EFI CEO Guy Gecht clarifies EFI's financial situation while looking to make print great again at Print 17 press conference.
In our previous article on EFI we reported that the company had received a notification letter from Nasdaq stating that EFI is not in compliance with Nasdaq listing rule 5250(c)(1), which requires timely filing of reports with the U.S. Securities and Exchange Commission. EFI was put on notice that they had 60 days to restate their earnings. During a previously scheduled press conference at Print 17, EFI CEO Guy Gecht seized the opportunity to update the press and analysts in attendance about this issue along with the company's efforts to resolve it.
The message was clear, EFI is healthy and thriving, and after a comprehensive analysis of its finances and processes, Gecht noted that the company has learned from the situation and is working to better its internal processes to prevent a similar situation occurring again.
The issue, according to Gecht, was that inventory that EFI was holding for clients (which had already been paid for) was incorrectly stated as having been installed. We have seen this type of problem before, and the rules are clear.
In a published statement Gecht stated:
“While we sincerely regret the delay in announcing our second quarter results and the impact on our shareholders, we are pleased to report that the EFI team delivered record Q2 revenue with solid cash generation. We expect the momentum to continue into the second half of the year, with anticipated record Q3 revenue, while making additional progress on our pipeline of new industry leading products, including planned commercialization of the Nozomi.”
For the six months ending in June 2017 the company reported revenue of $475.7 million down 1% year-over-year for the same period in 2016. Cash flow from operating activities for the six months ending on June 30, 2017, was $39 million, up 22% compared to $31.9 million during the same period in 2016.
Making Print Great Again
Gecht has a humorous delivery style and enjoys the limelight on stage. After providing a detailed explanation of how the reporting issue occurred and how the company has rectified it, he spoke about EFI’s commitment to making print great again by repealing and replacing analog using a three-step approach. The approach is simple—EFI will work to redefine print, it will encourage vendors to facilitate transformation, and offer toolkits for current businesses to help them participate in new technology.
Gecht used projected industry revenues to emphasize his point.
“Inkjet digital printing opportunity for vendors is expected to reach $20 billion by 2020 and $56 billion over time,” he said.
And in a plug for EFI’s new Nozumi product, he added that packaging—corrugated in particular, is an area of opportunity for printers. When we first saw the Nozomi product at Drupa 2016 it was clear that EFI had carved out a new direction for the company.
We have long admired the manner in which Guy Gecht has set about converting EFI from a software only organization into a full-service software-hardware selling organization. The acquisition of Vuetek, Jetrion, CretaPrint, Regianni and Matan have been well integrated into the company. The performance of the sales organization led by Senior Vice President Worldwide Sales Frank Mallozzi has been excellent. Hardware revenue equals that of software, and in our opinion, will exceed it when the Nozomi sales really start to kick in.
We believe the selling of the Vuetek line through Konica Minolta and Ricoh was a smart move by Gecht. In our opinion EFI should sell only through private label partners in North American and sell direct internationally. It would be the smartest thing they could do. In addition, the building of a support structure led by management that provides more depth within the organization would be more than prudent.
If we may offer some constructive criticism, Gecht seems to have a blind spot in that he has yet to recognize the support structure required of a global hardware provider on the scale of EFI. The company is under staffed and has been able to overcome this limitation because of the quality of the people who often do the work of three. Should they lose any one of the top three people (after Guy), it would be impossible to replace them with a single hire.
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