- Sales reach US$51.2 million
- Bookings attain US$58.7 million (book-to-bill ratio of 1.15)
- Cash flows from operating activities total US$3.6 million
QUEBEC CITY, March 25, 2014 /CNW Telbec/ - EXFO Inc. (NASDAQ: EXFO; TSX: EXF) reported today financial results for the second quarter ended February 28, 2014.
Sales reached US$51.2 million in the second quarter of fiscal 2014 compared to US$62.6 million in the second quarter of 2013 and US$56.0 million in the first quarter of 2014.
Bookings attained US$58.7 million in the second quarter of fiscal 2014 compared to US$53.4 million in the same period last year and US$57.9 million in the first quarter of 2014. The company's book-to-bill ratio was 1.15 in the second quarter of 2014.
Gross margin* amounted to 60.8% of sales in the second quarter of fiscal 2014 compared to 62.2% in both the second quarter of 2013 and the first quarter of 2014.
IFRS net loss in the second quarter of fiscal 2014 totaled US$1.3 million, or US$0.02 per share, compared to net earnings of US$39,000, or US$0.00 per diluted share, in the same period last year and a net loss of US$0.7 million, or US$0.01 per share, in the first quarter of 2014. IFRS net loss in the second quarter of 2014 included US$1.0 million in after-tax amortization of intangible assets, US$0.4 million in stock-based compensation costs and a foreign exchange gain of US$2.3 million.
Adjusted EBITDA** totaled -US$1.0 million, or -2.0% of sales, in the second quarter of fiscal 2014 compared to US$4.4 million, or 7.1% of sales, in the second quarter of 2013 and US$2.3 million, or 4.1% of sales, in the first quarter of 2014.
"Although we experienced some timing issues in the second quarter, I am pleased our bookings increased sequentially and 10.0% year-over-year to significantly strengthen our backlog," said Germain Lamonde, EXFO's Chairman, President and CEO. "As a result, we ended the first half of fiscal 2014 with relatively flat bookings year-over-year and a book-to-bill ratio of 1.09, but clearly with better order momentum. Given the strength of our recently launched technology platforms, including wireless and high-speed solutions, we are witnessing increases in our sales funnel, tier-1 customer engagements and larger projects. Consequently, I am confident EXFO has reached an important tipping point which bodes well for the second half of fiscal 2014."
Selected Financial Information
(In thousands of US dollars)
| Q2 2014 | Q1 2014 | Q2 2013 | ||||||||
| Sales | $ | 51,179 | $ | 56,003 | $ | 62,576 | ||||
| Gross margin* | $ | 31,106 | $ | 34,818 | $ | 38,912 | ||||
| 60.8% | 62.2% | 62.2% | ||||||||
| Other selected information: | ||||||||||
| IFRS net earnings (loss) | $ | (1,339) | $ | (747) | $ | 39 | ||||
| Amortization of intangible assets | $ | 1,074 | $ | 1,182 | $ | 1,922 | ||||
| Stock-based compensation costs | $ | 402 | $ | 463 | $ | 468 | ||||
| Restructuring charges | $ | ‒ | $ | ‒ | $ | 89 | ||||
| Net income tax effect of the above items | $ | (64) | $ | (67) | $ | (95) | ||||
| Foreign exchange gain | $ | 2,292 | $ | 802 | $ | 1,700 | ||||
| Adjusted EBITDA** | $ | (1,002) | $ | 2,292 | $ | 4,435 | ||||
Operating Expenses
Selling and administrative expenses totaled US$21.5 million, or 42.1% of sales in the second quarter of fiscal 2014 compared to US$23.1 million, or 36.9% of sales, in the same period last year and US$21.7 million, or 38.8% of sales, in the first quarter of 2014.
Gross research and development expenses amounted to US$13.0 million, or 25.5% of sales, in the second quarter of fiscal 2014 compared to US$14.1 million, or 22.6% of sales, in the second quarter of 2013 and US$13.3 million, or 23.8% of sales, in the first quarter of 2014.
