EXFO
$4.08
Exfo
$.02
.49%
Earnings Details
1st Quarter November 2019
Tuesday, January 7, 2020 4:05:00 PM
Tweet Share Watch
Summary

EXFO Guides Below Estimates

Exfo (EXFO) reported 1st Quarter November 2019 earnings of $0.04 per share on revenue of $73.6 million. The consensus earnings estimate was $0.04 per share on revenue of $71.3 million. Revenue grew 6.3% on a year-over-year basis.

The company said it expects second quarter non-IFRS results to range from a loss of $0.04 per share to breakeven on revenue of $66.0 million to $71.0 million. The current consensus estimate is earnings of $0.05 per share on revenue of $72.5 million for the quarter ending February 29, 2020.

EXFO Inc and its subsidiaries designs, manufactures and market test, service assurance and quality of experience solutions for wireless and wireline network operators and equipment manufacturers in the telecommunications industry.

Results
Reported Earnings
$0.04
Earnings Whisper
-
Consensus Estimate
$0.04
Reported Revenue
$73.6 Mil
Revenue Estimate
$71.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

EXFO reports first quarter results for fiscal 2020

  • Sales increased 6.3% to US$73.6 million, above midpoint of guidance range
  • IFRS net loss amounted to US$0.1 million, US$0.00 per share
  • Adjusted EBITDA totaled US$7.5 million, 10.3% of sales

QUEBEC CITY, Jan. 7, 2020 /CNW Telbec/ - EXFO Inc. (NASDAQ: EXFO) (TSX: EXF), the communications industry's test, monitoring and analytics experts, reported today financial results for the first quarter ended November 30, 2019.

"EXFO delivered a strong first-quarter performance to begin fiscal 2020, highlighted by sales above the midpoint of guidance for a fifth consecutive reporting period and adjusted EBITDA margin in double-digits," said EXFO's CEO Philippe Morin. "These results demonstrate the heightened leverage in our business model through a combination of increased revenue and lower cost structure. Although we are operating within a highly dynamic and transforming industry, we are confident about achieving our profitable growth strategy for the full fiscal year."

First-Quarter Highlights

  • Sales. Sales increased 6.3% in the first quarter of fiscal 2020 mainly due to a more linear influx of Test and Measurement (T&M) orders compared to the same period in 2019, and stronger demand for the company's solutions in the Asia-Pacific region. T&M sales accounted for 76% of revenue in the first quarter of 2020, while Service Assurance, Systems and Services (SASS) sales totaled 24%. Revenue distribution among the three main selling regions amounted to 54% in the Americas, 29% in Europe, Middle East and Africa (EMEA) and 17% in Asia-Pacific. EXFO's top customer accounted for 11.9% of sales, while the top three represented 19.7%.
  • Profitability. IFRS net loss amounted to US$0.1 million, or US$0.00 per share, in the first quarter of fiscal 2020, while adjusted EBITDA totaled US$7.5 million, or 10.3% of sales. EXFO adopted IFRS 16, "Leases," on Sept. 1, 2019, using the modified retrospective method which had a positive impact on adjusted EBITDA of US$0.9 million, or 1.2% of sales, in the first quarter of 2020. Prior period amounts were not adjusted.
  • Innovation. EXFO introduced the Optical Wave Expert, the first test solution to integrate DWDM (dense wavelength division multiplexing) channel power validation and OTDR (optical time domain reflectometry) fault-locating capabilities on a single port. Designed to reduce mean-time-to-repair, this instrument enables field technicians to automatically troubleshoot optical fiber links.

Business Outlook
EXFO forecasts sales between US$66.0 million and US$71.0 million for the second quarter of fiscal 2020, while IFRS net loss is expected to range between -US$0.09 and -US$0.05 per share. IFRS net loss includes US$0.05 per share in after-tax amortization of intangible assets, stock-based compensation costs and anticipated foreign exchange loss.

This guidance, which is a forward-looking statement, was established by management based on existing backlog as of the date of this news release, seasonality, expected bookings for the remaining of the quarter as well as exchange rates as of the date of this news release.

