- Sales reach US$57.8 million
- Bookings attain US$59.2 million, book-to-bill ratio of 1.03
- Adjusted EBITDA totals US$4.5 million, 7.7% of sales
QUEBEC CITY, June 23, 2015 /CNW Telbec/ - EXFO Inc. (NASDAQ: EXFO; TSX: EXF) reported today financial results for the third quarter ended May 31, 2015.
Sales reached US$57.8 million in the third quarter of fiscal 2015 compared to US$63.9 million in the third quarter of 2014 and US$51.0 million in the second quarter of 2015.
Bookings attained US$59.2 million in the third quarter of fiscal 2015 compared to US$66.5 million in the same period last year and US$54.7 million in the second quarter of 2015. The company's book-to-bill ratio was 1.03 in the third quarter of 2015.
Gross margin before depreciation and amortization* amounted to 61.4% of sales in the third quarter of fiscal 2015 compared to 63.3% in the third quarter of 2014 and 61.7% in the second quarter of 2015.
IFRS net earnings in the third quarter of fiscal 2015 totaled US$0.6 million, or US$0.01 per diluted share, compared to US$1.7 million, or US$0.03 per diluted share, in the same period last year and US$0.9 million, or US$0.02 per diluted share, in the second quarter of 2015. IFRS net earnings in the third quarter of 2015 included US$0.4 million in after-tax amortization of intangible assets, US$0.4 million in stock-based compensation costs and a foreign exchange loss of US$0.2 million.
Adjusted EBITDA** totaled US$4.5 million, or 7.7% of sales, in the third quarter of fiscal 2015 compared to US$7.3 million, or 11.5% of sales, in the third quarter of 2014 and US$1.2 million, or 2.3% of sales, in the second quarter of 2015.
"Our sequential sales improvement was led by a 20%-plus increase in the Americas, while the EMEA region remained challenging due to macro-economic issues, devaluation of local currencies and difficult end-markets," said Germain Lamonde, EXFO's Chairman, President and CEO. "Year-over-year, I am pleased with the adoption and progress in sales and bookings for our end-to-end solutions offering, which is driven mainly by network operators shifting their focus and investments toward visibility solutions to help increase quality of customer experience."
"We have begun taking action this quarter to reduce operating costs and position the company to accelerate revenue, since improving profitability is the centerpiece of management's strategy," Mr. Lamonde added.
| Selected Financial Information |
|||||||||
| Q3 2015 |
Q2 2015 |
Q3 2014 |
|||||||
| Sales |
$ |
57,781 |
$ |
50,990 |
$ |
63,882 |
|||
| Gross margin* |
$ |
35,500 |
$ |
31,444 |
$ |
40,413 |
|||
| 61.4% |
61.7% |
63.3% |
|||||||
| Other selected information: |
|||||||||
| IFRS net earnings |
$ |
563 |
$ |
931 |
$ |
1,665 |
|||
| Amortization of intangible assets |
$ |
444 |
$ |
1,019 |
$ |
1,025 |
|||
| Stock-based compensation costs |
$ |
374 |
$ |
388 |
$ |
407 |
|||
| Net income tax effect of the above items |
$ |
(49) |
$ |
(53) |
$ |
(63) |
|||
| Foreign exchange gain (loss) |
$ |
(175) |
$ |
2,987 |
$ |
(1,126) |
|||
| Adjusted EBITDA** |
$ |
4,462 |
$ |
1,158 |
$ |
7,345 |
|||
Operating Expenses
Selling and administrative expenses totaled US$20.5 million, or 35.5% of sales in the third quarter of fiscal 2015 compared to US$21.7 million, or 34.0% of sales, in the same period last year and US$20.2 million, or 39.6% of sales, in the second quarter of 2015.
Gross research and development expenses amounted to US$12.5 million, or 21.6% of sales, in the third quarter of fiscal 2015 compared to US$13.6 million, or 21.3% of sales, in the third quarter of 2014 and US$12.2 million, or 23.9% of sales, in the second quarter of 2015.
