Q1 2018 Earnings Call

At this time I would like to welcome everyone to the electronics for imaging first quarter 2018 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question press.

Punky, Thank you Joanne.

Joanne Horne Investor Relations of EFI, you May begin your conference.

Thank you, Sean Tal and welcome everyone to <unk> discussion of its first quarter 2018 operating results.

So I guess my Chief Executive Officer, Mark <unk>, Chief Financial Officer will lead the discussion following management's prepared remarks, we'll be happy to take your question first I'll review the Safe Harbor statement during.

During the call today, we will be making forward looking statements, which are statements other than statements of historical facts and statements in the future tense, including but not limited to statements regarding our strategy plans expectations regarding revenue growth introduction of new products product portfolio productivity.

Opportunities for our customers demand for our products as well as market trends product innovation, new market opportunities and acquisition strategy as well as estimates and our projections of revenue operating profit growth EPS gross margin cash flow market share operating expenses tax rate.

Working capital and any statements or assumptions underlying any of the foregoing.

Forward looking statements are subject to risks and uncertainties that could cause our results to differ materially because materially adverse effects on our results. Please refer to the discussion of risk factors in our SEC filings we.

We do not undertake to update in light of any new information or future results.

Payments, we make today are made as of the date of this call and are subject to revision until the company will have on file its Form 10-Q for the period ended March 31 2018.

In addition reference will be made to non-GAAP financial measures information regarding a reconciliation of non-GAAP to GAAP measures can be found in the press release that was issued this afternoon on our website in the IR section at Www Dot EFI Dot com.

Please note that slides corresponding to the information reviewed on today's conference call are also available on the Investor Relations website, and with that I'll turn the call over to Guy.

Thank you Joanna and thank you for joining us to discuss our first quarter 2019 results EFI as part of the strong reporting good results Ababa expectations reinforcing our strategy to be the lead enabler in the digital transformation of industries well.

Images really matter such as packaging fashion display graphics and building materials, we are far from realizing the full potential of the strategy, but Q1 was a good step toward that goal.

<unk> business grew 17% driven by record first quarter revenue for both inkjet and productivity software. This included 34% recurring revenue software in particular performed very well posting 25% Gulf inkjet revenues increased 15% and we met our objective to ship for Nozomi Nozomi units from them.

Market segment perspective, we're experiencing solid demand for both our textile and packaging portfolios. We're seeing this momentum continue into Q2, leading to a solid sequential in the overdue outlook. Despite fiery continue to report results significantly below <unk> levels.

Taking a closer look at the quarter I don't usually start by highlighting productivity software, but we are very in call. It 25% growth that the team delivered this quarter.

We're driven by.

Primarily by organic growth in almost all of our product lines and geographies and we also saw some deals close that has been delayed from previous periods.

As promised we also strengthened our management team of this segment recording system General managers to focus on software for packaging enterprise clean contextual. We believe we're seeing the early returns from the increased focus on those specific product lines, which enable our targeted industries to automate and transform the business workflow.

The results for our direct business also benefited from a strong in this quarter in display graphics, we continue to see strong demand for the relatively new Oswald platform introduced last deal.

As expected display graphics hybrid printer sales were slower in anticipation of the new platform released which will be introduced in a couple of weeks at the Facebook Rachel.

Multiple better units are expected to be installed this quarter with general availability to begin in the second half of deal.

We are beginning even more we're bringing even more innovation to our textbook portfolio as we just introduced <unk>, which is our new top of the line system and our first high speed fabric printer offering 12 calls we are also on plan to do.

The one Pos system for textile let us assume this one fast textile product while we're innovative for textile is just the next key won sprinter introduction on our long term roadmap. In fact, we expect to introduce a number of one plus high volume industrial printers, addressing EFI target markets over the coming years.

This system will be designed to leverage <unk> unique technology and expertise in controlling very large industries to digital based manufacturing.

Speaking of one system, we're very pleased with the progress of Nozomi, including meeting our commitment to shape for units in the March quarter.

Through the end of Q1, we have transacted and shipped nine units, including a sale through alliance, which we received approval to announce after quarter end.

In the second quarter were anticipated to anticipate shipping five units with seven planned for Q3, we are increasingly confident in our ability to generate $60 million in revenues for nozomi for the full year.

Our confidence in our revenue target is linked to the increasing interest we are seeing from corrugated suppliers around the globe. We have received positive feedback from most of the large players in corrugated packaging with many of them, indicating they plan to start testing digital production initially in one or two factories and then expand to other location.