 

Selected Financial Information

(In thousands of US dollars)






Three months ended
November 30,



2019


2018






Test and measurement sales


$

55,947


$

49,764

Service assurance, systems and services sales


17,749


19,416

Foreign exchange gains (losses) on forward exchange contracts


(145)


21

Total sales


$

73,551


$

69,201






Test and measurement bookings


$

55,009


$

63,996

Service assurance, systems and services bookings


15,049


17,221

Foreign exchange gains (losses) on forward exchange contracts


(145)


21

Total bookings


$

69,913


$

81,238

Book-to-bill ratio (bookings/sales)


0.95


1.17

Gross margin before depreciation and amortization*


$

43,310


$

40,304



58.9 %


58.2 %






Other selected information:





IFRS net loss


$

(63)


$

(7,467)

Amortization of intangible assets


$

1,632


$

2,940

Stock-based compensation costs


$

487


$

418

Restructuring charges


$

-


$

2,741

Acquisition-related deferred revenue fair value adjustment


$

-


$

864

Net income tax effect of the above items


$

(249)


$

(423)

Foreign exchange (gain) loss


$

126


$

(215)

Adjusted EBITDA*


$

7,544


$

2,728

 

Quarterly Overview
Sales reached US$73.6 million in the first quarter of fiscal 2020 compared to US$69.2 million in the first quarter of 2019.

Bookings attained US$69.9 million in the first quarter of fiscal 2020 compared to US$81.2 million for the same period in 2019. The company's book-to-bill ratio was 0.95 in the first quarter of 2020.

Gross margin before depreciation and amortization* improved to 58.9% of sales in the first quarter of fiscal 2020 from 58.2% in the first quarter of 2019.

Selling and administrative expenses totaled US$24.5 million, or 33.3% of sales in the first quarter of fiscal 2020 compared to US$26.4 million, or 38.1% of sales, in the first quarter of 2019.

Net R&D expenses amounted to US$11.7 million, or 16.0% of sales, in the first quarter of fiscal 2020 compared to US$15.2 million, or 22.0% of sales, in the same period last year. Net R&D expenses included US$2.1 million in restructuring charges in the first quarter of 2019.

IFRS net loss totaled US$0.1 million, or US$0.00 per share, in the first quarter of fiscal 2020 compared to  US$7.5 million, or US$0.14 per share, in the first quarter of 2019. IFRS net loss in the first quarter of 2020 included US$1.4 million in after-tax amortization of intangible assets, US$0.5 million in stock-based compensation costs and US$0.1 million in foreign exchange loss. In the first quarter of 2019, IFRS net loss was impacted by restructuring charges of US$2.7 million.

Adjusted EBITDA* amounted to US$7.5 million, or 10.3% of sales, in the first quarter of fiscal 2020 compared to US$2.7 million, or 3.9% of sales, in the first quarter of 2019.

Conference Call and Webcast
EXFO will host a conference call today at 5 p.m. (Eastern time) to review first-quarter results for fiscal 2020. To listen to the conference call and participate in the question period via telephone, dial 1-323-794-2093. Please take note the following participant passcode will be required: 7351891. Executive Chairman Germain Lamonde, CEO Philippe Morin and Pierre Plamondon, CPA, Chief Financial Officer and Vice-President of Finance, will participate in the call. An audio replay of the conference call will be available two hours after the event until 8 p.m. on January 14, 2020. The replay number is 1-719-457-0820 and the participant passcode is 7351891. 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 (NASDAQ: EXFO) (TSX: EXF) develops smarter test, monitoring and analytics solutions for fixed and mobile network operators, webscale companies and equipment manufacturers in the global communications industry. Our customers count on us to deliver superior network performance, service reliability and subscriber insights. They count on our unique blend of equipment, software and services to accelerate digital transformations related to fiber, 4G/LTE and 5G deployments. They count on our expertise with automation, real-time troubleshooting and big data analytics, which are critical to their business performance. We've spent over 30 years earning this trust, and today 1,900 EXFO employees in over 25 countries work side by side with our customers in the lab, field, data center and beyond.