Net R&D expenses totaled US$10.9 million, or 18.9% of sales, in the third quarter of fiscal 2015 compared to US$11.7 million, or 18.4% of sales, in the same period last year and US$10.5 million, or 20.6% of sales, in the second quarter of 2015.
Third-Quarter Highlights
- Sales. Geographical sales breakdown in the third quarter was 58% from the Americas, 23% from EMEA and 19% from the Asia-Pacific region. EXFO's top-three customers represented 15.7% of sales. The largest customer accounted for 7.0% of sales, mostly for EXFO's systems and solutions. Revenue after nine months would be almost flat year-over-year, excluding the negative impact of the US dollar.
- Profitability. EXFO generated adjusted EBITDA of US$4.5 million (7.7% of sales) in the third quarter of 2015 for a total of US$8.8 million (5.3%) after the first three quarters into the fiscal year. In comparison, the company delivered US$8.6 million (5.0%) of adjusted EBITDA after three quarters into 2014. A restructuring charge of US$1.2 million is planned for the fourth quarter of 2015 which is expected to generate annual savings US$2 million. EXFO had a cash position of US$29.9 million and no debt at the end of the third quarter of 2015.
- Innovation. EXFO introduced major enhancements to its analytics platform (EXFO Xtract), service assurance systems and network visibility solutions in the third quarter in order to help network operators take proactive actions that improve customer quality of experience. The company also released new capabilities for its iOLM fiber test technology and a fully automated wireless fiber inspection solution, both contributing to EXFO's thrust to automate and accelerate fiber deployments in wireless access networks. Following the quarter-end, EXFO accelerated its market-driven strategy by unveiling the most advanced, all-in-one test platform: FTB-1 Pro. This platform combines the unique, quad-port NetBlazer 10G Ethernet module and iSAM software test option. The company also launched a new OTDR series and above-mentioned iOLM and fiber inspection probe options for the FTB-1 Pro to greatly accelerate and simplify the turn-up of next-generation fixed and mobile access networks.
Business Outlook
EXFO forecasts sales between US$55.0 million and US$60.0 million for the fourth quarter of fiscal 2015, while IFRS net results are expected to range between a net loss of US$0.02 per share and net earnings of US$0.02 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$0.02 per share in restructuring charges.
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 third quarter of fiscal 2015. 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: 52901975. 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 June 30, 2015. The replay number is 1-855-859-2056 and the conference ID number is 52901975. 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 enables extraordinary experiences on global networks. Our test, service assurance and network visibility solutions allow equipment manufacturers and network operators to deliver a wealth of services to consumers, while increasing network capacity and reducing operating costs. From a company executive holding a telepresence meeting with overseas staff to a runner transferring data from wearable technology, EXFO's inherent expertise and powerful analytics render these events commonplace. Simply put, we have evolved over our 30-year history to ensure unmatched quality of service and quality of experience on next-generation fixed and mobile networks. 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, 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 (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 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:
| Adjusted EBITDA (unaudited) |
||||||||
| Q3 2015 |
Q2 2015 |
Q3 2014 |
||||||
| IFRS net earnings for the period |
$ |
563 |
$ |
931 |
$ |
1,665 |
||
| Add (deduct): |
||||||||
| Depreciation of property, plant and equipment |
1,163 |
1,256 |
1,219 |
|||||
| Amortization of intangible assets |
444 |
1,019 |
1,025 |
|||||
| Interest and other (income) expense |
36 |
(35) |
(220) |
|||||
| Income taxes |
1,707 |
586 |
2,123 |
|||||
| Stock-based compensation costs |
374 |
388 |
407 |
|||||
| Foreign exchange (gain) loss |
175 |
(2,987) |
1,126 |
|||||
| Adjusted EBITDA for the period |
$ |
4,462 |
$ |
1,158 |
$ |
7,345 |
||
| Adjusted EBITDA in percentage of sales |
7.7% |
2.3% |
11.5% |
| EXFO Inc. |
|||||||
| Condensed Unaudited Interim Consolidated Balance Sheets |
|||||||
| (in thousands of US dollars) |
|||||||
| As at May 31, 2015 |
As at August 31, 2014 |
||||||
| Assets |
|||||||
| Current assets |
|||||||
| Cash |
$ |
28,895 |
$ |
54,121 |
|||
| Short-term investments |
982 |
5,726 |
|||||
| Accounts receivable |
|||||||
| Trade |
47,678 |
46,031 |
|||||
| Other |
2,058 |
2,001 |
|||||
| Income taxes and tax credits recoverable |
5,324 |
3,796 |
|||||
| Inventories |
31,555 |
35,232 |
|||||
| Prepaid expenses |
2,816 |
2,281 |
|||||
| 119,308 |
149,188 |
||||||
| Tax credits recoverable |
36,423 |
41,745 |
|||||
| Property, plant and equipment |
37,864 |
42,780 |
|||||
| Intangible assets |
4,490 |
7,293 |
|||||
| Goodwill |
23,125 |
26,488 |
|||||
| Deferred income tax assets |
9,765 |
9,816 |
|||||
| Other assets |
475 |
721 |
|||||
| $ |
231,450 |
$ |
278,031 |
||||
| Liabilities |
|||||||
| Current liabilities |
|||||||
| Accounts payable and accrued liabilities |
$ |
36,009 |
$ |
29,553 |
|||
| Provisions |
437 |
532 |
|||||
| Income taxes payable |
834 |
840 |
|||||
| Deferred revenue |
9,348 |
8,990 |
|||||
| 46,628 |
39,915 |
||||||
| Deferred revenue |
2,845 |
3,319 |
|||||
| Deferred income tax liabilities |
2,262 |
3,087 |
|||||
| Other liabilities |
869 |
340 |
|||||
| 52,604 |
46,661 |
||||||
| Shareholders' equity |
|||||||
| Share capital |
86,471 |
111,491 |
|||||
| Contributed surplus |
17,524 |
16,503 |
|||||
| Retained earnings |
116,610 |
113,635 |
|||||
| Accumulated other comprehensive loss |
(41,759) |
(10,259) |
|||||
| 178,846 |
231,370 |
||||||
| $ |
231,450 |
$ |
278,031 |
||||
| EXFO Inc. |
||||||||||||
| Condensed Unaudited Interim Consolidated Statements of Earnings |
||||||||||||
| (in thousands of US dollars, except share and per share data) |
||||||||||||
| Three months ended May 31, 2015 |
Nine months ended May 31, 2015 |
Three months ended May 31, 2014 |
Nine months ended May 31, 2014 |
|||||||||
| Sales |
$ |
57,781 |
$ |
165,495 |
$ |
63,882 |
$ |
171,064 |
||||
| Cost of sales (1) |
22,281 |
63,064 |
23,469 |
64,727 |
||||||||
| Selling and administrative |
20,489 |
61,689 |
21,730 |
64,975 |
||||||||
| Net research and development |
10,923 |
33,087 |
11,745 |
33,999 |
||||||||
| Depreciation of property, plant and equipment |
1,163 |
3,664 |
1,219 |
3,737 |
||||||||
| Amortization of intangible assets |
444 |
2,561 |
1,025 |
3,281 |
||||||||
| Interest and other (income) expense |
36 |
(216) |
(220) |
(296) |