Net R&D expenses totaled US$11.0 million, or 21.4% of sales, in the second quarter of fiscal 2014 compared to US$12.0 million, or 19.1% of sales, in the same period last year and US$11.3 million, or 20.1% of sales, in the first quarter of 2014.
Second-Quarter Highlights
- Sales. Sales originated 45% from the Americas, 32% from EMEA, and 23% from Asia-Pacific in the second quarter of 2014. EXFO's top customer accounted for 6.9% of sales in the second quarter, while the top three represented 13.1%. Second-quarter bookings increased 10.0% year-over-year and 1.4% sequentially to US$58.7 million. At the halfway mark of fiscal 2014, bookings totaled US$116.6 million compared to US$117.7 million during the same period in 2013.
- Profitability. EXFO reported adjusted EBITDA of US$1.3 million (1.2% of sales) after six months into fiscal 2014 compared to US$7.2 million (5.8% of sales) during the same period in 2013 due to lower revenues. Cash flows from operating activities totaled US$7.0 million at the halfway mark of fiscal 2014 compared to -US$2.7 million during the same period in 2013. EXFO's cash position amounted to US$51.7 million with no debt at the end of the second quarter of 2014.
- Innovation. EXFO launched seven new products in the second quarter, including an end-to-end voice-over-LTE (VoLTE) service assurance suite that enables mobile operators to proactively monitor and assure quality of experience (QoE) of critical VoLTE deployments that are about to get underway. EXFO also introduced the industry's first polarization-multiplexed (Pol-Mux) optical spectrum analyzer to characterize 40G and 100G coherent networks; released a fully automated fiber inspection probe, the first in the industry to integrate auto-focus capabilities, thus eliminating costly false positive results and reducing fiber connector inspection time by more than 50%; and expanded its multi-service Power Blazer offering by adding bidirectional EtherSAM capabilities on all 10M to 100G Ethernet interfaces. Altogether, EXFO released 16 new products or major product upgrades at the halfway mark of fiscal 2014.
Business Outlook
EXFO forecasts sales between US$60.0 million and US$65.0 million for the third quarter of fiscal 2014, while IFRS net earnings are expected to range between US$0.00 and US$0.04 per diluted share. Net earnings include US$0.02 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 second quarter of fiscal 2014. To listen to the conference call and participate in the question period via telephone, dial 1-416-981-9095. 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 April 1, 2014. The replay number is 1-402-977-9141 and the reservation number is 21709023. 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 1600 people in 25 countries, supporting more than 2000 customers worldwide. For more information, visit www.EXFO.com and follow us on the EXFO Blog, Twitter, LinkedIn, Facebook, Google+ and YouTube.
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 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; limited visibility with regards to customer orders and the timing of such orders; fluctuating exchange rates; 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 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.
* Gross margin before depreciation and amortization represents sales less cost of sales, excluding depreciation and amortization.
** Adjusted EBITDA represents net earnings (loss) before interest, income taxes, depreciation and amortization, restructuring charges, stock-based compensation costs and foreign exchange gain.
The following table summarizes the reconciliation of adjusted EBITDA to IFRS net earnings (loss), in thousands of US dollars:
Adjusted EBITDA
| Q2 2014 | Q1 2014 | Q2 2013 | |||||||
| IFRS net earnings (loss) for the period | $ | (1,339) | $ | (747) | $ | 39 | |||
| Add (deduct): | |||||||||
| Depreciation of property, plant and equipment | 1,243 | 1,275 | 1,504 | ||||||
| Amortization of intangible assets | 1,074 | 1,182 | 1,922 | ||||||
| Interest (income) expenses | (49) | (27) | 25 | ||||||
| Income taxes | (41) | 948 | 2,088 | ||||||
| Restructuring charges | ‒ | ‒ | 89 | ||||||
| Stock-based compensation costs | 402 | 463 | 468 | ||||||
| Foreign exchange gain | (2,292) | (802) | (1,700) | ||||||
| Adjusted EBITDA for the period | $ | (1,002) | $ | 2,292 | $ | 4,435 | |||
| Adjusted EBITDA in percentage of sales | (2.0)% | 4.1% | 7.1% |
EXFO Inc.