Forward-Looking Statements
This news 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 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, but not limited to, macroeconomic uncertainty, including trade wars and recessions; our ability to successfully integrate businesses that we acquire; capital spending and network deployment levels in the communications industry (including our ability to quickly adapt cost structures to 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 communications test, monitoring and analytics solutions markets and increased competition among vendors; capacity to adapt our future product offering to future technological changes; limited visibility with regard to the timing and nature of customer orders; delay in revenue recognition due to longer sales cycles for complex systems involving customers' acceptance; 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 and to conduct business internationally; 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. Gross margin before depreciation and amortization represents sales, less cost of sales, excluding depreciation and amortization. Adjusted EBITDA represents net loss before interest and other expense, income taxes, depreciation and amortization, stock-based compensation costs, restructuring charges, acquisition-related deferred revenue fair value adjustment, and foreign exchange gain or loss.

These non-IFRS measures eliminate the effect on IFRS results of non-cash statement of earnings elements, restructuring charges as well as elements subject to significant volatility such as foreign exchange gain or loss. EXFO uses these measures for evaluating its historical and prospective financial performance, as well as its performance relative to competitors. These non-IFRS measures are also used by financial analysts who evaluate and compare EXFO's performance against that of competitors and industry players in the sector.

Finally, these measures help EXFO to plan and forecast future periods as well as make operational and strategic decisions. EXFO believes that providing this information to investors, in addition to IFRS measures, allows them to see the company's results through the eyes of management, and to better understand historical and future financial performance. More importantly, it enables the comparison of EXFO's performance on a relatively similar basis against that of other public and private companies in the industry worldwide.

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.

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

 

Adjusted EBITDA



Three months ended

November 30,



2019


2018






IFRS net loss for the period


$

(63)


$

(7,467)






Add (deduct):










Depreciation and amortization


3,926


4,369

Interest and other expense


399


377

Income taxes


2,669


1,641

Stock-based compensation costs


487


418

Restructuring charges


-


2,741

Acquisition-related deferred revenue fair value adjustment


-


864

Foreign exchange (gain) loss


126



(215)

Adjusted EBITDA for the period (1)


$

7,544


$

2,728






Adjusted EBITDA in percentage of sales (1)


10.3 %


3.9 %



(1)

IFRS net loss for the three months ended November 30, 2019 takes into account the impact of the adoption of IFRS 16 on September 1, 2019. The adoption of IFRS 16 had a positive impact on adjusted EBITDA of $851,000, or 1.2% of sales, for the three months ended November 30, 2019. Comparative figures were not adjusted.

 

EXFO Inc.

Condensed Unaudited Interim Consolidated Balance Sheets   


(in thousands of US dollars)






As at

November 30,
2019


 

As at

August 31,

2019







Assets












Current assets






Cash

$

15,045


$

16,518

Short-term investments


2,491



2,918

Accounts receivable






Trade


51,429



51,517

Other


3,404



3,396

Income taxes and tax credits recoverable


3,692



3,159

Inventories


41,513



38,017

Prepaid expenses


5,663



6,510

Other assets


3,364



3,083



126,601



125,118







Tax credits recoverable


45,285



46,704

Property, plant and equipment


39,719



39,364

Lease right-of-use assets


10,498



Intangible assets


20,495



21,654

Goodwill


39,076



38,648

Deferred income tax assets


4,819



4,821

Other assets


979



1,293


$

287,472


$

277,602

Liabilities












Current liabilities






Bank loan

$

13,322


$

5,000

Accounts payable and accrued liabilities


47,482



50,790

Provisions


942



1,065

Income taxes payable


311



704

Deferred revenue


20,120



24,422

Other liabilities


1,602



1,606

Current portion of lease liabilities


2,962



Current portion of long-term debt


2,335



2,449



89,076



86,036







Provisions


2,615



2,737

Deferred revenue


9,021



9,056

Lease liabilities


7,158



Long-term debt


2,718



3,293

Deferred income tax liabilities


3,166



3,598

Other liabilities


269



318



114,023



105,038







Shareholders' equity






Share capital


93,355



92,706

Contributed surplus


18,816



19,196

Retained earnings


112,110



112,173

Accumulated other comprehensive loss


(50,832)



(51,511)



173,449



172,564








$

287,472


$

277,602


 

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,



2019



2018







Sales

$

73,551


$

69,201







Cost of sales (1)


30,241



28,897

Selling and administrative


24,504



26,375

Net research and development


11,749



15,224

Depreciation of property, plant and equipment


1,443



1,429

Depreciation of lease right-of-use assets


851



Amortization of intangible assets


1,632



2,940

Interest and other expense


399



377

Foreign exchange (gain) loss


126



(215)







