EXFO Reports Third-Quarter Results for Fiscal 2012
-- Net loss of US$3.9 M on sales of US$59.5 M -- Gross margin of 60.4% on lower sales volume and product mix -- Cash flows from operations of US$2.8 M and US$23.0 M year-to-date
QUEBEC CITY, June 28, 2012 /PRNewswire/ – EXFO Inc. (NASDAQ: EXFO; TSX:
EXF) reported today financial results for the third quarter ended May
Sales reached US$59.5 million in the third quarter of fiscal 2012
compared to US$67.6 million in the third quarter of 2011 and US$66.9
million in the second quarter of 2012.
Bookings attained US$57.5 million in the third quarter of fiscal 2012
compared to US$61.3 million in the same period last year and US$60.6
million in the second quarter of 2012. The company’s book-to-bill ratio
was 0.97 in the third quarter of 2012.
Gross margin(*) amounted to 60.4% of sales in the third quarter of fiscal 2012,
compared to 64.2% in the third quarter of 2011 and 64.7% in the second
quarter of 2012, due to lower sales volume and unfavorable product mix.
IFRS net loss in the third quarter of fiscal 2012 totaled US$3.9
million, or US$0.06 per share, compared to net earnings of
US$1.8 million, or US$0.03 per diluted share, in the same period last
year and net earnings of US$1.0 million, or US$0.02 per diluted share,
in the second quarter of 2012. Net loss in the third quarter of 2012
included US$1.9 million in after-tax amortization of intangible assets
and US$0.4 million in stock-based compensation costs. EXFO also
reported a foreign exchange gain of US$1.1 million in the third quarter
Adjusted EBITDA(**) amounted to US$0.2 million, or 0.4% of sales, in the third quarter of
fiscal 2012 compared to US$7.1 million, or 10.5% of sales, in the third
quarter of 2011 and US$5.8 million, or 8.7% of sales, in the second
quarter of 2012. Foreign exchange gains or losses are included in
Cash flows from operations totaled US$2.8 million in the third quarter
of fiscal 2012 and US$23.0 million after nine months into the fiscal
year. Cash position amounted to US$69.7 million at the end of the third
quarter of 2012.
To align its cost structure with the challenging market environment,
EXFO has established a restructuring plan that is expected to provide
annual savings of approximately US$9.0 million. The company will incur
restructuring expenses of US$3.0 million mainly in the fourth quarter
of fiscal 2012.
“The uncertain macro-economic environment, European debt crisis and
network operators’ delayed spending combined to reduce EXFO’s
third-quarter bookings and revenues,” said Germain Lamonde, EXFO’s
Chairman, President and CEO. “We see projects being delayed rather than
cancelled and our funnel remains stronger than ever. Despite these
challenging market conditions, we are confident about the fundamentals
of our end-markets and remain committed to our long-term strategy of
enabling fixed and mobile operators increase network capacity,
performance and quality of experience. Although we expect market
conditions to improve in the second half of calendar 2012, we are
implementing a $9-million cost-reduction plan that will sharpen our
focus in strategic areas benefitting from investments and growth.”
Selected Financial Information
(In thousands of US dollars)
Q3 2012 Q2 2012 Q3 2011 Sales $ 59,505 $ 66,917 $ 67,630 Gross margin* $ 35,956 $ 43,301 $ 43,387 60.4% 64.7% 64.2% Other selected information: IFRS net earnings (loss) $ (3,902) $ 1,040 $ 1,799 Amortization of intangible $ 1,993 $ 1,974 $ 2,128 assets Stock-based compensation costs $ 370 $ 508 $ 432 Net income tax effect of the $ (60) $ (56) $ (70) above items Foreign exchange gain (loss) $ 1,090 $ (1,471) $ (243) Adjusted EBITDA** $ 248 $ 5,847 $ 7,119
Selling and administrative expenses totaled US$23.6 million, or 39.7% of
sales, in the third quarter of fiscal 2012 compared to US$23.1 million,
or 34.1% of sales, in the same period last year and US$23.7 million, or
35.4% of sales, in the second quarter of 2012.
Gross research and development expenses amounted to US$15.6 million, or
26.2% of sales, in the third quarter of fiscal 2012 compared to US$15.4
million, or 22.7% of sales, in the third quarter of 2011 and
US$14.8 million, or 22.1% of sales, in the second quarter of 2012.
Net R&D expenses totaled US$13.2 million, or 22.1% of sales, in the
third quarter of fiscal 2012 compared to US$12.9 million, or 19.2% of
sales, in the same period last year and US$12.3 million, or 18.4% of
sales, in the second quarter of 2012.
