EXFO INC.
-- Sales reach US$56.7 million, up year-over-year from US$56.0 million
-- Gross margin amounts to 62.6% of sales, up year-over-year from 62.2%
-- Adjusted EBITDA totals US$3.2 million, up year-over-year from US$2.3
million
QUEBEC CITY, Jan. 7, 2015 /CNW Telbec/ - EXFO Inc. (NASDAQ: EXFO; TSX: EXF) reported today financial results for the first quarter ended November 30, 2014.
Sales reached US$56.7 million in the first quarter of fiscal 2015 compared to US$56.0 million in the first quarter of 2014 and US$59.7 million in the fourth quarter of 2014.
Bookings attained US$54.2 million in the first quarter of fiscal 2015 compared to US$57.9 million in the same period last year and US$57.3 million in the fourth quarter of 2014. The company's book-to-bill ratio was 0.96 in the first quarter of 2015.
Gross margin before depreciation and amortization(*) amounted to 62.6% of sales in the first quarter of fiscal 2015 compared to 62.2% in the first quarter of 2014 and 63.0% in the fourth quarter of 2014.
IFRS net earnings in the first quarter of fiscal 2015 totaled US$1.5 million, or US$0.02 per diluted share, compared to a net loss of US$0.7 million, or US$0.01 per share, in the same period last year and net earnings of US$1.2 million, or US$0.02 per diluted share, in the fourth quarter of 2014. IFRS net earnings in the first quarter of 2015 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$2.0 million.
Adjusted EBITDA(**) totaled US$3.2 million, or 5.6% of sales, in the first quarter of fiscal 2015 compared to US$2.3 million, or 4.1% of sales, in the first quarter of 2014 and US$5.8 million, or 9.6% of sales, in the fourth quarter of 2014.
"Although market demand remained muted, we recorded year-over-year increases in sales, gross margin and earnings in the first quarter of fiscal 2015," said Germain Lamonde, EXFO's Chairman, President and CEO. "The telecom industry continued morphing from hardware-centric to SDN and NFV architectures (virtualized networks) and from fixed to mobile networking, while industry consolidation is ongoing in the background. I expect these elements to gradually turn into positive drivers for EXFO as fiscal 2015 unfolds, given our strong solutions offering."
"At EXFO, we have progressed against our strategic agenda, evolving into a solutions supplier and strengthening our market position and pipeline, especially in the wireless sector and in end-to-end visibility and customer experience assurance solutions," Mr. Lamonde added. "Considering recent wins at tier-1 network operators, growing business opportunities for our productivity-enhancing, end-to-end solutions and tight internal cost controls, I am pleased with their impact on earnings growth in the first quarter and remain confident EXFO will significantly increase its profitability in fiscal 2015."
Selected Financial Information
(In thousands of US dollars)
Q1 2015 Q4 2014 Q1 2014
------- ------- -------
Sales $56,724 $59,742 $56,003
Gross margin* $35,487 $37,633 $34,818
62.6% 63.0% 62.2%
Other selected information:
IFRS net earnings (loss) $1,481 $1,204 $(747)
Amortization of intangible assets $1,098 $1,117 $1,182
Stock-based compensation costs $400 $424 $463
Net income tax effect of the above
items $(58) $(62) $(67)
Foreign exchange gain (loss) $1,975 $(334) $802
Adjusted EBITDA** $3,197 $5,756 $2,292
---------------- ------ ------ ------
Operating Expenses
Selling and administrative expenses totaled US$21.0 million, or 37.1% of sales in the first quarter of fiscal 2015 compared to US$21.7 million, or 38.8% of sales, in the same period last year and US$21.5 million, or 35.9% of sales, in the fourth quarter of 2014.
Gross research and development expenses amounted to US$13.3 million, or 23.5% of sales, in the first quarter of fiscal 2015 compared to US$13.3 million, or 23.8% of sales, in the first quarter of 2014 and US$12.5 million, or 20.8% of sales, in the fourth quarter of 2014.
Net R&D expenses totaled US$11.7 million, or 20.6% of sales, in the first quarter of fiscal 2015 compared to US$11.3 million, or 20.1% of sales, in the same period last year and US$10.8 million, or 18.2% of sales, in the fourth quarter of 2014.
