Electronics for Imaging's CEO Presents at Citi 2013 Global Technology Conference - Transcript

Sep. 3.13 | About: Electronics for (EFII)

Electronics for Imaging, Inc. (NASDAQ:EFII)

Citi 2013 Global Technology Conference

September 3, 2013 12:50 pm ET

Executives

Guy Gecht - CEO

Marc Olin - Interim CFO

Analyst

Unidentified Analyst

[Call starts abruptly] everybody. Day one of the Citi Tech Conference. In this room we have management team from Electronics For Imaging. To my right is the CEO, Guy Gecht, and to his right is the Interim CFO, Marc Olin. And we have a -- this is a fireside chat format. We have a few questions and we’ll be opening it up to investors as well. So, let’s just start with Guy and Marc, if you may. The macro environment something we’ve been asking all our tech companies here. We’re in the third quarter, how do you see the macro environment in general for the printing segment or in generally as well in the IT segments, IT spending segments both on a -- maybe you can talk about it from a regional perspective as well as and how does that kind of visibility compared to where we were like say a quarter ago and perhaps even a year ago?

Guy Gecht

Sure. So we’re not an expert for IT or for the printing industry at all. Our real focus is id you look at our biggest segment in industrial printing; we see a lot more investment and excitement around that. If you look at our ink volume, it was up 26% last quarter show you that our customers are gaining a lot more business. And the drivers are before any macro is, number one, the target applications like out of format advertisement, signage or tiles printing and things like that are actually growing as a sizeable industry. And then inside of that the transformation from analog printing, digital printing is growing. And inside of that in many areas we're gaining shares; those three factor is helping us to grow.

But in general, what we’re hearing from customers is in the U.S. last year, this year there is a lot of confidence that those application will grow, people willing to make investments, capital mood is pretty good, the business is steady, digital printing is growing so people that made the shift very happy. In Europe, last year the business wasn’t that been focus from those but the panic level was too high; people really delay any decision was tough here not just for us but all of our (inaudible). The last two quarters we saw a rebound in Europe, we see that things are getting better, and the most important our customers don’t think it will get looked. So, when you don’t think things will get worse you make the right decision for your business to invest and to go with the growth reason, that’s what EFI technology allow them to go.

So on that Asia was strong before. We didn’t see any slowness in the China, China became our second largest market in sales, very bullish on our opportunity in China especially for the industrial inkjet. And then, in Latin America we saw some softness, software seemed to grow very nicely based on we bought more company a year ago it’s really helping us to grow the base despite the huge decline in the currency; we got impacts of that but still very good growth, maybe not as bullish on the future as it was year ago, but although we can't complain.

Unidentified Analyst

Okay. Can you talk to us about the secular shift about from analog to digital? Can you help investors kind of figure out, it’s been going on for a while we’ve heard several of your competitors, larger competitors speak about it. Where are we in that? How much has already transitioned, what is left to be transitioned and what’s kind of -- what should investors expect as you mature in that technology?

Guy Gecht

Yeah. So, clearly depends on the application. There's factors that forces analog to digital printing. One is from the supply side the technology, the technology at the point where it makes us economically to print a lot more job digitally and can you catch up with the quality and speed that the analog is helping in. And the second thing is from the end demand, marketers that are on where they’re looking to do more and more targeted printing, people want to get rid of inventory, they want to manufacture when they need things. And so, we’re seeing more of that of the focused on personalization and efficiency in manufacturing.

In our target applications, so if I look at signage and this better graphic, it’s about mid 30% of digital and glowing. And the overall market as I mentioned before is growing, consumer companies love to be in front of you when you go for the mall, when you travel, when you drive. And so, they’re investing more and more in signage and also the coated things that (inaudible) because it’s tough to get your attention on TV because people fast forward commercial or watch on the Internet.

Most people I know don’t really click on the right side of the search and so it’s tough to get your attention on the Internet and it’s tough to get your attention from newspaper. So really the out-of-home advertisement is a great way to get your attention. So we think that going so digital is about 30%, hopefully -- so it hopefully will double in the next three to five years and we will grow our share in the overall market growth.

