EXFO INC. 
By
-- Sales reach US$59.8 million
-- Bookings attain $64.3 million, book-to-bill ratio of 1.07
-- Adjusted EBITDA totals US$2.7 million
QUEBEC CITY, Jan. 9, 2013 /PRNewswire/ - EXFO Inc. (NASDAQ: EXFO; TSX: EXF) reported today financial results for the first quarter ended November 30, 2012.
Sales reached US$59.8 million in the first quarter of fiscal 2013 compared to US$66.4 million in the first quarter of 2012 and US$57.2 million in the fourth quarter of 2012.
Bookings attained US$64.3 million in the first quarter of fiscal 2013 compared to US$71.4 million in the same period last year and US$55.2 million in the fourth quarter of 2012. The company's book-to-bill ratio was 1.07 in the first quarter of 2013.
Gross margin(*) amounted to 60.5% of sales in the first quarter of fiscal 2013 compared to 64.8% in the first quarter of 2012 and 62.8% in the fourth quarter of 2012.
IFRS net loss in the first quarter of fiscal 2013 totaled US$1.6 million, or US$0.03 per share, compared to net earnings of US$2.9 million, or US$0.05 per diluted share, in the same period last year and a net loss of US$3.7 million, or US$0.06 per share, in the fourth quarter of 2012. IFRS net loss in the first quarter of 2013 included US$1.9 million in after-tax amortization of intangible assets, a foreign exchange gain of US$0.8 million and US$0.4 million in stock-based compensation costs.
Adjusted EBITDA(**) totaled US$2.7 million, or 4.5% of sales, in the first quarter of fiscal 2013 compared to US$6.5 million, or 9.7% of sales, in the first quarter of 2012 and US$4.5 million, or 8.0% of sales, in the fourth quarter of 2012.
"Despite a challenging environment during the last several quarters, I am increasingly optimistic about EXFO's opportunities for fiscal 2013 based on improving market conditions, recent investment plans announced by network operators and our highest bookings level in the past year," said Germain Lamonde, EXFO's Chairman, President and CEO. "While both Protocol and Physical-layer product groups delivered sequential bookings growth of about 15% in the first quarter, I am particularly excited about our Protocol solutions, especially in the areas of 4G/LTE, mobile backhaul and service assurance where we're gaining traction with tier-1 wireless operators. Given these data points, our history of market-share gains and recent restructuring initiative, we plan to increase sales 6% to 10% in 2013 and significantly improve profitability."
Selected Financial Information
(In thousands of US dollars)
Q1 2013 Q4 2012 Q1 2012
Sales $ 59,821 $ 57,156 $ 66,388
Gross margin* $ 36,164 $ 35,899 $ 43,018
60.5% 62.8% 64.8%
Other selected information:
IFRS net earnings (loss) $ (1,638) $ (3,714) $ 2,887
Amortization of intangible assets $ 1,962 $ 1,931 $ 1,921
Stock-based compensation costs $ 448 $ 429 $ 555
Restructuring costs $ $ 2,329 $
Net income tax effect of the above $ (67) $ (247) $ (30)
items
Foreign exchange gain (loss) $ 756 $ (1,940) $ 1,664
Adjusted EBITDA** $ 2,720 $ 4,546 $ 6,472
Operating Expenses
Selling and administrative expenses totaled US$22.3 million, or 37.3% of
sales in the first quarter of fiscal 2013 compared to US$24.6 million,
or 37.1% of sales, in the same period last year and US$22.2 million, or
38.9% of sales, in the fourth quarter of 2012.
Gross research and development expenses amounted to US$13.9 million, or 23.2% of sales, in the first quarter of fiscal 2013 compared to US$14.8 million, or 22.3% of sales, in the first quarter of 2012 and US$14.1 million, or 24.7% of sales, in the fourth quarter of 2012.