Third-Quarter Business Highlights
-- The uncertain macro-economic environment and network operators' delayed investments negatively affected the sales of EXFO's products and services in the third quarter of 2012. The company's protocol product families, however, continued to deliver year-over-year sales growth due to ongoing network upgrades from 10 Gbit/s to 40 Gbit/s and 100 Gbit/s as well as investments in wireless backhaul networks. -- EXFO's top customer accounted for 6.7% of sales in the third quarter, while the top three represented 14.5%. Global sales remained diversified with 51% originating from the Americas, 29% from Europe, Middle East and Africa (EMEA), and 20% from Asia-Pacific. -- EXFO launched seven new products in the third quarter, including the portable iPro, an intelligent high-performance capture and analysis probe for wireless networks up to 10 Gbit/s; an integrated, end-to-end, joint-monitoring solution with RAD Data Communications; Fibre Channel and MPLS (multiprotocol label switching) test capabilities for the NetBlazer product family; and the MaxTester 610 Copper Test Set and MaxTester 635 Copper/DSL/Multi-Play Test Set for cost-effective VDSL2 installation and repair work on copper links. Altogether, EXFO introduced 19 new solutions after nine months into fiscal 2012.
EXFO forecasts sales between US$55.0 million and US$60.0 million for the
fourth quarter of fiscal 2012, while IFRS net loss is expected to range
between US$0.11 and US$0.07 per share. IFRS net loss includes US$0.04
per share in after-tax amortization of intangible assets and
stock-based compensation costs as well as US$0.03 per share in
after-tax restructuring charges.
This guidance was established by management based on existing backlog as
of the date of this press release, seasonality, anticipated bookings
for the remaining of the quarter, no changes to the discounted value of
long-term tax credits, as well as exchange rates as of the day of this
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 2012. To
listen to the conference call and participate in the question period
via telephone, dial (416) 641-6684. Germain Lamonde, Chairman, President and CEO, and Pierre Plamondon, 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 7 p.m. on July 5, 2012. The replay
number is (402) 977-9141 and the reservation number is 21592376. 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.
Listed on the NASDAQ and TSX stock exchanges, EXFO is among the leading
providers of next-generation test and service assurance solutions for
wireline and wireless network operators and equipment manufacturers in
the global telecommunications industry. The company offers innovative
solutions for the development, installation, management and maintenance
of converged, IP fixed and mobile networks–from the core to the edge.
Key technologies supported include 3G, 4G/LTE, IMS, Ethernet, OTN,
FTTx, VDSL2, ADSL2+ and various optical technologies accounting for an
estimated 35% of the portable fiber-optic test market. EXFO has a staff
of approximately 1800 people in 25 countries, supporting more than 2000
telecom customers worldwide. For more information, visit www.EXFO.com.
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, will, expect, believe, anticipate, intend, could,
estimate, continue, or the negative or comparable terminology 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 our forward-looking statements due to
various factors including macro-economic uncertainty and/or recession
(including our ability to quickly adapt cost structures with
anticipated levels of business, ability to manage inventory levels with
market demand); capital spending levels in the telecommunications
industry; future economic, competitive, financial and market
conditions; limited visibility with regards to customer orders and the
timing of such orders; fluctuating exchange rates; consolidation in the
global telecommunications test and service assurance industry and
increased competition among vendors; concentration of sales; market
acceptance of our new products and other upcoming products; our ability
to successfully integrate our acquired and to-be-acquired businesses;
our ability to successfully expand international operations; 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
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 press
release. 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 FINANCIAL MEASURES
EXFO provides non-IFRS financial measures (gross margin*, EBITDA** and
adjusted EBITDA**) as supplemental information regarding
its operational performance. The company uses these measures for the
purposes of evaluating historical and prospective financial
performance, as well as its performance relative to competitors.
These measures also help EXFO to plan and forecast 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 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 represents sales less cost of sales, excluding depreciation and amortization. ** EBITDA is defined as net earnings (loss) before interest, income taxes, depreciation of property, plant and equipment and amortization of intangible assets. Adjusted EBITDA represents EBITDA excluding changes in the fair value of the cash contingent consideration.