In the other target application for us the tiles printing, it’s about 25% penetrated digital. So, there is still lot more room to grow and we’re still not providing ink for the devices that from our perspective even without further penetration we can continue to grow thereby just in producing ink which is part of our plan. As far as the overall production printing, commercial printing the (inaudible) analog from digital, still it’s a single digital, single digital the pages of the digital device is growing, expected to double in the next 10 years. I think the overall market I read in few places that declining 2% pages of view those but again digital can double next 10 years and probably double again. And so be far so this is a market we have less exposure to because really what’s driving we exposed to, most of the exposure is from the industrial but still digital looks pretty good.

Unidentified Analyst

Okay. And sort of as you look at your own company’s transition in towards targeted applications, signage is obviously one of the big ones and then the ceramic tile printing is the other one. What are some of the other areas that you’re very interested in expanding into?

Guy Gecht

Yeah. So, in the signage application, we’re still early on in transformation if I can go a lot more but part of our growth strategy is to expand the application like we got into thought. And so if you look around, there is a lot of things that are using images, we don’t think about it as printing necessarily but those are actually beautiful carpet here in the room that somebody paint a image on that so that’s a huge application. Textile in general it’s probably the largest market out there that all the time we’ll move from -- all the time it depends today it’s been on the analog method to being done on demand, customize. If the gap will need to do something that it’s customized for them they can do it down the road with inkjet technology. So that is another big application, wood printing we can see around these and other big application depending on glass. There is a lot more things around us that has great images that we can expand what we do in industrial the inkjet and go after.

Unidentified Analyst

Okay, good. Can you talk to us a little bit on the -- we talked about revenue growth, can you talk to us little bit on the margin expansion then? What are opportunities there to expand margins for your company, what are the competitive dynamics like we had Xerox and (inaudible) earlier, I know you guys don’t directly compete with them, you partner with Xerox --

Guy Gecht

We’re not partner with Xerox.

Unidentified Analyst

Yeah. But they talked a lot about competitive pricing because it’s a fairly new to printing environment. It's slightly different than yours, obviously very different. But can you just talk about an opportunity to expand margins, what’s the competitive dynamics like people asking investors often asking who are the EFI competitors? It’s not HP and Xerox and the typical printers. Who are the competitors?

Guy Gecht

We can cover that.

Unidentified Analyst

Yeah.

Guy Gecht

But, so far as the margin we did what we said we’re going to do. Last quarter was 13% so we are at a target model, and I think there will be opportunities to move towards to the higher end of our model of 15% as we scale. If you look at EFI results in the last many quarters we grow bottom line a lot faster than we grow top line so the growth rate is pretty good. As far as we can always accelerate the margin goals in the expense of future revenue like if we sell fewer printers than the ink mix it’s going to be higher what we sell it depend with the high gross margin but it’s not going to work well for the next few years. So, we really want to make sure that we have a good balance between generating good profitability and continue to drive top-line growth. We grew last quarter top-line was up 10% essentially almost the entire thing was organic. We think 10% is pretty good, we like the opportunity to grow that level, so we’ll make sure that we have the right mix of investment in both.

If you want me to cover competitors, we have different competitors for those segments. If you look at industrial inkjet the largest competitor in the signage is HP. We have some other competitors; there is a company in Austria named (inaudible), Agfa is a competitor, Inca which is now owned by Dai Nippon Screen is a competitor; on a very low end Océ that now is owned by Canon is a competitor but really on a very low end not in most of the deals. So that’s on the inkjet side.

On the fiery side, we still competing with Kodak, although there are a lot less popular with the bankruptcy and lack of facilities on some key people leaving the company. And we’re still -- of course this -- the end customer choice is between the fiery which means a little bit more spend on (inaudible) but great ROI. And our own partners on lower end lower cost, we just want them that customers need to do pick up. So, that’s the competition on the fiery. On the software side, there is really no global player. We are expanding geographically; we're very strong in the U.S. As we expand geographically we’re finding smaller, we call it, local heroes. So in Italy there are few players, in Spain a few players. When we got to Brazil there were a few players, we bought one, we build on that. In China, we have dealer exposure, so for dealer sales in software and the players there in China’s market will be bigger than the U.S. market very soon with that printing. So, we still have competitors in every local market.

