- Sales reach US$66.4 M and bookings US$71.4 M for book-to-bill ratio of 1.08
- Gross margin* improves to 64.8% on increased sales year-over-year of Protocol solutions
- Adjusted EBITDA** amounts to US$7.6 M, or 11.4% of sales
QUEBEC CITY, Jan. 11, 2012 /CNW Telbec/ - EXFO Inc. (NASDAQ: EXFO; TSX: EXF) reported today financial results for the first quarter ended November 30, 2011.
Sales reached US$66.4 million in the first quarter of fiscal 2012 compared to US$65.7 million in the first quarter of 2011 and US$64.4 million in the fourth quarter of 2011.
Bookings attained US$71.4 million in the first quarter of fiscal 2012 compared to US$89.8 million in the same period last year and US$62.5 million in the fourth quarter of 2011. The company's book-to-bill ratio was 1.08 in the first quarter of 2012.
Gross margin* improved to 64.8% of sales in the first quarter of fiscal 2012 from 62.2% in the first quarter of 2011 and 63.6% in the fourth quarter of 2011.
IFRS net earnings in the first quarter of fiscal 2012 totaled US$2.9 million, or US$0.05 per diluted share, compared to US$14.1 million, or US$0.23 per diluted share, in the same period last year and US$4.6 million, or US$0.08 per diluted share, in the fourth quarter of 2011. It should be noted that EXFO recorded an after-tax gain of US$13.1 million, or US$0.21 per diluted share, from the disposal of discontinued operations (Life Sciences and Industrial Division) in the first quarter of 2011. Net earnings in the first quarter of 2012 included US$1.9 million in after-tax amortization of intangible assets and US$0.6 million in stock-based compensation costs.
Adjusted EBITDA** amounted to US$7.6 million, or 11.4% of sales, in the first quarter of fiscal 2012 compared to US$8.2 million, or 12.1% of sales, in the first quarter of 2011 and US$6.9 million, or 10.8% of sales, in the fourth quarter of 2011. EXFO benefited from a foreign exchange gain of US$1.7 million in the first quarter of 2012.
"I am pleased with our second-highest bookings level in company history," said Germain Lamonde, EXFO's Chairman, President and CEO. "We also raised our gross margin close to our target of 65% on higher sales of software-intensive Protocol solutions and increased year-over-year sales across our main product groups with the exception of Copper Access which had benefited from a multi-million dollar, lower-margin order last year. These data points combined to generate healthy profitability in the first quarter of 2012 despite an uncertain global economic environment. I believe that our strategy to push ahead with game-changing solutions and a more aggressive access to key markets will pay off in the second half of the fiscal year, which is typically our strongest."
Selected Financial Information
(In thousands of US dollars)
| Q1 2012 | Q4 2011 | Q1 2011 | |||||||
| Sales: | |||||||||
| Continuing operations (formerly Telecom Div.) | $ | 66,388 | $ | 64,414 | $ | 65,653 | |||
| Discontinued operations (formerly Life Sciences & Industrial Div.) | − | − | 1,991 | ||||||
| Total | $ | 66,388 | $ | 64,414 | $ | 67,644 | |||
| Gross margin*: | |||||||||
| Continuing operations | $ | 43,018 | $ | 40,967 | $ | 40,868 | |||
| 64.8% | 63.6% | 62.2% | |||||||
| Discontinued operations | $ | − | $ | − | $ | 989 | |||
| −% | −% | 49.7% | |||||||
| Total | $ | 43,018 | $ | 40,967 | $ | 41,857 | |||
| 64.8% | 63.6% | 61.9% | |||||||
| Other selected information: | |||||||||
| IFRS net earnings | $ | 2,914 | $ | 4,638 | $ | 14,133 | |||
| Amortization of intangible assets | $ | 1,921 | $ | 2,122 | $ | 2,570 | |||
| Stock-based compensation costs | $ | 555 | $ | 461 | $ | 738 | |||
| Changes in the fair value of the cash contingent consideration | $ | − | $ | (2,685) | $ | − | |||
| Net income tax effect of the above items | $ | (30) | $ | (60) | $ | (192) | |||
| After-tax gain on the disposal of discontinued operations | $ | − | $ | − | $ | (13,071) | |||
| Foreign exchange gain (loss) | $ | 1,664 | $ | (57) | $ | (1,113) | |||
| Adjusted EBITDA** | $ | 7,581 | $ | 6,925 | $ | 8,188 | |||
Operating Expenses
Selling and administrative expenses totaled US$24.6 million, or 37.1% of sales, in the first quarter of fiscal 2012 compared to US$19.9 million, or 30.3% of sales, in the same period last year and US$21.8 million, or 33.9% of sales, in the fourth quarter of 2011.