||||||||
| Foreign exchange (gain) loss |
175 |
(4,787) |
1,126 |
(1,968) |
||||||||
| Earnings before income taxes |
2,270 |
6,433 |
3,788 |
2,609 |
||||||||
| Income taxes |
1,707 |
3,458 |
2,123 |
3,030 |
||||||||
| Net earnings (loss) for the period |
$ |
563 |
$ |
2,975 |
$ |
1,665 |
$ |
(421) |
||||
| Basic and diluted net earnings (loss) per share |
$ |
0.01 |
$ |
0.05 |
$ |
0.03 |
$ |
(0.01) |
||||
| Basic weighted average number of shares outstanding (000's) |
53,861 |
57,804 |
60,339 |
60,323 |
||||||||
| Diluted weighted average number of shares outstanding (000's) |
54,549 |
58,453 |
60,986 |
60,323 |
||||||||
| (1) |
The cost of sales is exclusive of depreciation and amortization, shown separately |
| EXFO Inc. |
|||||||||||||
| Condensed Unaudited Interim Consolidated Statements of Comprehensive Income (Loss) |
|||||||||||||
| (in thousands of US dollars) |
|||||||||||||
| Three months ended May 31, 2015 |
Nine months ended May 31, 2015 |
Three months ended May 31, 2014 |
Nine months ended May 31, 2014 |
||||||||||
| Net earnings (loss) for the period |
$ |
563 |
$ |
2,975 |
$ |
1,665 |
$ |
(421) |
|||||
| Other comprehensive income (loss), net of income taxes |
|||||||||||||
| Items that will not be reclassified subsequently to net earnings |
|||||||||||||
| Foreign currency translation adjustment |
802 |
(29,499) |
4,736 |
(6,792) |
|||||||||
| Items that may be reclassified subsequently to net earnings |
|||||||||||||
| Unrealized losses on forward exchange contracts |
38 |
(4,164) |
835 |
(694) |
|||||||||
| Reclassification of realized losses on forward exchange contracts in net earnings (loss) |
938 |
1,438 |
391 |
756 |
|||||||||
| Deferred income tax effect of losses on forward exchange contracts |
(270) |
725 |
(328) |
(16) |
|||||||||
| Other comprehensive income (loss) |
1,508 |
(31,500) |
5,634 |
(6,746) |
|||||||||
| Comprehensive income (loss) for the period |
$ |
2,071 |
$ |
(28,525) |
$ |
7,299 |
$ |
(7,167) |
|||||
| EXFO Inc. |
||||||||||||||||
| Condensed Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity |
||||||||||||||||
| (in thousands of US dollars) |
||||||||||||||||
| Nine months ended May 31, 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 |
225 |
– |
– |
– |
225 |
|||||||||||
| Redemption of share capital |
(831) |
(106) |
– |
– |
(937) |
|||||||||||
| Reclassification of stock-based compensation costs |
2,260 |
(2,260) |
– |
– |
– |
|||||||||||
| Stock-based compensation costs |
– |
1,261 |
– |
– |
1,261 |
|||||||||||
| Net loss for the period |
– |
– |
(421) |
– |
(421) |
|||||||||||
| Other comprehensive income (loss) |
||||||||||||||||
| Foreign currency translation adjustment |
– |
– |
– |
(6,792) |
(6,792) |
|||||||||||
| Changes in unrealized losses on forward exchange contracts, net of deferred income taxes of $16 |
– |
– |
– |
46 |
46 |
|||||||||||
| Total comprehensive loss for the period |
(7,167) |
|||||||||||||||
| Balance as at May 31, 2014 |
$ |
111,491 |
$ |
16,081 |
$ |
112,431 |
$ |
(10,169) |
$ |
229,834 |
||||||
| Nine months ended May 31, 2015 |
||||||||||||||||
| Share capital |
Contributed surplus |
Retained earnings |
Accumulated other comprehensive loss |
Total shareholders' equity |
||||||||||||
| Balance as at September 1, 2014 |
$ |
111,491 |
$ |
16,503 |
$ |
113,635 |
$ |
(10,259) |
$ |
231,370 |
||||||
| Redemption of share capital |
(26,396) |
1,222 |
– |
– |
(25,174) |
|||||||||||
| Reclassification of stock-based compensation costs |
1,376 |