Unidentified Analyst

Okay. It seems like a fairly fragmented market then.

Guy Gecht

On the software side, for sure.

Unidentified Analyst

Yeah, okay. And then how is the pricing environment in some of your inkjet applications? You mentioned HP is one of them, Canon, Oce being another one.

Guy Gecht

Yeah.

Unidentified Analyst

How is overall -- how is the pricing environment?

Guy Gecht

Look, people everywhere trying to get the best buy and to get the maximum. We tend to do those spending we find no different, right, when we go buy things we like to spend less and get more. But normally our business proposition to customers is with just spend a little bit more than the other they just one but they analyze on that. And we I look at our customers again 26% growth in (inaudible) ink volume tell me that our customers doing quite well on the inkjet side, I think the benefits of this. So, we’ve taken a quarter that they’re willing to spend a little bit more upon they get a lot better returns. And that will be -- that was our strategy all the time when we say so.

Well, we think the pricing pressure for sure and definitely some market like emerging market supply especially is a lot tougher than other market. We try to differentiate with innovation and keep the pricing so far with the best of it. Some new markets like the tile printing which is relative (inaudible) by 18 months. It’s still early on this market so it’s tough to differentiate so you see the pricing pressure maybe more than more with that market. So, yes, pricing pressure will be always there and we combat with innovation.

Unidentified Analyst

Can you give investors maybe a couple of point of how you differentiate yourself?

Guy Gecht

Yeah.

Unidentified Analyst

On the inkjet side as against some of your largest?

Guy Gecht

So, it’s been now 10 years since we brought Marc's company when he was the CEO of Printcafe that we differentiate with software. I mean, we -- there was before a lot of companies I think brought us a good strategy. So, well software is 16% 17% of EFI business it’s a great business, it will grow, lot of cooling revenue more, more SAS model as we go along. It’s really a great differentiate for both Fiery and inkjet. We’re the only company that company that uses not only we’re selling a great box we’ll help you to integrate with (inaudible) system. We’ll give you a way to estimate the custom job, we’ll give you a website where your customers can submit jobs, we’ll let you manage your -- we’ll help you manage your raw materials so you have the raw materials for the next job. We’ll help you schedule the job so you can be the most productive.

So, we help differentiate with that. We help differentiate with the digital content on the inkjet. Fiery today is the exclusive for our product to now inkjet a source of growth for Fiery but also it’s helping us to differentiate now inkjet because we have the leading color management, the leading workflow, the leading in speed of processing of data in front of inkjet and that’s a tremendous opportunity. We just in the process of introducing Fiery to the tile printing and the feedback is fantastic. The industry didn’t see anything like that. So, that’s a great differential. In general, we like to differentiate with the best technology in the categories, best sellers, you go, you sleep well at night if you buy an EMI product.

Marc Olin

And the -- on the inkjet side also the LED curing that we have is -- we're the only player in our space that’s offering that in that segment of machine. And so we’ve seen a lot of demand from customers because it let you cut down electric usage, print on printer substrates, cut down shipping cost and so on. And so that’s been a really big growth driver for us over the last 12 months.

Unidentified Analyst

Okay, that's interesting, I didn't know about that. I think one of the other questions -- I’ll ask one more and then I’ll open it up to the room. One of the other questions I get often from investors are you sell to some of the larger printer OEMs, Xerox being one of them. Why would a company like EFI when they have their own technology as well, can you elaborate a little bit on that as well?

Guy Gecht

So, Xerox is a great example we have, more than 10 years of very strategic partnership with them. We’re working really together. They like to present their customers good choice, right. The customer can select a little Fiery if they like it or lot of people really get exposure of this we train on that or they offer their own font and then the customer make a choice. So, whenever in given quarter whatever the percentage of end customers say I'm going to go for Fiery may be it’s little more expensive than the Xerox solution but I think that is better than we look to Xerox is offering more of that.

So, we’re working really well to differentiate them. We’re working really well to appeal to end user, they benefit from the shift from analog to digital, EFI is a big source of that. So, there is no really buying decision on the Xerox side there is buying decision on the end customer side, and we’re working together with Xerox to get customers to move most of these.

Unidentified Analyst

Okay.