Condensed Unaudited Interim Consolidated Balance Sheets
(in thousands of US dollars)
| As at February 28, 2014 |
As at August 31, 2013 |
|||||
| Assets | ||||||
| Current assets | ||||||
| Cash | $ | 47,064 | $ | 45,386 | ||
| Short-term investments | 4,641 | 4,868 | ||||
| Accounts receivable | ||||||
| Trade | 43,511 | 50,117 | ||||
| Other | 2,525 | 2,778 | ||||
| Income taxes and tax credits recoverable | 5,511 | 6,525 | ||||
| Inventories | 37,280 | 35,705 | ||||
| Prepaid expenses | 3,035 | 2,561 | ||||
| 143,567 | 147,940 | |||||
| Tax credits recoverable | 40,994 | 41,719 | ||||
| Property, plant and equipment | 42,852 | 45,523 | ||||
| Intangible assets | 5,539 | 7,543 | ||||
| Goodwill | 25,969 | 27,313 | ||||
| Deferred income taxes | 11,136 | 10,807 | ||||
| Other assets | 693 | 693 | ||||
| $ | 270,750 | $ | 281,538 | |||
| Liabilities | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities | $ | 31,267 | $ | 26,253 | ||
| Provisions | 638 | 756 | ||||
| Income taxes payable | 337 | 679 | ||||
| Current portion of long-term debt | ─ | 296 | ||||
| Deferred revenue | 8,625 | 9,467 | ||||
| 40,867 | 37,451 | |||||
| Deferred revenue | 3,501 | 3,932 | ||||
| Deferred income taxes | 3,373 | 3,226 | ||||
| Other liabilities | 922 | 477 | ||||
| 48,663 | 45,086 | |||||
| Shareholders' equity | ||||||
| Share capital | 111,337 | 109,837 | ||||
| Contributed surplus | 15,787 | 17,186 | ||||
| Retained earnings | 110,766 | 112,852 | ||||
| Accumulated other comprehensive loss | (15,803) | (3,423) | ||||
| 222,087 | 236,452 | |||||
| $ | 270,750 | $ | 281,538 | |||
EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Earnings
(in thousands of US dollars, except share and per share data)
| Three months ended February 28, 2014 |
Six months ended February 28, 2014 |
Three months ended February 28, 2013 |
Six months ended February 28, 2013 |
|||||||||
| Sales | $ | 51,179 | $ | 107,182 | $ | 62,576 | $ | 122,397 | ||||
| Cost of sales (1) | 20,073 | 41,258 | 23,664 | 47,321 | ||||||||
| Selling and administrative | 21,537 | 43,245 | 23,074 | 45,364 | ||||||||
| Net research and development | 10,973 | 22,254 | 11,960 | 23,562 | ||||||||
| Depreciation of property, plant and equipment | 1,243 | 2,518 | 1,504 | 3,109 | ||||||||
| Amortization of intangible assets | 1,074 | 2,256 | 1,922 | 3,884 | ||||||||
| Interest (income) expenses | (49) | (76) | 25 | (8) | ||||||||
| Foreign exchange gain | (2,292) | (3,094) | (1,700) | (2,456) | ||||||||
| Earnings (loss) before income taxes | (1,380) | (1,179) | 2,127 | 1,621 | ||||||||
| Income taxes | (41) | 907 | 2,088 | 3,220 | ||||||||
| Net earnings (loss) for the period | $ | (1,339) | $ | (2,086) | $ | 39$ | $ | (1,599) | ||||
| Basic and diluted net earnings (loss) per share | $ | (0.02) | $ | (0.03) | $ | 0.00 | $ | (0.03) | ||||
| Basic weighted average number of shares outstanding (000's) | 60,414 | 60,316 | 60,392 | 60,391 | ||||||||
| Diluted weighted average number of shares outstanding (000's) | 60,414 | 60,316 | 61,175 | 60,391 |
(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 February 28, 2014 |
Six months ended February 28, 2014 |
Three months ended February 28, 2013 |