First-Quarter Highlights
-- Sales. During the first quarter, EXFO booked a new system order with a
tier-1 wireless operator for an initial deployment that should lead to
significant revenue over time. EXFO's sales increased year-over-year in
Europe, Middle East and Africa (EMEA) and to a lesser extent in
Asia-Pacific in the first quarter of 2015 but decreased in the Americas.
Geographical split was at 48% from the Americas, 32% from EMEA, and 20%
from Asia-Pacific with top customer accounting for 4.1% of sales while
the top three represented 11.1%.
-- Profitability. EXFO generated adjusted EBITDA of US$3.2 million, or 5.6%
of sales, in the first quarter of 2015. The company also delivered
US$1.9 million in cash flows from operating activities. EXFO had a cash
position of US$57.6 million and no debt as at November 30, 2014.
-- Innovation. EXFO launched three new products in the first quarter,
including a new version of its TravelHawk Pro, a live 4G/LTE
troubleshooting tool now capturing up to 30 Gbit/s of data for deep
analysis; CPRI (common public radio interface) test capabilities for the
FTB-700G and FTB-800 NetBlazer series that are critical for
fiber-to-the-antenna (FTTA) network deployments; and expanded testing
functionalities for the Packet Blazer product family, allowing carrier
labs and network equipment manufacturers to fully qualify and test 100G
network elements.
Business Outlook
EXFO forecasts sales between US$52.0 million and US$57.0 million for the second quarter of fiscal 2015, while IFRS net results are expected to range between a net loss of US$0.03 per share and net earnings of US$0.01 per share. IFRS net loss/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 first quarter of fiscal 2015. To listen to the conference call and participate in the question period via telephone, dial 1-416-641-6700. 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 11:59 p.m. on January 14, 2015. The replay number is 1-402-977-9141 and the reservation number is 21753961. 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 a leading provider of next-generation test, service assurance and end-to-end quality of experience solutions for mobile and fixed network operators and equipment manufacturers in the global telecommunications industry. EXFO's intelligent solutions with contextually relevant analytics improve end-user quality of experience, enhance network performance and drive operational efficiencies throughout the network and service delivery lifecycle. Key technologies supported include 3G, 4G/LTE, VoLTE, IMS, video, Ethernet/IP, SNMP, OTN, FTTx, xDSL and various optical technologies accounting for more than 38% of the global 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, 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 (loss) 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 (loss), in thousands of US dollars:
Adjusted
EBITDA
(unaudited)
Q1 2015 Q4 2014 Q1 2014
------- ------- -------
IFRS net
earnings
(loss) for
the period $1,481 $1,204 $(747)
Add (deduct):
Depreciation
of property,
plant and
equipment 1,245 1,258 1,275
Amortization
of
intangible
assets 1,098 1,117 1,182
Interest
income (217) (30) (27)
Income taxes 1,165 1,449 948
Stock-based
compensation
costs 400 424 463
Foreign
exchange
(gain) loss (1,975) 334 (802)
------ --- ----
Adjusted
EBITDA for
the period $3,197 $5,756 $2,292
====== ====== ======
Adjusted
EBITDA in
percentage
of sales 5.6% 9.6% 4.1%
=== === ===
EXFO Inc.