Earnings (loss) before income taxes


2,606



(5,826)







Income taxes


2,669



1,641







Net loss for the period

$

(63)


$

(7,467)







Basic and diluted net loss per share

$

(0.00)


$

(0.14)







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


55,439



55,184







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


55,439



55,184



(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

November 30,



2019



2018







Net loss for the period

$

(63)


$

(7,467)

Other comprehensive income (loss), net of income taxes






Items that may be reclassified subsequently to net loss






Foreign currency translation adjustment


561



(3,356)

Unrealized gains/losses on forward exchange contracts


(35)



(687)

Reclassification of realized gains/losses on forward exchange contracts in net loss


183



91

Deferred income tax effect of gains/losses on forward exchange contracts


(30)



209







Other comprehensive income (loss)


679



(3,743)







Comprehensive income (loss) for the period

$

616


$

(11,210)

 

EXFO Inc.

Condensed Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity


(in thousands of US dollars)




Three months ended November 30, 2018



Share

capital



Contributed
surplus



Retained
earnings



Accumulated
other
comprehensive
loss



Total
shareholders'
equity
















Balance as at September 1, 2018

$

91,937


$

18,428


$

114,906


$

(47,350)


$

177,921

Adoption of IFRS 9






(253)





(253)

Adjusted balance as at September 1, 2018


91,937



18,428



114,653



(47,350)



177,668

Reclassification of stock-based compensation costs


643



(643)







Stock-based compensation costs




460







460

Net loss for the period






(7,467)





(7,467)

Other comprehensive loss















Foreign currency translation adjustment








(3,356)



(3,356)

Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes of $209








(387)



(387)
















Total comprehensive loss for the period














(11,210)
















Balance as at November 30, 2018

$

92,580


$

18,245


$

107,186


$

(51,093)


$

166,918

































Three months ended November 30, 2019



Share

capital



Contributed
surplus



Retained
earnings



Accumulated
other
comprehensive
loss



Total
shareholders'
equity
















Balance as at September 1, 2019

$

92,706


$

19,196


$

112,173


$

(51,511)


$

172,564

Reclassification of stock-based compensation costs


861



(861)







Redemption of share capital


(212)



(13)







(225)

Stock-based compensation costs




494







494

Net loss for the period






(63)





(63)

Other comprehensive income















Foreign currency translation adjustment








561



561

Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes of $30








118



118
















Total comprehensive income for the period














616
















Balance as at November 30, 2019

$

93,355


$

18,816


$

112,110


$

(50,832)


$

173,449

 

EXFO Inc.

Condensed Unaudited Interim Consolidated Statements of Cash Flows


(in thousands of US dollars)



Three months ended

November 30,



2019



2018







Cash flows from operating activities






Net loss for the period

$

(63)


$

(7,467)

Add (deduct) items not affecting cash






Stock-based compensation costs


487



418

Depreciation and amortization


3,926



4,369

Write-off of capital assets


216



Deferred revenue


(4,372)



3,922

Deferred income taxes


(442)



(29)

Changes in foreign exchange gain/loss


(21)



(529)



(269)



684







Changes in non-cash operating items






Accounts receivable


72



(4,052)

Income taxes and tax credits


516



(998)

Inventories


(3,493)



(1,361)

Prepaid expenses


378



183

Other assets


35



(12)

Accounts payable, accrued liabilities and provisions


(3,693)



3,132

Other liabilities


(16)



(51)



(6,470)



(2,475)

Cash flows from investing activities






Additions to short-term investments


(147)



Disposal of short-term investments


563



342

Purchases of capital assets


(2,040)



(2,882)



(1,624)



(2,540)

Cash flows from financing activities






Bank loan


8,354



11,257

Repayment of lease liabilities


(844)



Repayment of long-term debt


(676)



(717)

Redemption of share capital


(225)





6,609



10,540







Effect of foreign exchange rate changes on cash


12



(196)







Change in cash


(1,473)



5,329

Cash – Beginning of the period


16,518



12,758

Cash – End of the period

$

15,045


$

18,087

 

EXFO-F

Cision View original content:http://www.prnewswire.com/news-releases/exfo-reports-first-quarter-results-for-fiscal-2020-300983046.html

SOURCE EXFO Inc.