EXFO Reports First-Quarter Results for Fiscal 2016

06 Jan, 2016, 16:05 ET from EXFO inc.

  • Bookings reach US$58.5 million, up 7.8% year-over-year
  • Sales attain US$55.2 million
  • Gross margin improves to 63.5%
  • Adjusted EBITDA totals US$5.3 million, 9.6% of sales

QUEBEC CITY, Jan. 6, 2016 /CNW Telbec/ - EXFO Inc. (NASDAQ: EXFO; TSX: EXF) reported today financial results for the first quarter ended November 30, 2015.

Sales reached US$55.2 million in the first quarter of fiscal 2016 compared to US$56.7 million in the first quarter of 2015 and US$56.6 million in the fourth quarter of 2015.

Bookings attained US$58.5 million in the first quarter of fiscal 2016 compared to US$54.2 million in the same period last year and US$54.9 million in the fourth quarter of 2015. The company's book-to-bill ratio was 1.06 in the first quarter of 2016.

Gross margin before depreciation and amortization* amounted to 63.5% of sales in the first quarter of fiscal 2016 compared to 62.6% in the first quarter of 2015 and 61.2% in the fourth quarter of 2015.

IFRS net earnings in the first quarter of fiscal 2016 totaled US$1.8 million, or US$0.03 per diluted share, compared US$1.5 million, or US$0.02 per diluted share, in the same period last year and US$2.3 million, or US$0.04 per diluted share, in the fourth quarter of 2015. IFRS net earnings in the first 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 gain of US$0.3 million.

Adjusted EBITDA* totaled US$5.3 million, or 9.6% of sales, in the first quarter of fiscal 2016 compared to US$3.2 million, or 5.6% of sales, in the first quarter of 2015 and US$5.0 million, or 8.8% of sales, in the fourth quarter of 2015.

"The transformations implemented during fiscal 2015 are starting to pay off as demonstrated by the bookings growth of our two product groups, especially in North America and for our Protocol-layer offering, which helped to generate our best gross margin in 15 quarters," said Germain Lamonde, EXFO's Chairman, President and CEO. "Within our Protocol-layer group, I am particularly pleased with our unique, end-to-end EXFO Xtract analytics solution based on its strong funnel and recent important wins at two major network operators. Given the impact of our transformations, completed cost reductions and favorable currency trends, I believe we are off to a good start to deliver or surpass our adjusted EBITDA target of US$20 million for fiscal 2016."

 

Selected Financial Information

(In thousands of US dollars)

Q1 2016

Q4 2015

Q1 2015

Physical-layer sales

$

37,477

$

34,967

$

37,848

Protocol-layer sales

18,629

22,419

19,168

Foreign exchange losses on forward exchange contracts

(874)

(792)

(292)

Total sales

$

55,232

$

56,594

$

56,724

Physical-layer bookings

$

38,878

$

35,521

$

37,394

Protocol-layer bookings

20,469

20,187

17,142

Foreign exchange losses on forward exchange contracts

(874)

(792)

(292)

Total bookings

$

58,473

$

54,916

$

54,244

Book-to-bill ratio

1.06

0.97

0.96

Gross margin*

$

35,095

$

34,619

$

35,487

63.5%

61.2%

62.6%

Other selected information:

IFRS net earnings

$

1,766

$

2,323

$

1,481

Amortization of intangible assets

$

300

$

322

$

1,098

Stock-based compensation costs

$

376

$

133

$

400

Restructuring charges

$

$

1,637

$

Net income tax effect of the above items

$

(28)

$

(371)

$

(58)

Foreign exchange gain

$

310

$

2,425

$

1,975

Adjusted EBITDA*

$

5,286

$

4,962

$

3,197

 

Operating Expenses Selling and administrative expenses totaled US$20.3 million, or 36.7% of sales in the first quarter of fiscal 2016 compared to US$21.0 million, or 37.1% of sales, in the same period last year and US$20.5 million, or 36.3% of sales, in the fourth quarter of 2015.

Net R&D expenses totaled US$9.9 million, or 18.0% of sales, in the first quarter of fiscal 2016 compared to US$11.7 million, or 20.6% of sales, in the first quarter of 2015 and US$10.9 million, or 19.3% of sales, in the fourth quarter of 2015.

