EFI to divest label printing interests

By David PittmanRead later

EFI is to spin out the operational part of its inkjet label printer line as it seeks to focus on higher growth opportunities

EFI is to spin out the operational part of its inkjet label printer line as it seeks to focus on higher growth opportunities.

The company reported third quarter results of 248.4 million USD in revenue, up one percent compared to the third quarter of last year. GAAP net income was 1.9 million USD, down 89 percent compared to 17.7 million USD for the same period in 2016. Non-GAAP net income was 22.7 million USD, down 18 percent compared to non-GAAP net income of 27.6 million USD for the same period in 2016. Cash flow from operating activities was 3.4 million USD, down 86 percent compared to 24 million USD during the same period in 2016.

For the nine months ended September 30, 2017, EFI reported revenue of 724.1 million USD, down 0.2 percent year-over-year compared to 725.4 million USD for the same period in 2016. GAAP net income was 9.4 million USD compared to 25 million USD year-on-year. Non-GAAP net income was 74 million USD, down from 80.5 million USD. Cash flow from operating activities for the nine months ended September 30, 2017 was 42.4 million USD, down 24 percent compared to 55.8 million USD during the same period in 2016.

EFI CEO Guy Gecht described these result as ‘disappointing’, and said: ‘To reaccelerate growth, we are reallocating budget and talent toward our largest opportunities, in textile and packaging, along with making organizational changes and adding senior positions to improve focus and execution.’

This will see EFI move away from the label market and equipment sales as the company makes a strategic move to focus on higher growth opportunities. In an earnings call, available as a transcription via Seeking Alpha, Gecht stated that, in comparison to some other inkjet markets EFI is targeting such as textile and packaging, the label market is smaller and a more competitive, crowded landscape as it is ‘the easiest technical application for inkjet’.

‘We expect to spin out the operational part of our jet label printer line but we are keeping the IP and ink at EFI,’ commented Gecht.

‘In the last few weeks of the quarter, we were in an intensive discussion with one of the firms that contacted us in the past with an interest in taking over the product line. With a strategic shift away from labels, our team slowed the pursuit of new deals. So, we ended up with no label printer sales compared to 4 million USD in the third quarter of last year.’

Digital corrugated printing is one market where EFI sees opportunities, with its Nozomi single-pass LED inkjet press for high-speed corrugated board production gaining traction.

Gecht noted that the company’s industrial textile business achieved double-digit growth during the third quarter and it is making ‘significant progress’ in the rollout of Nozomi.

The first machine, Gecht said, is set to produce one million sqm in October, equivalent to 247 acres of output in one month from one machine alone.

‘We have customers for 2017 units who wish to remain anonymous for now,’ continued Gecht. ‘All we can say at this point that one unit will be out first in Asia-Pacific and one will be the second installation in the US at an integrated corrugated producer. So, the four units we planned to recognize in the fourth quarter are all identified.

‘As planned, we are on track to manufacture two units per month exiting the year and we’re confident we can make 24 units next year. Our working assumption is that we will recognize 60 million USD in printers and ink revenue from these units during 2018 with the balance of the revenue recognized in 2018.

‘We’re particularly gratified to finally see the results of our years of investment in this great new opportunity. We have the foresight few years ago to begin investing in the corrugated packaging segment because we were confident it will be the next and potentially the most significant opportunity for industrial inkjet and it’s great to hear our customers validate that strategy and tell us we made the right choice and executed on this path.’