Condensed Unaudited Interim Consolidated Balance Sheets
(in thousands of US dollars)
As at As at
November 30, August 31,
2014 2014
---- ----
Assets
Current assets
Cash $52,221 $54,121
Short-term investments 5,389 5,726
Accounts receivable
Trade
48,074 46,031
Other 2,610 2,001
Income taxes and tax credits
recoverable 4,363 3,796
Inventories 34,551 35,232
Prepaid expenses 2,502 2,281
----- -----
149,710 149,188
Tax credits recoverable 38,982 41,745
Property, plant and equipment 40,007 42,780
Intangible assets 6,078 7,293
Goodwill 25,140 26,488
Deferred income taxes 10,273 9,816
Other assets 548 721
--- ---
$270,738 $278,031
======== ========
Liabilities
Current liabilities
Accounts payable and accrued
liabilities $35,672 $29,553
Provisions 508 532
Income taxes payable 727 840
Deferred revenue 7,728 8,990
----- -----
44,635 39,915
Deferred revenue 2,952 3,319
Deferred income taxes 2,733 3,087
Other liabilities 711 340
--- ---
51,031 46,661
------ ------
Shareholders' equity
Share capital 111,015 111,491
Contributed surplus 16,540 16,503
Retained earnings 115,116 113,635
Accumulated other comprehensive
loss (22,964) (10,259)
------- -------
219,707 231,370
------- -------
$270,738 $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
November 30,
------------
2014 2013
---- ----
Sales $56,724 $56,003
------- -------
Cost of sales (1) 21,237 21,185
Selling and administrative 21,032 21,708
Net research and development 11,658 11,281
Depreciation of property,
plant and equipment 1,245 1,275
Amortization of intangible
assets 1,098 1,182
Interest income (217) (27)
Foreign exchange gain (1,975) (802)
------ ----
Earnings before income taxes 2,646 201
Income taxes 1,165 948
----- ---
Net earnings (loss) for the
period $1,481 $(747)
====== =====
Basic and diluted net
earnings (loss) per share $0.02 $(0.01)
Basic weighted average
number of shares
outstanding (000's) 60,335 60,217
Diluted weighted average
number of shares
outstanding (000's) 60,980 60,217
(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,
------------
2014 2013
---- ----
Net earnings (loss) for the
period $1,481 $(747)
Other comprehensive income
(loss), net of income taxes
Items that will not be
reclassified subsequently to
net earnings
Foreign currency translation
adjustment (11,735) (1,948)
Items that may be reclassified
subsequently to net earnings
Unrealized losses on forward exchange
contracts (1,505) (240)
Reclassification of realized losses on
forward exchange contracts in net
loss 162 174
Deferred income tax effect of losses
on forward exchange contracts 373 18
Other comprehensive loss (12,705) (1,996)
------- ------
Comprehensive loss for the
period $(11,224) $(2,743)
======== =======
EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity
(in thousands of US dollars)
Three months ended November 30, 2013
------------------------------------
Share Contributed Retained Accumulated Total
Capital Surplus earnings other shareholders'
comprehensive equity
loss
----
Balance as at September 1, 2013 $109,837 $17,186 $112,852 $(3,423) $236,452
Exercise of stock options 106 - - - 106
Reclassification of stock-based
compensation costs 1,435 (1,435) - - -
Stock-based compensation costs - 417 - - 417
Net loss for the period - - (747) - (747)
Other comprehensive loss
Foreign currency translation
adjustment - - - (1,948) (1,948)
Changes in unrealized losses
on forward exchange
contracts, net of deferred
income taxes of $18 - - - (48) (48)
Total comprehensive loss for the period - - (747) (1,996) (2,743)
--- --- ---- ------ ------
Balance as at November 30, 2013 $111,378 $16,168 $112,105 $(5,419) $234,232
======== ======= ======== ======= ========
Three months ended November 30, 2014
------------------------------------
Share Contributed Retained Accumulated Total
Capital Surplus earnings other shareholders'
comprehensive equity
loss
----
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 - - 1,481 (12,705) (11,224)
--- --- ----- ------- -------
Balance as at November 30, 2014 $111,015 $16,540 $115,116 $(22,964) $219,707
======== ======= ======== ======== ========
EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
Three months ended
November 30,
------------
2014 2013
---- ----
Cash flows from operating activities
Net earnings (loss) for the period $1,481 $(747)
Add (deduct) items not affecting cash
Stock-based compensation costs 400 463
Depreciation and amortization 2,343 2,457
Deferred revenue (1,027) (1,752)
Deferred income taxes (332) 625
Changes in foreign exchange gain/
loss (1,028) (108)
1,837 938
Changes in non-cash operating items
Accounts receivable (5,036) (1,657)
Income taxes and tax credits (212) 743
Inventories (1,181) (2,312)
Prepaid expenses (336) 171
Other assets 1 6
Accounts payable, accrued
liabilities and provisions 6,836 5,485
Other liabilities (19) (26)
1,890 3,348
----- -----
Cash flows from investing activities
Additions to short-term investments (13,691) (9,781)
Proceeds from disposal and maturity
of short-term investments 13,766 9,772
Additions to capital assets (754) (701)
---- ----
(679) (710)
---- ----
Cash flows from financing activities
Exercise of stock options - 106
Redemption of share capital (853) -
---- ---
(853) 106
---- ---
Effect of foreign exchange rate
changes on cash (2,258) (365)
------ ----
Change in cash (1,900) 2,379
Cash - Beginning of the period 54,121 45,386
------ ------
Cash - End of the period $52,221 $47,765
======= =======
Supplementary information
Income taxes paid $367 $642
SOURCE EXFO inc.