Gross research and development expenses amounted to US$14.8 million, or 22.3.% of sales, in the first quarter of fiscal 2012 compared to US$13.7 million, or 20.9% of sales, in the first quarter of 2011 and US$14.3 million, or 22.3% of sales, in the fourth quarter of 2011.
Net R&D expenses totaled US$12.5 million, or 18.8% of sales, in the first quarter of fiscal 2012 compared to US$11.6 million, or 17.7% of sales, in the same period last year and US$12.1 million, or 18.8% of sales, in the fourth quarter of 2011.
First-Quarter Business Highlights
- EXFO achieved its second-highest bookings level (US$71.4 million) in company history based on strong results from the Protocol and Optical product lines especially in the Americas. The company obtained multiple contract wins for 4G/LTE simulators, analyzers and service assurance solutions, including the announced win with Finnish network operator DNA for the BrixHawk Service Assurance solution that combines Brix and NetHawk's technologies to deliver unique monitoring and reporting capabilities. Also, shortly after the quarter-end, EXFO received a follow-on order in excess of US$1.8 million from a Tier-1 North American network operator for the AXS-200/635 Triple-Play Tester.
- EXFO's top customer accounted for 4.3% of sales in the first quarter, while the top three represented 10.2%. Global sales were diversified with 55% originating from the Americas, 27% from Europe, Middle East and Africa (EMEA), and 18% from Asia-Pacific.
- EXFO launched five new products in the first quarter, including the BrixHawk Distributed Analyzer for live mobile network troubleshooting and service optimization; key enhancements to the FTB Ecosystem (FTB-1, FTB-200 and FTB-500) with expanded software capabilities like 3G and GPS as well as improved functionalities for EXFO Connect; and the release of the FTB-85100G Packet Blazer, a multi-rate, multi-service test solution for characterizing high-speed networks reaching 100G.
Profitable Growth
EXFO generated adjusted EBITDA** of US$7.6 million (11.4% of sales) in the first quarter of fiscal 2012 on revenue of US$66.4 million. Foreign exchange losses or gains are included in adjusted EBITDA**. See the section below entitled "Non-IFRS Financial Measures" for a reconciliation of adjusted EBITDA** to IFRS net earnings.
Business Outlook
EXFO forecasts sales between US$65.0 million and US$70.0 million for the second quarter of fiscal 2012, while net earnings are expected to range between US$0.00 and US$0.04 per diluted share. Net earnings include 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 2012. To listen to the conference call and participate in the question period via telephone, dial 1-416-981-9072. Germain Lamonde, Chairman, President and CEO, and Pierre Plamondon, 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 18, 2012. The replay number is 1-402-977-9141 and the reservation number is 21562094. 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 wireless and wireline 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, and various optical technologies (accounting for an estimated 35% of the portable fiber-optic test market). EXFO has a staff of approximately 1800 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 our forward-looking statements due to various factors including economic uncertainty (including our ability to quickly adapt cost structures with anticipated levels of business, ability to manage inventory levels with market demand); future economic, competitive, financial and market conditions; capital spending levels in the telecommunications industry; limited visibility with regards to customer orders and the timing of such orders; fluctuating exchange rates; our ability to successfully integrate our acquired and to-be-acquired businesses; consolidation in the global telecommunications test and service assurance industry and increased competition among vendors; concentration of sales; market acceptance of our new products and other upcoming products; 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 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 press release. 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 Financial Measures
EXFO provides non-IFRS financial measures (gross margin*, EBITDA** and adjusted EBITDA**) as supplemental information regarding its operational performance. The company uses these measures for the purpose 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 for future periods as well as to make operational and strategic decisions. EXFO believes that providing this information to investors, in addition to IFRS measures, allows them 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.