Marc Olin

I think the example you gave before about the car stereo system is appropriate. When you buy a Lexus you can get the built-in Toyota stereo system or you get the Bose system, it’s not that they're Toyota or Bose to get one or the other, it’s if you want the superior capability and it’s like with Fiery like when you get the better sound but you also get better gas mileage because the Fiery actually drives more productivity out of the printing equipment because the process of the file is faster, get them into production quicker so you can get more clicks out of the actual equipment.

Unidentified Analyst

Okay.

Guy Gecht

And that's totally aligned with Xerox's objective with customers to get but (inaudible) benefits so the volume to get more volume to go to the digital screening production, there is a lot of interest. So, we're actually aligned on that one.

Unidentified Analyst

Okay. Let me open it up to investors. Again, any questions from the audience here?

Question-and-Answer Session

Unidentified Analyst

Where is Vincent Pilette go?

Guy Gecht

Tonight the new company will issue a press release, so I will not -- we announced it, obviously I know but. You definitely want to continue advance because he is an experienced. This was a much larger company, it is a much larger company with complete different industry, and for him it’s important to build he’s experience in that. And I think he is an ambitious guy, he want to do more in his life and we knew when we hired him that he’s ambitious when you got in, you will be ambitious when you get out, so we understand we have a window with him, we enjoy having him and we have great candidates from outside the company and great candidates inside the company. So, it continue to be exciting for us regardless of who the CFO, CEO better something.

Unidentified Analyst

Okay. Can you guide a little bit, I know we were talking about Xerox building their own controllers which is outsourcing them from EFI and so sometimes investors want to dig a little deeper into that. I understand on the surface once an upgrade option versus a standalone option but help me understand are the certain -- help the investors also understand. Are there certain production jobs you think that are more suited for the Fiery front-end? Are there certain applications -- just let me get me a little bit deeper into why one versus the other? Yeah.

Guy Gecht

Yeah. So, look who will buy us. We think that end customers are going to be a lot happier and more productive with Fiery because it is our product, we invest in this process the line of business, that’s what we do, it still a solid business. So --

Unidentified Analyst

Yeah, yeah.

Guy Gecht

So for us it’s not just an accessory, it’s very full. So we believe the end users no matter what application they’re going to end up ahead using Fiery but (inaudible). I think that you also have customers that’s been using Fiery for many years, they got used to do -- the employees know how to use it, the workflow is very familiar, so they like to stay with what they had and some people have mixed equipment and Fiery is the only opportunity really to have the same workflow across the board between the converters which some people care about that.

Marc Olin

I think if you are looking though for the key point of differentiation is really speed and quality.

Unidentified Analyst

Okay.

Marc Olin

So if you are in an office environment where you might not be as focused from the quality the output or the speed of the output it's not as big a differentiator. When you get into professional print, into production print, which is really our strength, that’s where the Fiery provides the big advantage.

Unidentified Analyst

Okay. Take care of how fast you can print, the image resolution, et cetera.

Marc Olin

Exactly the quality, the color --

Unidentified Analyst

Okay.

Marc Olin

How closely the color matches what you, what the end user was expecting out of it.

Guy Gecht

One more point on this we have over 20,000 location that uses our software, one of EFI's software and of course Fiery integrates a lot better with that than anything else. So if you care about that --

Unidentified Analyst

Right.

Guy Gecht

Care about making sure the system (inaudible) itself when it's stuck to each other and you get the productivity gains and Fiery is better for you.

Unidentified Analyst

Okay.

Marc Olin

We’ve seen a lot over the last year or two as we really build the integration story very tightly between Fiery and the productivity software installs we’ve seen a lot of customers that had never looked at Fiery before now start to switch to Fiery across our platform because the benefit of the integration.

Unidentified Analyst

Okay. That’s a good point. Let’s talk a little bit about the Cretaprint, the tiles, we have spent what about a year and year and a half month since the acquisition --

Guy Gecht

(inaudible)

Unidentified Analyst

Yes, what drove you into this acquisition and sort of how you see that evolving and you talked about the ink production eventually for the ceramic tiles, et cetera. So can you talk to us about that roadmap?

