EXFO Reports Second-Quarter Results for Fiscal 2013
-- Sales reach US$62.6 million -- Gross margin amounts to 62.2% of sales -- Adjusted EBITDA totals US$4.4 million
QUEBEC CITY, March 27, 2013 /PRNewswire/ – EXFO Inc. (NASDAQ: EXFO; TSX:
EXF) reported today financial results for the second quarter ended
February 28, 2013.
Sales reached US$62.6 million in the second quarter of fiscal 2013
compared to US$66.9 million in the second quarter of 2012 and US$59.8
million in the first quarter of 2013.
Bookings attained US$53.4 million in the second quarter of fiscal 2013
compared to US$60.6 million in the same period last year and US$64.3
million in the first quarter of 2013. The company’s book-to-bill ratio
was 0.85 in the second quarter of 2013 and 0.96 after six months into
the fiscal year.
Gross margin(*) amounted to 62.2% of sales in the second quarter of fiscal 2013
compared to 64.7% in the second quarter of 2012 and 60.5% in the first
quarter of 2013.
IFRS net earnings in the second quarter of fiscal 2013 totaled
US$39,000, or US$0.00 per diluted share, compared to net earnings of
US$1.0 million, or US$0.02 per diluted share, in the same period last
year and a net loss of US$1.6 million, or US$0.03 per share, in the
first quarter of 2013. IFRS net earnings in the second quarter of 2013
included US$1.9 million in after-tax amortization of intangible assets,
US$0.5 million in stock-based compensation costs, US$0.1 million in
after-tax restructuring charges and a foreign exchange gain of US$1.7
Adjusted EBITDA(**) totaled US$4.4 million, or 7.1% of sales, in the second quarter of
fiscal 2013 compared to US$7.8 million, or 11.7% of sales, in the
second quarter of 2012 and US$2.7 million, or 4.5% of sales, in the
first quarter of 2013.
“I am encouraged by our sequential increase in sales and profitability
in the second quarter,” said Germain Lamonde, EXFO’s Chairman,
President and CEO. “At the beginning of fiscal 2013, we had expected a
stronger financial performance in the second half and I remain
confident we will deliver a stronger second half. This stated
confidence is based on improving market conditions, discussions with
customers, positive impact of key new product launches for 4G/LTE and
100G network deployments, recent product approvals and the quality of
our sales funnel.”
“Consequently, I believe EXFO will generate mid-single digit sales
growth and improved profitability in fiscal 2013,” Mr. Lamonde added.
“I am pleased with our improved market position and remain committed to
returning to our historical sales CAGR of 20% that we delivered over
the last 10 years, while focusing on the earnings growth that the
investment community has come to expect from EXFO.”
Selected Financial Information
(In thousands of US dollars)
Q2 2013 Q1 2013 Q2 2012 Sales $ 62,576 $ 59,821 $ 66,917 Gross margin* $ 38,912 $ 36,164 $ 43,301 62.2% 60.5% 64.7% Other selected information: IFRS net earnings (loss) $ 39 $ (1,638) $ 954 Amortization of intangible assets $ 1,922 $ 1,962 $ 1,974 Stock-based compensation costs $ 468 $ 448 $ 508 Restructuring charges $ 89 $ - $ - Change in fair value of cash contingent consideration $ - $ - $ (311) Net income tax effect of the above items $ (95) $ (67) $ (56) Foreign exchange (gain) loss $ (1,700) $ (756) $ 1,471 Adjusted EBITDA** $ 4,435 $ 2,720 $ 7,826
Selling and administrative expenses totaled US$23.1 million, or 36.9% of
sales in the second quarter of fiscal 2013 compared to US$23.7 million,
or 35.4% of sales, in the same period last year and US$22.3 million, or
37.3% of sales, in the first quarter of 2013.
Gross research and development expenses amounted to US$14.1 million, or
22.6% of sales, in the second quarter of fiscal 2013 compared to
US$14.8 million, or 22.1% of sales, in the second quarter of 2012 and
US$13.9 million, or 23.2% of sales, in the first quarter of 2013.
Net R&D expenses totaled US$12.0 million, or 19.1% of sales, in the
second quarter of fiscal 2013 compared to US$12.3 million, or 18.4% of
sales, in the same period last year and US$11.6 million, or 19.4% of
sales, in the first quarter of 2013.