| * | Gross margin represents sales less cost of sales, excluding depreciation and amortization. |
| ** | EBITDA is defined as net earnings before interest, income taxes, depreciation of property, plant and equipment, and amortization of intangible assets. Adjusted EBITDA represents EBITDA excluding changes in the fair value of the cash contingent consideration and the gain from the disposal of discontinued operations. |
The following table summarizes the reconciliation of EBITDA and adjusted EBITDA to IFRS net earnings in thousands of US dollars:
EBITDA and adjusted EBITDA (including discontinued operations)
| Three months ended November 30, 2011 |
Three months ended August 31, 2011 |
Three months ended November 30, 2010 |
|||||||
| IFRS net earnings for the period | $ | 2,914 | $ | 4,638 | $ | 14,133 | |||
| Add (deduct): | |||||||||
| Depreciation of property, plant and equipment | |||||||||
| Continuing operations | 1,568 | 1,667 | 1,646 | ||||||
| Discontinued operations | - | - | 14 | ||||||
| Amortization of intangible assets | |||||||||
| Continuing operations | 1,921 | 2,122 | 2,566 | ||||||
| Discontinued operations | - | - | 4 | ||||||
| Interest expenses (income) | |||||||||
| Continuing operations | 27 | (77) | 7 | ||||||
| Income taxes | |||||||||
| Continuing operations | 1,151 | 1,260 | 2,829 | ||||||
| Discontinued operations | - | - | 201 | ||||||
| EBITDA for the period | 7,581 | 9,610 | 21,400 | ||||||
| Change in the fair value of the cash contingent consideration (continuing operations) |
- | (2,685) | - | ||||||
| Gain on disposal of discontinued operations | - | - | (13,212) | ||||||
| Adjusted EBITDA for the period | $ | 7,581 | $ | 6,925 | $ | 8,188 | |||
| Adjusted EDITDA in percentage of total sales | 11.4% | 10.8 % | 12.1 % | ||||||
|
EXFO Inc. (in thousands of US dollars) |
|||||||||
| As at November 30, 2011 |
As at August 31, 2011 |
As at September 1, 2010 |
|||||||
| Assets | |||||||||
| Current assets | |||||||||
| Cash | $ | 56,170 | $ | 22,771 | $ | 21,440 | |||
| Short-term investments | 12,123 | 47,091 | 10,379 | ||||||
| Accounts receivable | |||||||||
| Trade | 46,444 | 45,151 | 50,190 | ||||||
| Other | 5,080 | 6,329 | 5,217 | ||||||
| Income taxes and tax credits recoverable | 5,930 | 5,414 | 2,604 | ||||||
| Inventories | 50,001 | 52,754 | 40,328 | ||||||
| Prepaid expenses | 3,084 | 3,237 | 2,816 | ||||||
| Current assets held for sale | - | - | 3,769 | ||||||
| 178,832 | 182,747 | 136,743 | |||||||
| Tax credits recoverable | 31,835 | 34,120 | 26,887 | ||||||
| Forward exchange contracts | - | 149 | - | ||||||
| Property, plant and equipment | 33,523 | 32,076 | 24,730 | ||||||
| Intangible assets | 19,817 | 22,901 | 27,947 | ||||||
| Goodwill | 29,353 | 30,942 | 29,355 | ||||||
| Deferred income taxes | 16,977 | 17,314 | 19,408 | ||||||
| Long-term assets held for sale | - | - | 7,530 | ||||||
| $ | 310,337 | $ | 320,249 | $ | 272,600 | ||||
| Liabilities | |||||||||
| Current liabilities | |||||||||
| Bank loan | $ | - | $ | 784 | $ | - | |||
| Accounts payable and accrued liabilities | 32,960 | 30,320 | 29,943 | ||||||
| Provisions | 1,829 | 1,817 | 927 | ||||||
| Income taxes payable | 821 | 876 | 426 | ||||||
| Contingent liability | 316 | 338 | - | ||||||
| Current portion of long-term debt | 603 | 645 | 568 | ||||||
| Deferred revenue | 9,087 | 10,590 | 10,354 | ||||||
| Current liabilities related to assets held for sale | - | - | 2,531 | ||||||
| 45,616 | 45,370 | 44,749 | |||||||
| Deferred revenue | 5,409 | 5,704 | 5,775 | ||||||
| Long-term debt | 904 | 968 | 1,419 | ||||||