Guy Gecht

Sure. We are a strong believer in using inkjet technology for industrial applications, just for a second, why inkjet. Inkjet is the only printing technology that you don’t need to touch the substance, you don’t need to touch the material, you are ejecting it on the small show. So this is pretty don’t touch, and therefore with inkjet you can present almost any material out there. And so we think that the opportunity to go to manufacturing industry and transform them to on-demand imaging is very significant. We started with signage that was less closer to from a graphical perspective, lot more open to digital but we always wanted to expand to other industries. In that sense we’re still planning to expand. So expanding the stamp for our inkjet capability we thought that size is a great way to enter. We’ve been watching that market for three, four years. We actually made no a great small investment in a startup in Israel that turn out to be a loss, but we learnt from that, they were all going up the size too.

And around 2011 we felt like the technology of inkjet is now at a point where it really can make a difference to all manufacturers. Look, this is a very fast production item. Cretaprint today the printer can print up to 15 meter a minute of tiles. I mean we’re talking about a very fast high quality imaging. So we felt like inkjet is there, reliable enough, its started to happen, we got to get it. And then the decision was do we go organically which is slow but maybe less (inaudible) or we buy a company and we build on that, that have the relationship, have the product and we help them and we scale them.

We look around, we really liked Cretaprint run by two brothers, great cultural space, very good innovators, we felt like we can help them a lot for both being a scalable global company as business shift from the main market of Spain and Italy to move to China to Indonesia to India to Brazil and also we can help with the inkjet expertise we have at home. So we decide to buy then, we (inaudible) go in a few months and we ended up with a deal. So that was really a classic example how we expand the turn like the core capabilities of EFI, core experience, the ecosystem of picture font and Fiery, productivity software and inkjet and bring it to new stamp. So we still look at that, the outer markets that we continue to monitor, there are companies in those markets with the people and I think its fair to say that we have plenty to act on that, we have the cash, we have the power, the target markets of future growth was we love to the expand the turn for the investment.

Unidentified Analyst

(inaudible).

Guy Gecht

Coming along I said on the conference calls two times, it's a 2014 event, still on track, still on schedule and it’s a great upside. Every month we sell more machines, those machines will be able to take our ink. This is little complex opportunity because this market evolves where you have the equipment providers and the ink providers being different company unlike on the finance side it is the same companies providing both still its two companies. So it will be gradual, we don’t expect to get anywhere near the penetration we got on the VUTEk but even a small penetration it’s a big upside. People spend about, people buy about 1000 kilo a month, kilo today is somewhere like $20, $25 so you can do the calculation, its $200,000 spend on ink per machine a year but so and we have a lot of machines out there. So if we get 10%, 15% of those machines to buy our ink that’s a huge upside when they buy. And so we’re very excited about this expansion, as well as the rest of EFI ecosystem we are doing an Fiery content to (inaudible) growth opportunity for Fiery and we are doing some other parts of EFI ecosystem this month.

Unidentified Analyst

What if the established ink vendors like (inaudible) and Glaze, right?

Guy Gecht

Right.

Unidentified Analyst

What are they doing relative to competing with you in this new context?

Guy Gecht

We were very honest with them, they said look when we get into inkjet the first three letters of inkjet is ink and I don think the business model is very appealing without thinking in longer term. The business model is very appealing in this period but in the longer term we are a ambitious company, we like to provide ink, equipment and software to our customers. They know that, and remember that EFI market share is high teens. So there is all other companies that sell equipment and they can provide inks to the non provider ink. We are planning to target mainly on customers. So I think we’ll still have a little competitor with us. Again we are not expecting to take anywhere near the majority of market share definitely not in the first few years. So we will continue to look little upwards with them and compete with them in some other areas, this has been new.

Unidentified Analyst

And so the 1000 kilos a month is what the current glaze vendors market?

Guy Gecht

Yeah.

Unidentified Analyst

Can you talk a little bit about maybe free cash usage and how EFI generally views, what’s the capital allocation policy, can you update investors on any shifts in that or how do you kind of view that?

Guy Gecht

So it's pretty consistent with what we had said before. We have just like three buckets of priority, the first priority is acquisition that lessens the kinds of segments. On the software size mostly small acquisition, the geographic expansion have been doing for the last few years as well as finding some applications we can combine with our software and bring to the other 20,000 locations worldwide and that will continue.