(1,376) |
– |
– |
– |
|||||||||||
| Stock-based compensation costs |
– |
1,175 |
– |
– |
1,175 |
|||||||||||
| Net earnings for the period |
– |
– |
2,975 |
– |
2,975 |
|||||||||||
| Other comprehensive loss |
||||||||||||||||
| Foreign currency translation adjustment |
– |
– |
– |
(29,499) |
(29,499) |
|||||||||||
| Changes in unrealized losses on forward exchange contracts, net of deferred income taxes of $725 |
– |
– |
– |
(2,001) |
(2,001) |
|||||||||||
| Total comprehensive loss for the period |
(28,525) |
|||||||||||||||
| Balance as at May 31, 2015 |
$ |
86,471 |
$ |
17,524 |
$ |
116,610 |
$ |
(41,759) |
$ |
178,846 |
||||||
| EXFO Inc. |
|||||||||||||
| Condensed Unaudited Interim Consolidated Statements of Cash Flows |
|||||||||||||
| (in thousands of US dollars) |
|||||||||||||
| Three months ended May 31, 2015 |
Nine months ended May 31, 2015 |
Three months ended May 31, 2014 |
Nine months ended May 31, 2014 |
||||||||||
| Cash flows from operating activities |
|||||||||||||
| Net earnings (loss) for the period |
$ |
563 |
$ |
2,975 |
$ |
1,665 |
$ |
(421) |
|||||
| Add (deduct) items not affecting cash |
|||||||||||||
| Stock-based compensation costs |
374 |
1,162 |
407 |
1,272 |
|||||||||
| Depreciation and amortization |
1,607 |
6,225 |
2,244 |
7,018 |
|||||||||
| Deferred revenue |
854 |
1,358 |
209 |
(519) |
|||||||||
| Deferred income taxes |
542 |
199 |
1,147 |
1,448 |
|||||||||
| Changes in foreign exchange gain/loss |
(77) |
(2,875) |
378 |
(523) |
|||||||||
| 3,863 |
9,044 |
6,050 |
8,275 |
||||||||||
| Changes in non-cash operating items |
|||||||||||||
| Accounts receivable |
(6,494) |
(7,811) |
(8,208) |
(3,683) |
|||||||||
| Income taxes and tax credits |
(541) |
(1,964) |
(759) |
(1,702) |
|||||||||
| Inventories |
950 |
(983) |
727 |
(2,806) |
|||||||||
| Prepaid expenses |
(374) |
(875) |
492 |
(124) |
|||||||||
| Other assets |
30 |
29 |
53 |
19 |
|||||||||
| Accounts payable, accrued liabilities and provisions |
1,334 |
8,994 |
4,565 |
9,956 |
|||||||||
| Other liabilities |
(30) |
(62) |
(35) |
(78) |
|||||||||
| (1,262) |
6,372 |
2,885 |
9,857 |
||||||||||
| Cash flows from investing activities |
|||||||||||||
| Additions to short-term investments |
‒ |
(19,509) |
(9,821) |
(24,392) |
|||||||||
| Proceeds from disposal and maturity of short-term investments |
1,619 |
23,685 |
9,244 |
23,806 |
|||||||||
| Additions to capital assets |
(1,826) |
(4,625) |
(2,750) |
(5,146) |
|||||||||
| (207) |
(449) |
(3,327) |
(5,732) |
||||||||||
| Cash flows from financing activities |
|||||||||||||
| Repayment of long-term debt |
‒ |
‒ |
‒ |
(307) |
|||||||||
| Exercise of stock options |
‒ |
‒ |
30 |
225 |
|||||||||
| Redemption of share capital |
(71) |
(25,174) |
‒ |
(937) |
|||||||||
| (71) |
(25,174) |
30 |
(1,019) |
||||||||||
| Effect of foreign exchange rate changes on cash |
78 |
(5,975) |
771 |
(1,069) |
|||||||||
| Change in cash |
(1,462) |
(25,226) |
359 |
2,037 |
|||||||||
| Cash – Beginning of the period |
30,357 |
54,121 |
47,064 |
45,386 |
|||||||||
| Cash – End of the period |
$ |
28,895 |
$ |
28,895 |
$ |
47,423 |
$ |
47,423 |
|||||
| Supplementary information |
|||||||||||||
| Income taxes paid |
$ |
350 |
$ |
1,174 |
$ |
271 |
$ |
1,142 |
|||||
| Additions to capital assets |
$ |
1,700 |
$ |
4,638 |
$ |
2,734 |
$ |
5,414 |
|||||
SOURCE EXFO inc.
Vance Oliver, Director, Investor Relations, (418) 683-0913, Ext. 23733, [email protected]
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