| Contingent liability | - | - | 2,660 | ||||||
| Other liabilities | 632 | 723 | 603 | ||||||
| Deferred income taxes | 4,856 | 4,803 | - | ||||||
| Long-term liabilities related to assets held for sale | - | - | 537 | ||||||
| 57,417 | 57,568 | 55,743 | |||||||
| Shareholders' equity | |||||||||
| Share capital | 110,945 | 110,341 | 106,126 | ||||||
| Contributed surplus | 17,658 | 18,017 | 18,563 | ||||||
| Retained earnings | 116,233 | 113,438 | 91,152 | ||||||
| Accumulated other comprehensive income | 8,084 | 20,885 | 1,016 | ||||||
| 252,920 | 262,681 | 216,857 | |||||||
| $ | 310,337 | $ | 320,249 | $ | 272,600 | ||||
| EXFO Inc. (in thousands of US dollars, except share and per share data) |
|||||
| Three months ended November 30, |
|||||
| 2011 | 2010 | ||||
| Sales | $ | 66,388 | $ | 65,653 | |
| Cost of sales (1) | 23,370 | 24,785 | |||
| Selling and administrative | 24,618 | 19,899 | |||
| Net research and development | 12,483 | 11,601 | |||
| Depreciation of property, plant and equipment | 1,568 | 1,646 | |||
| Amortization of intangible assets | 1,921 | 2,566 | |||
| Earnings from operations | 2,428 | 5,156 | |||
| Interest expenses | (27) | (7) | |||
| Foreign exchange gain (loss) | 1,664 | (1,113) | |||
| Earnings before income taxes | 4,065 | 4,036 | |||
| Income taxes | 1,151 | 2,829 | |||
| Net earnings from continuing operations | 2,914 | 1,207 | |||
| Net earnings from discontinued operations | - | 12,926 | |||
| Net earnings for the period | $ | 2,914 | $ | 14,133 | |
| Basic and diluted net earnings from continuing operations per share | $ | 0.05 | $ | 0.02 | |
| Basic net earnings from discontinued operations per share | $ | - | $ | 0.22 | |
| Diluted net earnings from discontinued operations per share | $ | - | $ | 0.21 | |
| Basic net earnings per share | $ | 0.05 | $ | 0.24 | |
| Diluted net earnings per share | $ | 0.05 | $ | 0.23 | |
| Basic weighted average number of shares outstanding (000's) | 60,341 | 59,665 | |||
| Diluted weighted average number of shares outstanding (000's) | 61,763 | 61,106 | |||
(1) The cost of sales is exclusive of depreciation and amortization, shown separately.
| EXFO Inc. (in thousands of US dollars) |
||||||
| Three months ended November 30, |
||||||
| 2011 | 2010 | |||||
| Net earnings for the period | $ | 2,914 | $ | 14,133 | ||
| Other comprehensive income (loss), net of income taxes | ||||||
| Foreign currency translation adjustment | (11,752) | 6,227 | ||||
| Unrealized gains on forward exchange contracts | (819) | 1,444 | ||||
| Reclassification of realized gains on forward exchange contracts in net earnings | (625) | (189) | ||||
| Deferred income tax effect of the components of other comprehensive Income (loss) |
395 | (338) | ||||
| Other comprehensive income (loss) | (12,801) | 7,144 | ||||
| Comprehensive income (loss) for the period | $ | (9,887) | $ | 21,277 | ||
| EXFO Inc. (in thousands of US dollars) |
|||||||||||||||
| Three months ended November 30, 2010 | |||||||||||||||
| Share capital |
Contributed surplus | Retained earnings | Accumulated other comprehensive income |
Total shareholders' equity |
|||||||||||
| Balance as at September 1, 2010 | $ | 106,126 | $ | 18,563 | $ | 91,152 | $ | 1,016 | $ | 216,857 | |||||
| Exercise of stock options | 61 | - | - | - | 61 | ||||||||||
| Reclassification of stock-based compensation costs | 861 | (861) | - | - | - | ||||||||||
| Stock-based compensation costs | - | 725 | - | - | 725 | ||||||||||
| Net earnings for the period | - | - | 14,133 | - | 14,133 | ||||||||||
| Other comprehensive income | |||||||||||||||