Net R&D expenses totaled US$11.6 million, or 19.4% of sales, in the first quarter of fiscal 2013 compared to US$12.5 million, or 18.8% of sales, in the same period last year and US$11.9 million, or 20.8% of sales, in the fourth quarter of 2012.
First-Quarter Highlights
-- EXFO's sales and bookings improved 4.7% and 16.4% sequentially
in the first quarter mainly due to increased traction of
Physical-layer products and less seasonality. It should be
noted the company was unable to recognize into revenue in the
first quarter more than US$2.0 million in orders. EXFO's top
customer accounted for 7.2% of sales in the first quarter,
while the top three represented 15.6%. Global sales originated
56% from the Americas, 27% from Europe, Middle East and Africa
(EMEA), and 17% from Asia-Pacific.
-- Focusing on profitability, EXFO expects to benefit from US$8.0
million in annual cost-savings from its almost completed
restructuring plan. The company has reported US$2.3 million in
restructuring costs so far with US$0.3 million left to incur in
the second quarter of 2013. Based on increased sales volume and
a tight control on expenses, EXFO expects to deliver a
significant improvement in adjusted EBITDA in 2013.
-- On the innovation front, EXFO launched five new products,
including the next-generation BV-110 service assurance probe
that enables network operators to validate service-level
agreements and end-user quality of experience (QoE) at customer
premises and cell sites. It fully complements the recently
launched BV-3100 hardware probe, which allows operators to
accelerate Ethernet deployments in wireless backhaul and metro
networks. The company also strengthened its FTB Ecosystem and
EXFO Connect initiative with the introduction of FTB Anywhere,
a unique cloud-based solution allowing an operator to share
software licenses among its fleet of FTB platforms to avoid
costly delays in shipping units across large geographies.
Business Outlook
EXFO forecasts sales between US$62.0 million and US$67.0 million for the
second quarter of fiscal 2013, while IFRS net loss is expected to range
between US$0.04 and US$0.00 per share. Net loss includes US$0.04 per
share in after-tax amortization of intangible assets and stock-based
compensation costs.
This guidance was established by management based on existing backlog as of the date of this press release, 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 its financial results for the first quarter of fiscal 2013. To
listen to the conference call and participate in the question period
via telephone, dial 1-416-981-9005. 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 one hour after the event until 7 p.m. on January 16, 2013.
The replay number is 1-402-977-9141 and the reservation number
is 21620458. 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
Listed on the NASDAQ and TSX stock exchanges, EXFO is among the leading
providers of next-generation test and service assurance solutions for
wireline and wireless network operators and equipment manufacturers in
the global telecommunications industry. The company offers innovative
solutions for the development, installation, management and maintenance
of converged, IP fixed and mobile networks--from the core to the edge.
Key technologies supported include 3G, 4G/LTE, IMS, Ethernet, OTN,
FTTx, VDSL2, ADSL2+ and various optical technologies accounting for
more than 35% of the portable fiber-optic test market. EXFO has a staff
of approximately 1700 people in 25 countries, supporting more than 2000
telecom customers worldwide. For more information, visit www.EXFO.com.
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, will, expect, believe, anticipate, intend, could,
estimate, continue, or the negative or comparable terminology are
intended to identify forward-looking statements. In addition,
any statements that refer 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 macro-economic uncertainty and/or recession
(including our ability to quickly adapt cost structures with
anticipated levels of business and our ability to manage inventory
levels with market demand); capital spending and network deployment
levels in the telecommunications industry; future economic,
competitive, financial and market conditions; limited visibility with
regards to customer orders and the timing of such orders; fluctuating
exchange rates; consolidation in the global telecommunications test and
service assurance industry and increased competition among vendors;
concentration of sales; timely release and market acceptance of our new
products and other upcoming products; our ability to successfully
integrate our acquired and to-be-acquired businesses; our ability to
successfully expand international operations; 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 you 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 (gross margin* and adjusted EBITDA**) as
supplemental information regarding its operational performance. The
company uses these measures for the purposes of evaluating
its historical and prospective financial performance, as well as its
performance relative to competitors. These measures also help the
company to plan and forecast 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 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.