Six months ended February 28, 2013 |
||||||||||
| Net earnings (loss) for the period | $ | (1,339) | $ | (2,086) | $ | 39 | $ | (1,599) | |||||
| Other comprehensive income (loss), net of income taxes | |||||||||||||
| Items that will not be reclassified subsequently to net earnings | |||||||||||||
| Foreign currency translation adjustment | (9,580) | (11,528) | (9,184) | (10,892) | |||||||||
| Items that may be reclassified subsequently to net earnings | |||||||||||||
| Unrealized gains/losses on forward exchange contracts | (1,289) | (1,529) | (679) | (762) | |||||||||
| Reclassification of realized gains/losses on forward exchange contracts in net earnings (loss) | 191 | 365 | (130) | (329) | |||||||||
| Deferred income tax effect of gains/losses on forward exchange contracts | 294 | 312 | 217 | 293 | |||||||||
| Other comprehensive loss | (10,384) | (12,380) | (9,776) | (11,690) | |||||||||
| Comprehensive loss for the period | $ | (11,723) | $ | (14,466) | $ | (9,737) | $ | (13,289) | |||||
EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity
(in thousands of US dollars)
| Six months ended February 28, 2013 | |||||||||||||||||
| Share capital |
Contributed surplus | Retained earnings | Accumulated other comprehensive income |
Total shareholders' equity |
|||||||||||||
| Balance as at September 1, 2012 | $ | 110,965 | $ | 17,298 | $ | 111,511 | $ | 13,507 | $ | 253,281 | |||||||
| Exercise of stock options | 87 | - | - | - | 87 | ||||||||||||
| Redemption of share capital | (913) | (227) | - | - | (1,140) | ||||||||||||
| Reclassification of stock-based compensation costs | 1,261 | (1,261) | - | - | - | ||||||||||||
| Stock-based compensation costs | - | 878 | - | - | 878 | ||||||||||||
| Net loss for the period | - | - | (1,599) | - | (1,599) | ||||||||||||
| Other comprehensive loss | |||||||||||||||||
| Foreign currency translation adjustment | - | - | - | (10,892) | (10,892) | ||||||||||||
| Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes of $293 | - | - | - | (798) | (798) | ||||||||||||
| Total comprehensive loss for the period | - | - | (1,599) | (11,690) | (13,289) | ||||||||||||
| Balance as at February 28, 2013 | $ | 111,400 | $ | 16,688 | $ | 109,912 | $ | 1,817 | $ | 239,817 | |||||||
| Six months ended February 28, 2014 | |||||||||||||||||
| Share capital |
Contributed surplus | Retained earnings | Accumulated other comprehensive loss |
Total shareholders' equity |
|||||||||||||
| Balance as at September 1, 2013 | $ | 109,837 | $ | 17,186 | $ | 112,852 | $ | (3,423) | $ | 236,452 | |||||||
| Exercise of stock options | 195 | - | - | - | 195 | ||||||||||||
| Redemption of share capital | (831) | (106) | - | - | (937) | ||||||||||||
| Reclassification of stock-based compensation costs | 2,136 | (2,136) | - | - | - | ||||||||||||
| Stock-based compensation costs | - | 843 | - | - | 843 | ||||||||||||
| Net loss for the period | - | - | (2,086) | - | (2,086) | ||||||||||||
| Other comprehensive loss | |||||||||||||||||
| Foreign currency translation adjustment | - | - | - | (11,528) | (11,528) | ||||||||||||
| Changes in unrealized losses on forward exchange contracts, net of deferred income taxes of $312 | - | - | - | (852) | (852) | ||||||||||||