| Foreign currency translation adjustment | - | - | - | 6,227 | 6,227 | ||||||||||
| Changes in unrealized gains on forward exchange contracts, net of deferred income taxes of $338 | - | - | - | 917 | 917 | ||||||||||
| Total comprehensive income for the period | - | - | - | 7,144 | 7,144 | ||||||||||
| Balance as at November 30, 2010 | $ | 107,048 | $ | 18,427 | $ | 105,285 | $ | 8,160 | $ | 238,920 | |||||
| Three months ended November 30, 201 | |||||||||||||||
| Share Capital |
Contributed Surplus | Retained earnings | Accumulated other comprehensive income |
Total shareholders' equity |
|||||||||||
| Balance as at September 1, 2011 | $ | 110,341 | $ | 18,017 | $ | 113,438 | $ | 20,885 | $ | 262,681 | |||||
| Reclassification of stock-based compensation costs | 848 | (848) | - | - | - | ||||||||||
| Redemption of share capital | (244) | - | (119) | - | (363) | ||||||||||
| Stock-based compensation costs | - | 489 | - | - | 489 | ||||||||||
| Net earnings for the period | - | - | 2,914 | - | 2,914 | ||||||||||
| Other comprehensive loss | |||||||||||||||
| Foreign currency translation adjustment | - | - | - | (11,752) | (11,752) | ||||||||||
| Changes in unrealized gains on forward exchange contracts, net of deferred income taxes of $395 | - | - | - | (1,049) | (1,049) | ||||||||||
| Total comprehensive loss for the period | - | - | - | (12,801) | (12,801) | ||||||||||
| Balance as at November 30, 2011 | $ | 110,945 | $ | 17,658 | $ | 116,233 | $ | 8,084 | $ | 252,920 | |||||
| EXFO Inc. (in thousands of US dollars) |
|||||||
| Three months ended November 30, | |||||||
| 2011 | 2010 | ||||||
| Cash flows from operating activities | |||||||
| Net earnings for the period | $ | 2,914 | $ | 14,133 | |||
| Add (deduct) items not affecting cash | |||||||
| Change in discount on short-term investments | 31 | (18) | |||||
| Stock-based compensation costs | 555 | 738 | |||||
| Depreciation and amortization | 3,489 | 4,230 | |||||
| Gain on disposal of discontinued operations | - | (13,212) | |||||
| Deferred revenue | (1,141) | (2,571) | |||||
| Deferred income taxes | 735 | 1,990 | |||||
| Foreign exchange gain/loss | (1,214) | 537 | |||||
| 5,369 | 5,827 | ||||||
| Change in non-cash operating items | |||||||
| Accounts receivable | (2,897) | (4,480) | |||||
| Income taxes and tax credits | 128 | (1,059) | |||||
| Inventories | 593 | (1,362) | |||||
| Prepaid expenses | 15 | (385) | |||||
| Accounts payable, accrued liabilities and provisions | 3,397 | (1,224) | |||||
| Other liabilities | (61) | 135 | |||||
| 6,544 | (2,548) | ||||||
| Cash flows from investing activities | |||||||
| Additions to short-term investments | (57,922) | (226,146) | |||||
| Proceeds from disposal and maturity of short-term investments | 90,779 | 209,605 | |||||
| Additions to capital assets | (4,486) | (1,979) | |||||
| Net proceeds from disposal of discontinued operations | - | 22,124 | |||||
| Business combination | - | (132) | |||||
| 28,371 | 3,472 | ||||||
| Cash flows from financing activities | |||||||
| Bank loan | (785) | - | |||||
| Exercise of stock options | - | 61 | |||||
| Redemption of share capital | (363) | - | |||||
| (1,148) | 61 | ||||||
| Effect of foreign exchange rate changes on cash | (368) | 344 | |||||
| Change in cash | 33,399 | 1,329 | |||||
| Cash - Beginning of the period | 22,771 | 22,109 | |||||
| Cash - End of the period | $ | 56,170 | $ | 23,438 | |||
For further information:
Vance Oliver
Manager, Investor Relations
(418) 683-0913, Ext. 23733
vance.oli[email protected]
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