EXFO Reports Third Quarter Results for Fiscal 2016

• Sales increase 5.4% year-over-year to US$60.9 million
• Adjusted EBITDA improves 18.8% year-over-year to US$5.3 million
• Cash flows from operations of US$2.3 million raises cash position to US$46.3 million

QUEBEC CITY, June 29, 2016 /PRNewswire/ - EXFO Inc. (NASDAQ: EXFO) (TSX: EXF) reported today financial results for the third quarter ended May 31, 2016.

Sales reached US$60.9 million in the third quarter of fiscal 2016 compared to US$57.8 million in the third quarter of 2015 and US$53.6 million in the second quarter of 2016. After three quarters into 2016, sales increased 2.6% year-over-year to US$169.7 million.

Bookings attained US$59.7 million in the third quarter of fiscal 2016 for a book-to-bill ratio of 0.98 compared to US$59.2 million in the same period last year and US$59.7 million in the second quarter of 2016. Bookings improved 5.8% year-over-year to US$177.9 million after three quarters into 2016 for a book-to-bill ratio of 1.05 for this period.

Gross margin before depreciation and amortization* amounted to 60.8% of sales in the third quarter of fiscal 2016 compared to 61.4% in the third quarter of 2015 and 64.7% in the second quarter of 2016. After three quarters into 2016, gross margin reached 62.9% compared to 61.9% for the same period in 2015.

IFRS net earnings in the third quarter of fiscal 2016 totaled US$0.9 million, or US$0.02 per diluted share, compared US$0.6 million, or US$0.01 per diluted share, in the same period last year and US$4.0 million, or US$0.07 per diluted share, in the second quarter of 2016. IFRS net earnings in the third quarter of 2016 included US$0.3 million in after-tax amortization of intangible assets, US$0.4 million in stock-based compensation costs and a foreign exchange loss of US$1.0 million.

After three quarters into 2016, IFRS net earnings totaled US$6.6 million, or US$0.12 per diluted share, compared to US$3.0 million, or US$0.05 per diluted share, in the same period in 2015. IFRS net earnings on a year-to-date basis included US$0.8 million in after-tax amortization of intangible assets, US$1.1 million in stock-based compensation costs and a foreign exchange gain of US$0.5 million.

Adjusted EBITDA* totaled US$5.3 million, or 8.7% of sales, in the third quarter of fiscal 2016 compared to US$4.5 million, or 7.7% of sales, in the third quarter of 2015 and US$5.3 million, or 9.9% of sales, in the second quarter of 2016. On a year-to-date basis, adjusted EBITDA totaled US$15.9 million, or 9.3% of sales, compared to US$8.8 million, or 5.3% of sales, for the same period in 2015.

EXFO's cash and short-term investments amounted to US$46.3 million at the end of the third quarter of fiscal 2016 compared to US$29.9 million at the end of the third quarter of 2015 and US$44.4 million at the end of the second quarter of 2016.

"I am quite pleased with the progress of our financial results after the first three quarters of 2016, including the solid performances of both our Physical and Protocol-layer product groups," said Germain Lamonde, EXFO's Chairman, President and CEO. "During the third quarter, our instruments business delivered strong bookings and revenues, while we experienced delays in closing some systems-based deals which, in turn, limited our overall top and bottom-line results."

"After nine months into fiscal 2016, we have increased adjusted EBITDA by 80% year-over-year and generated more EBITDA than the entire reporting period in 2015," Mr. Lamonde added.

 

 

Operating Expenses Selling and administrative expenses totaled US$20.8 million, or 34.2% of sales in the third quarter of fiscal 2016 compared to US$20.5 million, or 35.5% of sales, in the same period last year and US$19.6 million, or 36.5% of sales, in the second quarter of 2016.

Net R&D expenses totaled US$11.3 million, or 18.6% of sales, in the third quarter of fiscal 2016 compared to US$10.9 million, or 18.9% of sales, in the third quarter of 2015 and US$10.2 million, or 19.0% of sales, in the second quarter of 2016.

Third-Quarter Highlights

• Sales. In the third quarter of 2016, sales were particularly robust within EXFO's optical and transport product lines which are benefiting from a 100G investment cycle. From a geographic standpoint, 59% of sales originated from the Americas, 22% from EMEA and 19% from Asia-Pacific. EXFO's top customer accounted for 5.0% of sales, while the top three represented 14.7%.
• Profitability. Adjusted EBITDA improved 18.8% year-over-year to US$5.3 million in the third quarter of 2016. After nine months into fiscal 2016, EXFO generated adjusted EBITDA of US$15.9 million, or 9.3% of sales. The company also reported US$2.3 million in cash flows from operating activities in the third quarter and US$20.8 million after nine months into fiscal 2016.
• Innovation. EXFO launched four key new solutions during the third quarter of 2016, including the LTB-8, a multi-module test platform dedicated to high-speed testing in lab and manufacturing environments; a 100G Power Blazer test module that can be swapped between the LTB-8 and FTB-2 Pro platforms to ease the transition between lab and field testing; and EXFO added two 100G portable testers to its NetBlazer product family in order to address growing turn-up and troubleshooting requirements for metro networks and data center interconnects (DCIs).

