-currency." Management believes the ex-currency measures provide investors with an additional perspective on year-over-year financial trends and enables investors to analyze our operating results in the same way management does. The year-over-year currency impact can be determined as the difference between year-over-year actual growth rates and year-over-year ex-currency growth rates.