As far as the landscape acquisition on inkjet is actually pretty robust. We actually are looking quite a few spaces and companies associated to expand that, we feel pretty good out there, pretty appealing, we’ll continue to do our due diligence on that. The -- we are not going to have all the opportunity or most of them for sure, we’re going to pace this discipline but the good news in our target acquisition M&A landscape is there is not a lot of -- there is actually no other big buyer. This is not the IT where you have all those big names is chasing the same company and bidding higher, higher multiples, its normally either sell to EFI or stay then alone.

So sometimes some convincing is needed to help people to sell to EFI but its not we actually are finding it, we have the time to do the decisions and negotiate the right deal for EFI. So acquisition is definitely the high thing accretive growing our (inaudible) I think that EFI post confirmation of strategy definitely is something we like to do and we will do.

The second thing is buyback we still have authorization, the buyback in general the goal is to maintain the share count. We are more active where the share is under pressure. Fortunately, the last six months, we didn’t need to be as active. If in the future there will be any weakness we will have to jump in and do some more; we are not against it. The first thing is obviously the dividend, we had discussion so far, we did not make the decisions to start the dividend but maybe in the future things will change.

Unidentified Analyst

Could you remind us how much of the buyback is outstanding and over what period?

Guy Gecht

Yeah, yeah, we have $100 million authorization, we completed I think $35 million in that. Again part of this is the stock was performing well by itself and we feel like we need to have the bias. Secondly is that when we announce the plan the goal was to offset the list payment of the new headquarter, we sold the headquarter, we bought a new headquarter. We ended up with very creative and attractive deal that involved buy and lease so we ended up leaving a lot less cash to offset that. So at least as far as the sense of urgency we got to move in six weeks and the list was (inaudible) quarter that was not as urgent to move on the buyback as we thought originally.

Unidentified Analyst

I must be doing something wrong 1000 kilos per month at $20 per kilo is it $240,000 glaze market?

Guy Gecht

Per unit, yes.

Unidentified Analyst

Per year?

Guy Gecht

Yes.

Marc Olin

Per machine.

Guy Gecht

Per machine.

Unidentified Analyst

Oh per machine?

Marc Olin

Per machine. I thought that might not have gotten --

Guy Gecht

Per machine, yeah, very appealing.

Unidentified Analyst

And in terms of acquisition versus buyback do you have like a stated policy out there about how much roughly you want to spend on average year on acquisition?

Guy Gecht

We don’t have a stated policy because we want to buy if we go one even we buy five companies and they are great companies, that’s great. We can digest them maybe different policy advice, we own and develop and we only buy two companies because that’s what we found and that’s fun I mean really its not about quantity, its about the quality but our ability to integrate. Once you’re doing acquisition that’s it, I mean, once you announce, then sign it, there is no way back. So you get to do a lot of homework upfront, you got to have all your plans, you got to make sure that the retention is there, the integration is there and that’s what we’re trying to do. And we don’t want to risk it, this is not to take a bet on the product, (inaudible) kill us; acquisition as we know can go home, we don’t want it to go wrong (inaudible). So far I think we have done really well on acquisition, we want to maintain this record. So we will continue to do that and so it's not really a matter of fact.

The other thing is we are not planning to do and we don’t need to do a transformational type of acquisition some companies just led I need to chase my company to be a cloud base I need to change my company, EFI have done that, we did all the heavy-lifting, this is our best day already in the next few years ahead of us because a lot of the headwinds have gone, we are where we wanted to be, focus on the right market with the leadership technology, the markets are going. So for us its just to make it stronger and move faster and go faster and leverage it to different markets and its not about we got to do something because the business, the (inaudible) in the business is a little bit (inaudible), that’s not our situation.

Unidentified Analyst

Hi, could you talk about the label printing market and when you expect that to take off like these other inkjet markets have taken off?

Guy Gecht

Sure. So that was the market that’s definitely a market that’s definitely a market that it takes longer to move from analog to digital that’s still left and 1% of label in the world, printers gone digital devices and as we know there is a lot of labels and this is not going to go away. So we kind of -- we have a product there, its -- we believe it’s the best inkjet product out there but it’s a very small product, it’s a very small market. So we continue to invest in this but in a pace where we kind of more so sit and wait. We are helping customers that are getting into digital to get the benefit of digital but until there is going to be more pressure to move the short run I think its -- we will wait, its not just technology, the market need to be there.

