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 As at
November 30, August 31,
2015 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 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 (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 Contributed Retained Accumulated Total
Capital Surplus earnings other shareholders'
comprehensive equity
loss
----
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.