| Total comprehensive loss for the period | - | - | (2,086) | (12,380) | (14,466) | ||||||||||||
| Balance as at February 28, 2014 | $ | 111,337 | $ | 15,787 | $ | 110,766 | $ | (15,803) | $ | 222,087 | |||||||
EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
| Three months ended February 28, 2014 |
Six months ended February 28, 2014 |
Three months ended February 28, 2013 |
Six months ended February 28, 2013 |
|||||||||||||||||
| Cash flows from operating activities | ||||||||||||||||||||
| Net earnings (loss) for the period | $ | (1,339) | $ | (2,086) | $ | 39 | $ | (1,599) | ||||||||||||
| Add (deduct) items not affecting cash | ||||||||||||||||||||
| Changes in discount on short-term investments | ─ | ─ | (3) | (1) | ||||||||||||||||
| Stock-based compensation costs | 402 | 865 | 468 | 916 | ||||||||||||||||
| Depreciation and amortization | 2,317 | 4,774 | 3,426 | 6,993 | ||||||||||||||||
| Deferred revenue | 1,024 | (728) | 111 | (1,420) | ||||||||||||||||
| Deferred income taxes | (324) | 301 | 988 | 1,721 | ||||||||||||||||
| Changes in foreign exchange gain/loss | (793) | (901) | (775) | (798) | ||||||||||||||||
| 1,287 | 2,225 | 4,254 | 5,812 | |||||||||||||||||
| Changes in non-cash operating items | ||||||||||||||||||||
| Accounts receivable | 6,182 | 4,525 | 2,016 | (6,088) | ||||||||||||||||
| Income taxes and tax credits | (1,686) | (943) | (1,313) | (3,186) | ||||||||||||||||
| Inventories | (1,221) | (3,533) | 1,213 | 1,053 | ||||||||||||||||
| Prepaid expenses | (787) | (616) | (414) | (55) | ||||||||||||||||
| Other assets | (40) | (34) | ─ | ─ | ||||||||||||||||
| Accounts payable, accrued liabilities and provisions | (94) | 5,391 | (3,687) | (50) | ||||||||||||||||
| Other liabilities | (17) | (43) | (15) | (210) | ||||||||||||||||
| 3,624 | 6,972 | 2,054 | (2,724) | |||||||||||||||||
| Cash flows from investing activities | ||||||||||||||||||||
| Additions to short-term investments | (4,790) | (14,571) | (10,236) | (34,769) | ||||||||||||||||
| Proceeds from disposal and maturity of short-term investments | 4,790 | 14,562 | 13,283 | 37,810 | ||||||||||||||||
| Additions to capital assets | (1,695) | (2,396) | (2,504) | (4,493) | ||||||||||||||||
| (1,695) | (2,405) | 543 | (1,452) | |||||||||||||||||
| Cash flows from financing activities | ||||||||||||||||||||
| Repayment of long-term debt | (307) | (307) | (293) | (293) | ||||||||||||||||
| Exercise of stock options | 89 | 195 | 36 | 87 | ||||||||||||||||
| Redemption of share capital | (937) | (937) | (167) | (1,140) | ||||||||||||||||
| (1,155) | (1,049) | (424) | (1,346) | |||||||||||||||||
| Effect of foreign exchange rate changes on cash | (1,475) | (1,840) | (1,566) | (1,921) | ||||||||||||||||
| Change in cash | (701) | 1,678 | 607 | (7,443) | ||||||||||||||||
| Cash - Beginning of the period | 47,765 | 45,386 | 50,818 | 58,868 | ||||||||||||||||
| Cash - End of the period | $ | 47,064 | $ | 47,064 | $ | 51,425 | $ | 51,425 | ||||||||||||
SOURCE: EXFO inc.
Vance Oliver
Director, Investor Relations
(418) 683-0913, Ext. 23733
[email protected]
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