I could tell you the customers are guiding digital labels; the growth rate of ink is the highest in label. We are seeing numbers like 30% year-over-year growth to 60% year-over-year growth in labels. So, I think when customer invest they are finding all sort of application for their customers. So the analog there is just the market is still in the conservative model. We’ll wait for this and we are patient there is other areas the inkjet is going very fast so we are in good shape here.

Unidentified Analyst

Is that a function of more economical environment or is there something more --

Guy Gecht

I think just like with the other digital, I don’t know the digital you have the two factors as I mentioned one is the technology is not there the replacement of analog still fast and secondly the end buyers are not demanding the short run customization yet they will as everything in marketing, everything in life we want to get things that are customized to us labels will be part of it, target will be one and labels will target one by one and target. If somebody is going, something from New York the September for the Citi Conference so that’s going to change down the road but its tough to predict when its going to be the inflection point.

Unidentified Analyst

You said that you’re going to maintain margin and rather go for top line growth. Do you have a target for top line growth?

Guy Gecht

We’d like to go double-digit kind of low double-digit combination of organic and inorganic again last quarter we delivered 10% growth almost starting with organic we’re very pleased with that guidance with double digit growth this quarter organic potentially organic. So our goal is to continue to do organically as fine things move faster we’d like to be a billion dollar in a few years company with scale we could generate a lot more profit when we grow so even in that we definitely like to continue this cycle.

Unidentified Analyst

And within that growth rate Guy is there -- there are certain segments obviously your controllers might be at a certain growth rate, your productivity software obviously at much higher growth rates. Can you update the audience on that?

Guy Gecht

Yeah so I’ll let Mark talk about productivity software because he was interested in that. I think on the signage side we say GDP plus even multi-year but obviously with product introduction cycles, so much better than like this sales and GDP plus is something like lastly we were down 15% so much well because the cycle down hopefully now we’re seeing many quarters of cycle left. On inkjet I think we’ve been doing quite well, the growth is at three factors, the end market is growing, another position is happening and EFI is gaining shares and then productivity software…

Marc Olin

Yeah on the software side we are looking for high single digit organic growth and low double digit with the continue acquisition that we are looking at around the world.

Guy Gecht

I think what we’re seeing is that the booking rate this year is a lot higher, we need to stop the digit we have more customers that big software subscription deals then we had to buy it so therefore it does not reflect I mean this revenue but its obviously translate the future revenue that we love to report…

Marc Olin

And we think we haven’t touched China at all yet in the software space and we saw that the market for a software in China is within the next five years should be about the same size as the U.S. market. So in the close to $100 million opportunity there that is completed untouched by us right now.

Unidentified Analyst

Anything else that industry maybe don’t get about EFI, maybe you want to clarify?

Guy Gecht

Maybe you guys would tell me we are not expanding very well, but…

Marc Olin

Yeah.

Guy Gecht

I think investors are getting more and more of the story, I think there is a lot of exciting opportunities, I feel like we just started, we post confirmation, there is a lot of growth discipline needs, most exciting time and I think lot of people in the management team that work on this transformation really good to be on the other side and I think you guys could expect in the longer term, shorter term great things from us.

Unidentified Analyst

Okay.

Marc Olin

Yeah. I’d just add that I think the industry that we serve is going through tremendous transformation now from analog to digital and I think that is really what’s been driving EFI’s growth at double-digit levels and serving an industry that’s clearly not growing at that rate.

Unidentified Analyst

Right.

Marc Olin

Because we are focused on the specific area of the industry that are growing, that are transforming and so people have to make technology decisions, they can’t survive unless they adopt new technology because of the analog to digital shift…

Unidentified Analyst

Right.

Marc Olin

And I think we are in the right place at the right time with the right products there to take advantage of that…

Unidentified Analyst

Okay, good, just on time.

Unidentified Company Speaker

Thank you.

Guy Gecht

Thank you.

Unidentified Analyst

Alright, thank you very much.

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