Business Outlook EXFO forecasts sales between US$57.0 million and US$62.0 million for the fourth quarter of fiscal 2016, while IFRS net results are expected to range between a loss of US$0.01 per share and earnings of US$0.03 per share. IFRS net loss/earnings include US$0.01 per share in after-tax amortization of intangible assets and stock-based compensation costs as well as US$0.01 per share for foreign exchange losses based on current exchange rates.

This guidance was established by management based on existing backlog as of the date of this press release, current market conditions, seasonality, expected bookings for the remaining of the quarter, as well as exchange rates as of the day of this press release.

Conference Call and Webcast EXFO will host a conference call today at 5 p.m. (Eastern time) to review third-quarter results for fiscal 2016. To listen to the conference call and participate in the question period via telephone, dial 1-704-288-0432. Please take note the following conference ID number will be required: 20909896. Germain Lamonde, Chairman, President and CEO, and Pierre Plamondon, CPA, CA, Vice-President of Finance and Chief Financial Officer, will participate in the call. An audio replay of the conference call will be available two hours after the event until 11:59 p.m. on July 5, 2016. The replay number is 1-855-859-2056 and the conference ID number is 20909896. The audio Webcast and replay of the conference call will also be available on EXFO's Website at www.EXFO.com, under the Investors section.

About EXFO EXFO provides communications service providers (CSPs) with test orchestration and performance intelligence solutions to ensure the smooth deployment, maintenance and management of next-generation, physical, virtual, fixed and mobile networks. The company has also forged strong relationships with network equipment manufacturers (NEMs) to develop deep expertise that migrates from the lab to the field and beyond. EXFO's key differentiation comes from combining intelligent, automated and cloud-based test and monitoring solutions with real-time analytics to deliver unmatched end-to-end visibility and assurance—from a network, services and end-user level. EXFO is no. 1 in portable optical testing and boasts the largest active service assurance deployment worldwide. For more information, visit www.EXFO.com and follow us on the EXFO Blog.

Forward-Looking Statements This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, and we intend that such forward-looking statements be subject to the safe harbors created thereby. Forward-looking statements are statements other than historical information or statements of current condition. Words such as may, expect, believe, plan, anticipate, intend, could, estimate, continue, or similar expressions or the negative of such expressions are intended to identify forward-looking statements. In addition, any statement that refers to expectations, projections or other characterizations of future events and circumstances are considered forward-looking statements. They are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in forward-looking statements due to various factors including, but not limited to, macroeconomic uncertainty as well as capital spending and network deployment levels in the telecommunications industry (including our ability to quickly adapt cost structures with anticipated levels of business and our ability to manage inventory levels with market demand); future economic, competitive, financial and market conditions; consolidation in the global telecommunications test and service assurance industry and increased competition among vendors; capacity to adapt our future product offering to future technological changes; limited visibility with regards to timing and nature of customer orders; longer sales cycles for complex systems involving customers' acceptances delaying revenue recognition; fluctuating exchange rates; concentration of sales; timely release and market acceptance of our new products and other upcoming products; our ability to successfully expand international operations; our ability to successfully integrate businesses that we acquire; and the retention of key technical and management personnel. Assumptions relating to the foregoing involve judgments and risks, all of which are difficult or impossible to predict and many of which are beyond our control. Other risk factors that may affect our future performance and operations are detailed in our Annual Report, on Form 20-F, and our other filings with the U.S. Securities and Exchange Commission and the Canadian securities commissions. We believe that the expectations reflected in the forward-looking statements are reasonable based on information currently available to us, but we cannot assure that the expectations will prove to have been correct. Accordingly, you should not place undue reliance on these forward-looking statements. These statements speak only as of the date of this document. Unless required by law or applicable regulations, we undertake no obligation to revise or update any of them to reflect events or circumstances that occur after the date of this document.

*NON-IFRS MEASURES

EXFO provides non-IFRS measures (constant currency data, gross margin before depreciation and amortization, and adjusted EBITDA) as supplemental information regarding its operational performance. The company uses these measures for the purpose of evaluating historical and prospective financial performance, as well as its performance relative to competitors. These measures also help the company to plan and forecast for future periods as well as to make operational and strategic decisions. EXFO believes that providing this information, in addition to IFRS measures, allows investors to see the company's results through the eyes of management, and to better understand its historical and future financial performance.

The presentation of this additional information is not prepared in accordance with IFRS. Therefore, the information may not necessarily be comparable to that of other companies and should be considered as a supplement to, not a substitute for, the corresponding measures calculated in accordance with IFRS.

Constant currency data represents data before foreign currency impact. Data for the current period is translated using foreign exchange rates of the corresponding period from the preceding year. 

Gross margin before depreciation and amortization represents sales less cost of sales, excluding depreciation and amortization.

Adjusted EBITDA represents net earnings before interest, income taxes, depreciation and amortization, stock-based compensation costs and foreign exchange gain or loss.

The following table summarizes the reconciliation of adjusted EBITDA to IFRS net earnings, in thousands of US dollars:

 

 

 

 

 

 

 

EXFO-F

 

SOURCE EXFO inc.