EFII
#So we did announce three new productivity suites.
We had three announced already in 2015, and at Connect last week we announced three new productivity suites aimed at specific subsegments of the market.
So we continue to make progress around making the applications more modular.
But it is definitely a work in process.
And we are going to continue to come out with more suites, continue to get more modularity in there.
So we will still have on occasion some large projects from customers that require custom development, but that's really a function of individual clients.
But we are certainly better positioned now to respond to customers' requests around large projects.
It's really because ---+ the way that our OpEx is structured now is that we do have a lot of pay-for-performance in the fourth quarter with the overachievement.
Even though it was down at a lower level of OpEx as a percentage of revenue, in Q1 the variable pay portion of it, because the revenue is much lower, will be at a lower level; and that will help to scale down the absolute level of OpEx.
We are saying 36% to 37%.
And Q4, I think, was at 35.5%, so it's kind of right at the low end of that range in Q4.
We've transitioned most of the clients now onto the new US-style revenue recognition method in their contracts.
So we are ---+ you know, running into Q1 we think we are at a pretty normalized level in terms of us being able to recognize what we sell, when we sell it like we do in the other segments of the business.
Yes, sorry it wasn't clear.
Yes, that was the numbers.
In general now ---+ remember, we're going to report now all the inks together, not just UV.
That was essentially what we saw for the spray graphics enablers before.
So between all types of ink, which is UV for the spray graphics enablers, and ceramic ink, and the water-based for the textiles ---+ we recorded a growth in volume of 65%.
Now that's obviously not really fair to the presentation, because we had ---+ we are not counting what wasn't in our ownership a year ago.
So even if I add Reggiani and Matan, of their ink last year in Q4, they were not ---+ the volume ---+ they were not part of EFI ---+ the growth was about 30%.
We are showing a very, very strong growth, especially on the textile, but of course on ceramic from a percentage year over year is a very strong number.
But still smaller compared to the other two.
And UV is the largest number, but also well into double digits.
So we are very pleased with that volume that our customer is recording, and it's showing you they are moving more jobs from analog to digital.
The ink numbers on the textile was presently surprising when we looked at that.
We knew it was going to grow nicely, and it grew very nicely.
And I think definitely that with EFI, Reggiani is more emphasizing on attachment rate ---+ means if you buy printer from us, we really want to sell you ink.
And so we are seeing more activity there.
Customers are making more bigger volume.
And obviously, when they buy more printers, they print more.
And again, we state that as an indication to the underlying demand in the market.
In what is not the easy macro, we are seeing jobs moving.
30% growth is a number I don't think you're going to find in too many industries and too many categories.
We did still set our long-term gross margin targets at the investor day, and our goal long-term is to get back close to 40% again, as we mentioned.
So we are not giving forward guidance beyond Q1, but we definitely see opportunities to continue to push the margin trend higher, back to where it used to be, in the inkjet segment.
You know, I think that it's ---+ you know, we don't want to put a stake in the ground right now, because currency is obviously having an impact upon that, as does the growth rate of the different businesses.
And right now we are just trying to keep up with the opportunities that have been presenting themselves across the different segments.
And we are seeing the margin come in a bit higher than we were anticipating; it was kind of the high end of what we thought it was going to be in Q4.
So we are making some good progress, but I don't think we are ready to put a stake in the ground to say: it's going to be here on X date.
Well, as we mentioned previously, the ink that we are selling at Reggiani today is not ink that we manufacture, and so it's not quite at the margin of the other inks that we manufacture on our own.
But it's still nice margin and higher margin than the printers, so there is some benefit there.
But that ---+ as a reseller, you know, we can't get the same type of margins as when we make the stuff ourselves.
It's really the leverage of the higher revenue that we saw there.
As that business ---+ you've seen the gross margin expand there consistently over the last ---+ really, the last five years.
And so that is the beauty of that software business.
As the revenue expands, we have a great drop rate.
And so we do believe as we continue to expand that business that we will continue to see nice gross margin accretion.
Thank you, everyone, for joining us today, and thank you for your interest in EFI.
Our success reflects the hard work and dedication of our team around the world.
And as always, I want to thank them for their efforts, as well as for the shareholders for their support and confidence, and our customers for their trust.
We are excited about the year ahead and look forward to sharing our progress with you.
Thank you.