The following table summarizes the reconciliation of EBITDA and adjusted
EBITDA to IFRS net earnings (loss), in thousands of US dollars:
EBITDA and adjusted EBITDA
Q3 2012 Q22012 Q3 2011 IFRS net earnings (loss) for the $ (3,902) $ 1,040 $ 1,799 period Add (deduct): Depreciation of property, plant and 1,520 1,546 1,745 equipment Amortization of intangible assets 1,993 1,974 2,128 Interest (income) expenses 163 (171) (619) Income taxes 474 1,769 2,066 EBITDA for the period 248 6,158 7,119 Changes in fair value of cash - (311) - contingent consideration Adjusted EBITDA for the period $ 248 $ 5,847 $ 7,119 EBITDA in percentage of sales 0.4 % 9.2 % 10.5 % Adjusted EBITDA in percentage of sales 0.4 % 8.7 % 10.5 %
EXFOInc. Unaudited Interim ConsolidatedBalanceSheets (in thousands of US dollars) As at As at May 31, August 31, 2012 2011 Assets Current assets Cash $ 61,909 $ 22,771 Short-term investments 7,831 47,091 Accounts receivable Trade 43,704 45,151 Other 3,236 6,329 Income taxes and tax credits recoverable 8,413 5,414 Inventories 40,497 52,754 Prepaid expenses 3,491 3,237 169,081 182,747 Tax credits recoverable 32,382 34,120 Forward exchange contracts - 149 Property, plant and equipment 43,189 32,076 Intangible assets 15,420 22,901 Goodwill 28,105 30,942 Deferred income taxes 16,529 17,314 $ 304,706 $ 320,249 Liabilities Currentliabilities Bank loan $ - $ 784 Accounts payable and accrued liabilities 33,488 30,320 Provisions 1,050 1,817 Forward exchange contracts 537 - Income taxes payable 895 876 Contingent liability - 338 Current portion of long-term debt 554 645 Deferred revenue 12,044 10,590 48,568 45,370 Deferred revenue 5,228 5,704 Long-term debt 554 968 Other liabilities 694 723 Deferred income taxes 5,499 4,803 60,543 57,568 Shareholders' equity Share capital 111,890 110,341 Contributed surplus 17,322 18,017 Retained earnings 113,490 113,438 Accumulated other comprehensive income 1,461 20,885 244,163 262,681 $ 304,706 $ 320,249
EXFO Inc. Unaudited Interim Consolidated Statements of Earnings (in thousands of US dollars, except share and per share data) Nine Three Threemonths months months Nine months ended ended ended ended May 31, May 31, May31, May 31, 2012 2012 2011 2011 Sales $ 59,505 $ 192,810 $ 67,630 $ 205,329 Cost of sales (1) 23,549 70,535 24,243 76,849 Selling and administrative 23,625 71,919 23,082 65,216 Net research and development 13,173 37,963 12,943 35,788 Depreciation of property, plant and equipment 1,520 4,634 1,745 4,988 Amortization of intangible assets 1,993 5,888 2,128 7,061 Changes in fair value of cash contingent consideration - (311) - - Earnings (loss) from operations (4,355) 2,182 3,489 15,427 Interest and other income (expenses) (163) (19) 619 661 Foreign exchange gain (loss) 1,090 1,283 (243) (3,751) Earnings (loss) before income taxes (3,428) 3,446 3,865 12,337 Income taxes 474 3,394 2,066 7,615 Net earnings (loss) from continuing operations (3,902) 52 1,799 4,722 Net earnings from discontinued operations - - - 12,926 Net earnings (loss) for the period $ (3,902) $ 52 $ 1,799 $ 17,648 Basic and diluted net earnings (loss) from continuing operations per share $ (0.06) $ 0.00 $ 0.03 $ 0.08 Basic net earnings from discontinued operations per share $ - $ - $ - $ 0.22 Diluted net earnings from discontinued operations per share $ - $ - $ - $ 0.21 Basic and diluted net earnings (loss) per share $ (0.06) $ 0.00 $ 0.03 $ 0.29 Basic weighted average number of shares outstanding (000's) 60,537 60,440 60,183 59,916 Diluted weighted average number of shares outstanding (000's) 60,537 61,694 61,720 61,449 (1) The cost of sales is exclusive of depreciation and amortization, shown separately.
