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Technology Stocks : RGFX Raster Graphics

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To: joseph burns who wrote (75)	7/25/1997 3:38:00 AM
From: Jeff Lawlor	of 593

I had an opportunity to listen in on the conf. call this afternoon. Many analysts seemed extremely pleased with results. Breakdown of revenue: Printer Sales - 62% of revenue - up 34% from 2Q96 - up 14% from 1Q97 Software - 5% of revenue - down 7% from 2Q96 - down 4% from 1Q97 Consumables - 26% of revenue - up 57% from 2Q96 - up 15% from 1Q97 Software sales down due to realignment with European distributor and release of new products by ENCAD and HP, who have purchased Onyx software in the past. RGFX confident that European distributorship problems will be rectified in Q3 and Q4. 61% of revenue from international sales which is up 70% from 2Q96. Some other comments by CEO: Increased marketing focus on P5000 for rest of year - RGFX has booked 10 more trade shows for the rest of 1997. Direct mail campaigns will be launched to target segments of customers for P5000 in Q3 and Q4. One problem with P5000 sales this quarter is lack of consumables available early in quarter. RGFX has since made outdoor paper, vinyl and inks available which should positively impact P5000 sales in Q3 and Q4. Other consumable introductions for P5000 expected in Q3. Displacement of DCS 5442 sales due to P5000 was within expectations although RGFX couldn't report any cannibalization numbers. P1000 revenue declined in this quarter. RGFX introduced this product at the low end to extend their family of products but P1000 will not be significant contributor for rest of year. Initiative being piloted (kicked off this quarter) related to financing options for RGFX customers - mostly leasing programs. Expectation is to make this fully operational in Q4. RGFX believes it will give them an opportunity to recognize revenue at time of sale and to better able them to manage for upgrades. There was mention of Q3 being seasonally weak compared to Q4, however, continued growth in revenue and net income projected for both quarters. Revenue expectations for 1998 revolve around increasing distribution channels in US, where they have less of a stronghold, and continued emphasis in Europe. RGFX recently hired a Worldwide Director of Sales which the CEO stated as being a key component in 1998 growth opportunities. All in all, very good quarter with expectations for continued growth for rest of year and 1998 (35-40% increases in revenue year over year and >40% increases in net income). Can't wait to see how market reacts tomorrow. Should be exciting for rest of year. Regards, Jeff

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