First-Quarter Highlights

  • Bookings and Sales. Bookings increased 7.8% year-over-year (or more than 10% on a constant currency basis*) to US$58.5 million for a book-to-bill ratio of 1.06 in the first quarter of 2016. Bookings were particularly strong in the Americas and within the Protocol-layer product group, reflecting higher margins and increased solutions orders. Sales distribution at a regional level resulted in 56% from the Americas, 26% from EMEA and 18% from Asia-Pacific. From a product-line standpoint, Physical-layer sales represented 67% of total sales and Protocol-layer sales 33%. EXFO's top customer accounted for 8.2% of sales, while the top three represented 18.2%.
  • Profitability. Adjusted EBITDA increased 65% year-over-year to US$5.3 million (9.6% of sales) in the first quarter of 2016, which is in line with EXFO's US$20 million annual target. The company also delivered US$3.2 million in cash flows from operating activities and had a cash position of US$29.4 million and no debt as at November 30, 2015.
  • Innovation. EXFO launched two new products in the first quarter, namely the MaxTester-940 Fiber Certifier OLTS (optical loss test set) for data center and enterprise markets and iSAM, an intelligent service activation software application bringing speed and simplicity to testing Ethernet services. The company also received the 2015 Global Portable Fiber-Optic Test Equipment (FOTE) Market Share Leadership Award from Frost & Sullivan for consolidating its leadership position by increasing optical sales 6% during the previous calendar year and bolstering its market share.

Business Outlook EXFO forecasts sales between US$52.0 million and US$57.0 million for the second quarter of fiscal 2016, while IFRS net earnings are expected to range between US$0.04 and US$0.08 per diluted share. IFRS net earnings include US$0.01 per diluted 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 first-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: 94927176. 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 January 13, 2016. The replay number is 1-855-859-2056 and the conference ID number is 94927176. 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 over global networks. Our test, service assurance and network visibility solutions allow network operators and equipment manufacturers 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 1500 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 (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, restructuring charges, stock-based compensation costs and foreign exchange gain.

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

 

Adjusted EBITDA (unaudited)

Q1 2016

Q4 2015

Q1 2015

IFRS net earnings for the period

$

1,766

$

2,323

$

1,481

Add (deduct):

Depreciation of property, plant and equipment

975

1,171

1,245

Amortization of intangible assets

300

322

1,098

Interest (income) expense

63

61

(217)

Income taxes

2,116

1,740

1,165

Restructuring charges

1,637

Stock-based compensation costs

376

133

400

Foreign exchange gain

(310)

(2,425)

(1,975)

Adjusted EBITDA for the period

$

5,286

$

4,962

$

3,197

Adjusted EBITDA in percentage of sales

9.6%

8.8%

5.6%

 

EXFO Inc.

Condensed Unaudited Interim Consolidated Balance Sheets

(in thousands of US dollars)

As at

November 30,

2015

As at

August 31,

2015

Assets

Current assets

Cash

$

27,874

$

25,864

Short-term investments

1,490

1,487

Accounts receivable

Trade

48,959

48,068

Other

2,797

2,384

Income taxes and tax credits recoverable

3,477

3,855

Inventories

30,741

27,951

Prepaid expenses

2,711

2,801

118,049

112,410

Tax credits recoverable

35,443

35,625

Property, plant and equipment

35,374

35,695

Intangible assets

3,867

4,096

Goodwill

21,539

21,860

Deferred income tax assets

8,365

8,900

Other assets

218

416

$

222,855

$

219,002

Liabilities

Current liabilities

Bank loan

$

312

$

Accounts payable and accrued liabilities

36,750

34,126

Provisions

335

427

Income taxes payable

519

779

Deferred revenue

7,376

7,647

45,292

42,979

Deferred revenue

4,553

2,957

Deferred income tax liabilities

1,695

1,524

Other liabilities

507

791

52,047

48,251

Shareholders' equity

Share capital

86,767

86,045

Contributed surplus

17,396

17,778

Retained earnings

120,699

118,933

Accumulated other comprehensive loss

(54,054)

(52,005)

170,808

170,751

$

222,855

$

219,002

 

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,

2015

2014

Sales

$

55,232

$

56,724

Cost of sales (1)