* Gross margin represents sales less cost of sales, excluding depreciation and amortization.
** Adjusted EBITDA is defined as net earnings (loss) before interest, income taxes, depreciation of property, plant and equipment, amortization of intangible assets, restructuring charges, stock-based compensation costs and foreign exchange gain (loss).
The following tables summarize the reconciliation of adjusted EBITDA to IFRS net earnings (loss), in thousands of US dollars:
Adjusted EBITDA
Three months Three months Three months
ended ended ended
November 30, August 31, November 30,
2012 2012 2011
IFRS net earnings (loss) $ (1,638) $ (3,714) $ 2,887
for the period
Add (deduct):
Depreciation of property, 1,605 1,535 1,568
plant and equipment
Amortization of 1,962 1,931 1,921
intangible assets
Interest (income) (33) (63) 71
expenses
Income taxes 1,132 159 1,134
Restructuring charges 2,329
Stock-based compensation 448 429 555
costs
Foreign exchange (gain) (756) 1,940 (1,664)
loss
Adjusted EBITDA for the $ 2,720 $ 4,546 $ 6,472
period
Adjusted EBITDA in 4.5% 8.0% 9.7%
percentage of sales
EXFO Inc.
Condensed Unaudited Interim Consolidated Balance Sheets
(in thousands of US dollars)
As at As at
November 30, August 31,
2012 2012
Assets
Current assets
Cash $ 50,818 $ 58,868
Short-term investments 8,171 8,236
Accounts receivable
Trade 45,701 37,643
Other 3,773 4,283
Income taxes and tax credits recoverable 8,597 9,024
Inventories 41,065 41,212
Prepaid expenses 3,415 3,800
161,540 163,066
Tax credits recoverable 40,511 38,397
Property, plant and equipment 49,045 49,848
Intangible assets 12,214 14,132
Goodwill 28,958 29,160
Deferred income taxes 11,946 12,080
$ 304,214 $ 306,683
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 35,202 $ 32,392
Provisions 853 952
Income taxes payable 1,068 917
Current portion of long-term debt 583 565
Deferred revenue 9,348 10,583
47,054 45,409
Deferred revenue 4,596 4,997
Long-term debt 291 282
Other liabilities 413 609
Deferred income taxes 2,609 2,105
54,963 53,402
Shareholders' equity
Share capital 110,835 110,965
Contributed surplus 16,950 17,298
Retained earnings 109,873 111,511
Accumulated other comprehensive income 11,593 13,507
249,251 253,281
$ 304,214 $ 306,683
EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Earnings
(in thousands of US dollars, except share and per share data)
Three months ended
November 30,
2012 2011
Sales $ 59,821 $ 66,388
Cost of sales(1) 23,657 23,370
Selling and administrative 22,290 24,618
Net research and development 11,602 12,483
Depreciation of property, plant and 1,605 1,568
equipment
Amortization of intangible assets 1,962 1,921
Earnings (loss) from operations (1,295) 2,428
Interest income (expenses) 33 (71)
Foreign exchange gain 756 1,664
Earnings (loss) before income taxes (506) 4,021
Income taxes 1,132 1,134
Net earnings (loss) for the period $ (1,638) $ 2,887
Basic and diluted net earnings (loss) $ (0.03) $ 0.05
per share
Basic weighted average number of shares 60,389 60,341
outstanding (000's)
Diluted weighted average number of 60,389 61,763
shares outstanding (000's)
(1) The cost of sales is exclusive of depreciation and amortization, shown separately.
EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Comprehensive
Loss
(in thousands of US dollars)
Three months ended
November 30,
2012 2011
Net earnings (loss) for the period $ (1,638) $ 2,887
Other comprehensive income (loss), net of
income taxes
Items that will not be reclassified
subsequently to net earnings
Foreign currency translation adjustment (1,708) (11,827)
Items that may be reclassified subsequently to
net earnings
Unrealized gains on forward exchange (83) (819)
contracts
Reclassification of realized gains on
forward exchange contracts in net earnings
(loss) (199) (625)
Deferred income tax effect of gains on 76 395
forward exchange contracts
(206) (1,049)
Other comprehensive loss (1,914) (12,876)
Comprehensive loss for the period $ (3,552) $ (9,989)
EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity
(in thousands of US dollars)
Three months ended November 30, 2011
Accumulated
other Total
Share Contributed Retained comprehensive shareholders'
Capital Surplus earnings income equity
Balance as at $ 110,341 $ 18,017 $ 115,104 $ 21,049 $ 264,511
September 1,
2011
Redemption of (244) (119) - - (363)
share capital
Reclassification 848 (848) - - -
of stock-based
compensation
costs
Stock-based - 489 - - 489
compensation
costs
Net earnings for - - 2,887 - 2,887
the period
Other
comprehensive
loss
Foreign - - - (11,827) (11,827)
currency
translation
adjustment
Changes in
unrealized
gains on
forward
exchange
contracts, net
of deferred
income taxes
of $395 - - - (1,049) (1,049)
Total - - 2,887 (12,876) (9,989)
comprehensive
income (loss)
for the period
Balance as at $ 110,945 $ 17,539 $ 117,991 $ 8,173 $ 254,648
November 30,
2011
Three months ended November 30, 2012
Accumulated
other Total
Share Contributed Retained comprehensive shareholders'
Capital Surplus earnings income equity
Balance as at $ 110,965 $ 17,298 $ 111,511 $ 13,507 $ 253,281
September 1,
2012
Exercise of 51 - - - 51
stock options
Redemption of (793) (180) - - (973)
share capital
Reclassification 612 (612) - - -
of stock-based
compensation
costs
Stock-based - 444 - - 444
compensation
costs
Net loss for the - - (1,638) - (1,638)
period
Other
comprehensive
loss
Foreign - - - (1,708) (1,708)
currency
translation
adjustment
Changes in
unrealized
gains on
forward
exchange
contracts, net
of deferred
income taxes
of $76 - - - (206) (206)
Total - - (1,638) (1,914) (3,552)
comprehensive
loss for the
period
Balance as at $ 110,835 $ 16,950 $ 109,873 $ 11,593 $ 249,251
November 30,
2012
EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
Three months ended
November 30,
2012 2011
Cash flows from operating activities
Net earnings (loss) for the period $ (1,638) $ 2,887
Add (deduct) items not affecting cash
Change in discount on short-term investments 2 31
Stock-based compensation costs 448 555
Depreciation and amortization 3,567 3,489
Deferred revenue (1,531) (1,141)
Deferred income taxes 733 718
Change in foreign exchange gain/loss (23) (1,214)
1,558 5,325
Change in non-cash operating items
Accounts receivable (8,104) (2,897)
Income taxes and tax credits (1,873) 172
Inventories (160) 593
Prepaid expenses 359 15
Accounts payable, accrued liabilities and 3,637 3,397
provisions
Other liabilities (195) (61)
(4,778) 6,544
Cash flows from investing activities
Additions to short-term investments (24,533) (57,922)
Proceeds from disposal and maturity of 24,527 90,779
short-term investments
Additions to capital assets (1,989) (4,486)
(1,995) 28,371
Cash flows from financing activities
Bank loan - (785)
Exercise of stock options 51 -
Redemption of share capital (973) (363)
(922) (1,148)
Effect of foreign exchange rate changes on (355) (368)
cash
Change in cash (8,050) 33,399
Cash - Beginning of the period 58,868 22,771
Cash - End of the period $ 50,818 $ 56,170
SOURCE EXFO INC.
