EFI to Spin Off Inkjet Label Line, Eyes Growth in Corrugated

EFI revealed its third quarter results last week, along with some insight into its strategy moving forward in the label and packaging industries.

Per a press release issued by EFI on Thursday, Oct. 26:

For the quarter ended September 30, 2017, the Company reported record third quarter revenue of $248.4 million, up 1% compared to third quarter 2016 revenue of $245.6 million. GAAP net income was $1.9 million, down 89% compared to $17.7 million for the same period in 2016 or $0.04 per diluted share, down 89% compared to $0.37 per diluted share for the same period in 2016. Non-GAAP net income was $22.7 million, down 18% compared to non-GAAP net income of $27.6 million for the same period in 2016 or $0.48 per diluted share, down 17% compared to $0.58 per diluted share for the same period in 2016. Cash flow from operating activities was $3.4 million, down 86% compared to $24.0 million during the same period in 2016.

For the nine months ended September 30, 2017, the Company reported revenue of $724.1 million, down 0.2% year-over-year compared to $725.4 million for the same period in 2016. GAAP net income was $9.4 million or $0.20 per diluted share, compared to $25.0 million or $0.52 per diluted share for the same period in 2016. Non-GAAP net income was $74.0 million or $1.57 per diluted share, compared to non-GAAP net income of $80.5 million or $1.68 per diluted share for the same period in 2016. Cash flow from operating activities for the nine months ended September 30, 2017, was $42.4 million, down 24% compared to $55.8 million during the same period in 2016.

In the release, EFI CEO Guy Gecht said he was disappointed with these results and is reassessing the company’s resources with a focus on where it sees opportunity — particularly in textiles and packaging.

According to a transcript from Seeking Alpha of a conference call hosted by EFI to discuss the results, Gecht explained that the company expects to spin off its inkjet label printer line, while maintaining the intellectual property and ink assets at the company.

“In comparison to some other inkjet markets we are targeting such as textile and packaging, the can for label is much smaller and a competitive landscape is much more crowded, as label printing is the easiest technical application in inkjet,” Gecht said in the transcript.

He went on to state that EFI has entered the late stages of a deal that will license the manufacture, sales and support of the inkjet label line to others in the industry.

Though Gecht made the announcement that EFI would be shifting away from the label segment, he did express positivity and excitement surrounding the company’s single-pass, direct to board, digital corrugated press — the Nozomi C18000. Gecht stated that Hinojosa, a corrugated converter in Spain, is seeing success with the platform and the first U.S. installation of the press is on track at Complete Design and Packaging in Concord, N.C. Gecht also stated an installation is scheduled in the Asia-Pacific region, along with a second in the U.S. However, those customers wished to remain anonymous for the time being.

“We’re particularly gratified to finally see the results of our years of investment in this great new opportunity,” Gecht said in the transcript. “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.”