20,137

21,237

Selling and administrative

20,252

21,032

Net research and development 

9,933

11,658

Depreciation of property, plant and equipment

975

1,245

Amortization of intangible assets

300

1,098

Interest (income) expense

63

(217)

Foreign exchange gain

(310)

(1,975)

Earnings before income taxes

3,882

2,646

Income taxes

2,116

1,165

Net earnings for the period

$

1,766

$

1,481

Basic and diluted net earnings per share

$

0.03

$

0.02

Basic weighted average number of shares outstanding (000's)

53,814

60,335

Diluted weighted average number of shares outstanding (000's)

54,535

60,980

(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,

2015

2014

Net earnings for the period

$

1,766

$

1,481

Other comprehensive income (loss), net of income taxes

Items that will not be reclassified subsequently to net earnings

Foreign currency translation adjustment

(2,509)

(11,735)

Items that may be reclassified subsequently to net earnings

Unrealized losses on forward exchange contracts

(270)

(1,505)

Reclassification of realized losses on forward exchange contracts in net earnings

878

162

Deferred income tax effect of losses on forward exchange contracts

(148)

373

Other comprehensive loss

(2,049)

(12,705)

Comprehensive loss for the period

$

(283)

$

(11,224)

 

EXFO Inc.

Condensed Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity

(in thousands of US dollars)

Three months ended November 30, 2014

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

(919)

66

(853)

Reclassification of stock-based compensation costs

443

(443)

Stock-based compensation costs

414

414

Net earnings for the period

1,481

1,481

Other comprehensive loss

Foreign currency translation adjustment

(11,735)

(11,735)

Changes in unrealized losses on forward exchange contracts, net of deferred income taxes of $373

(970)

(970)

Total comprehensive loss for the period

(11,224)

Balance as at November 30, 2014

$

111,015

$

16,540

$

115,116

$

(22,964)

$

219,707

Three months ended November 30, 2015

Share Capital

Contributed Surplus

Retained earnings

Accumulated other comprehensive loss

Total shareholders' equity

Balance as at September 1, 2015

$

86,045

$

17,778

$

118,933

$

(52,005)

$

170,751

Redemption of share capital

(1)

(1)

Reclassification of stock-based compensation costs

723

(723)

Stock-based compensation costs

341

341

Net earnings for the period

1,766

1,766

Other comprehensive income (loss)

Foreign currency translation adjustment

(2,509)

(2,509)

Changes in unrealized losses on forward exchange contracts, net of deferred income taxes of $148

460

460

Total comprehensive loss for the period

(283)

Balance as at November 30, 2015

$

86,767

$

17,396

$

120,699

$

(54,054)

$

170,808

 

 

EXFO Inc.

Condensed Unaudited Interim Consolidated Statements of Cash Flows

(in thousands of US dollars)

Three months ended

November 30,

2015

2014

Cash flows from operating activities

Net earnings for the period

$

1,766

$

1,481

Add (deduct) items not affecting cash

Stock-based compensation costs

376

400

Depreciation and amortization

1,275

2,343

Deferred revenue

1,511

(1,027)

Deferred income taxes

573

(332)

Changes in foreign exchange gain/loss

(344)

(1,028)

5,157

1,837

Changes in non-cash operating items

Accounts receivable

(2,024)

(5,036)

Income taxes and tax credits

(278)

(212)

Inventories

(3,226)

(1,181)

Prepaid expenses

54

(336)

Other assets

193

1

Accounts payable, accrued liabilities and provisions

3,375

6,836

Other liabilities

(28)

(19)

3,223

1,890

Cash flows from investing activities

Additions to short-term investments

(21)

(13,691)

Proceeds from disposal and maturity of short-term investments

13,766

Additions to capital assets

(1,309)

(754)

(1,330)

(679)

Cash flows from financing activities

Bank loan

315

Redemption of share capital

(1)

(853)

314

(853)

Effect of foreign exchange rate changes on cash

(197)

(2,258)

Change in cash

2,010

(1,900)

Cash – Beginning of the period

25,864

54,121

Cash – End of the period

$

27,874

$

52,221

Supplementary information

Income taxes paid

$

608

$

367

 

EXFO-F

 

SOURCE EXFO inc.



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