EXFO Inc. Unaudited Interim Consolidated Statements of ComprehensiveIncome (Loss) (in thousands of US dollars) Three Nine Three Nine months months months months ended ended ended ended May 31, May 31, May 31, May 31, 2012 2012 2011 2011 Net earnings (loss) for the period $ (3,902) $ 52 $ 1,799 $ 17,648 Other comprehensive income (loss), net of income taxes Foreign currency translation adjustment (12,227) (17,831) 1,839 20,826 Unrealized gains (losses) on forward exchange contracts (1,066) (922) 188 3,426 Reclassification of realized gains on forward exchange contracts in net earnings (loss) (285) (1,265) (792) (1,445) Deferred income tax effect of the components of other comprehensive income (loss) 362 594 172 (531) Other comprehensive income (loss) (13,216) (19,424) 1,407 22,276 Comprehensive income(loss) for the period $ (17,118) $ (19,372) $ 3,206 $ 39,924
EXFO Inc. UnauditedInterimConsolidatedStatementsof ChangesinShareholders'Equity (in thousands of US dollars) NinemonthsendedMay31,2011 Accumulated other Total Share Retained comprehensive shareholders' capital Contributedsurplus earnings income quity Balance as at September 1, 2010 $ 106,126 $ 18,563 $ 91,152 $ 1,016 $ 216,857 Exercise of stock options 1,447 - - - 1,447 Reclassification of stock-based compensation costs 2,654 (2,654) - - - Stock-based compensation costs - 1,714 - - 1,714 Net earnings for the period - - 17,648 - 17,648 Other comprehensive income Foreign currency translation adjustment - - - 20,826 20,826 Changes in unrealized gains on forward exchange contracts, net of deferred income taxes of $531 - - - 1,450 1,450 Total comprehensive income for the period - - 17,648 22,276 39,924 Balance as at May 31, 2011 $ 110,227 $ 17,623 $ 108,800 $ 23,292 $ 259,942 Nine months ended May 31, 2012 Accumulated other Total Share Contributed Retained comprehensive shareholders' Capital Surplus earnings income equity Balance as at September 1, 2011 $ 110,341 $ 18,017 $ 113,438 $ 20,885 $ 262,681 Exercise of stock options 118 - - - 118 Redemption of share capital (404) (222) - - (626) Reclassification of stock-based compensation costs 1,835 (1,835) - - - Stock-based compensation costs - 1,362 - - 1,362 Net earnings for the period - - 52 - 52 Other comprehensive loss Foreign currency translation adjustment - - - (17,831) (17,831) Changes in unrealized gains (losses) on forward exchange contracts, net of deferred income taxes of $594 - - - (1,593) (1,593) Total comprehensive income (loss) for the period - - 52 (19,424) (19,372) Balance as at May 31, 2012 $ 111,890 $ 17,322 $ 113,490 $ 1,461 $ 244,163
EXFOInc. Unaudited Interim Consolidated Statements of Cash Flows (in thousands of US dollars) Three Nine Three months months months Nine months ended ended ended ended May 31, May 31, May 31, May 31, 2012 2012 2011 2011 Cash flows from operating activities Net earnings (loss) for the period $ (3,902) $ 52 $ 1,799 $ 17,648 Add (deduct) items not affecting cash Change in discount on short-term investments 43 (19) (46) Stock-based compensation costs 370 1,433 432 1,795 Depreciation and amortization 3,513 10,522 3,873 12,067 Gain on disposal of discontinued operations (13,212) Gain on disposal of capital assets (568) (568) Changes in fair value of cash contingent consideration (311) Deferred revenue 2,629 1,976 1,602 2,281 Deferred income taxes 379 2,002 1,718 6,327 Foreign exchange gain/loss (1,091) (2,130) 426 2,017 1,898 13,587 9,263 28,309 Change in non-cash operating items Accounts receivable (2,339) 268 1,570 6,175 Income taxes and tax credits (2,060) (3,479) (1,852) (5,171) Inventories 1,930 9,573 (5,491) (8,951) Prepaid expenses (238) (451) (123) (832) Accounts payable, accrued liabilities and provisions 3,478 3,443 (119) 1,731 Other liabilities 163 11 95 247 2,832 22,952 3,343 21,508 Cash flows frominvesting activities Additions to short-term investments (24,170) (91,968) (106,701) (421,651) Proceeds from disposal and maturity of short-term investments 21,135 128,901 101,414 381,332 Additions to capital assets (6,826) (18,003) (3,790) (7,085) Proceeds from disposal of capital assets 568 568 Net proceeds from disposal of discontinued operations 22,063 Business combination (517) (760) (9,861) 18,930 (9,026) (25,533) Cash flows from financing activities Bank loan 3 (782) 772 772 Repayment of long-term debt (296) (296) Exercise of stock options 40 118 167 1,447 Redemption of share capital (626) 43 (1,586) 939 1,923 Effect of foreign exchange rate changes on cash (2,354) (1,158) 6 1,134 Change in cash (9,340) 39,138 (4,738) (968) Cash - Beginning of the period 71,249 22,771 25,879 22,109 Cash- End of the period $ 61,909 $ 61,909 $ 21,141 $ 21,141
SOURCE EXFO INC.