-- Growth. Despite late budget releases by network operators, EXFO's revenue level improved 4.6% sequentially in the second quarter mainly due to increased traction in the wireless sector. This marked the second consecutive quarter of revenue growth for EXFO amid difficult market conditions. The company posted double-digit sequential sales increases in the Asia-Pacific and Europe, Middle East and Africa (EMEA) regions, but a decrease in the Americas. EXFO's top customer accounted for 5.9% of sales in the second quarter, while the top three represented 13.1%. -- Profitability.EXFO finished break-even (US$39,000) on an IFRS basis in the second quarter compared to a net loss of US$1.6 million in the previous quarter. The company also generated US$2.1 million in cash flows from operating activities. Based on increased sales volume and a tight control on expenses, EXFO expects to significantly improve profitability in the second half of the fiscal year. -- Innovation. EXFO launched six new products in the second quarter including amongst others the TravelHawk Pro, a 4G/LTE network troubleshooting tool that has been selected by three of world's top five LTE operators; FTB-88100NGE Power Blazer, the first portable, multiservice test solution supporting transmission rates from 10M to 100G; and packet synchronization functionalities on the FTB1/FTB-800 NetBlazer series for wireless network deployments. Altogether, the company has released 11 new products since the beginning of the fiscal year.
EXFO forecasts sales between US$64.0 million and US$69.0 million for the
third quarter of fiscal 2013, while IFRS net earnings are expected to
range between US$0.00 and US$0.04 per diluted share. Net earnings
include US$0.03 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 second quarter of fiscal 2013. To
listen to the conference call and participate in the question period
via telephone, dial 1-416-641-6680. 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 7 p.m. on April 3, 2013. The
replay number is 1-402-977-9141 and the reservation number is 21649128.
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
more than 35% of the portable fiber-optic test market. EXFO has a staff
of approximately 1700 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 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 and our ability to manage inventory
levels with market demand); capital spending and network deployment
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; timely release and 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 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.
EXFO provides non-IFRS measures (gross margin* and adjusted EBITDA**) as
supplemental information regarding its operational performance. The
company uses these measures for the purposes of evaluating its
historical and prospective financial performance, as well as its
performance relative to competitors. These measures also help the
company to plan and forecast future periods as well as to 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.
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. ** Adjusted EBITDA represents net earnings (loss) before interest, income taxes, depreciation of property, plant and equipment, amortization of intangible assets, restructuring charges, change in the fair value of the cash contingent consideration, 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:
Three months Three months Three months ended ended ended February 28, November 30, February 29, 2013 2012 2012 IFRS net earnings $ $ (loss) for the period $ 39 (1,638) 954 Add (deduct): Depreciation of property, plant and equipment 1,504 1,605 1,546 Amortization of intangible assets 1,922 1,962 1,974 Interest (income) expenses 25 (33) (54) Income taxes 2,088 1,132 1,738 Restructuring charges 89 - - Change in fair value of cash contingent consideration - - (311) Stock-based compensation costs 468 448 508 Foreign exchange (gain) loss (1,700) (756) 1,471 Adjusted EBITDA for $ $ the period $ 4,435 2,720 7,826 Adjusted EBITDA in percentage of sales 7.1% 4.5% 11.7%
Condensed Unaudited Interim Consolidated Balance Sheets
(in thousands of US dollars)
As at As at February 28, August 31, 2013 2012 Assets Current assets Cash $ 51,425 $ 58,868 Short-term investments 4,952 8,236 Accounts receivable Trade 42,715 37,643 Other 2,643 4,283 Income taxes and tax credits recoverable 8,375 9,024 Inventories 38,331 41,212 Prepaid expenses 3,685 3,800 152,126 163,066 Tax credits recoverable 40,368 38,397 Property, plant and equipment 46,593 49,848 Intangible assets 10,111 14,132 Goodwill 27,885 29,160 Deferred income taxes 11,266 12,080 $ 288,349 $ 306,683 Liabilities Current liabilities Accounts payable and accrued liabilities $ 29,420 $ 32,392 Provisions 742 952 Income taxes payable 1,225 917 Current portion of long-term debt 584 565 Deferred revenue 9,069 10,583 41,040 45,409 Deferred revenue 4,481 4,997 Long-term debt - 282 Other liabilities 383 609 Deferred income taxes 2,628 2,105 48,532 53,402 Shareholders' equity Share capital 111,400 110,965 Contributed surplus 16,688 17,298 Retained earnings 109,912 111,511 Accumulated other comprehensive income 1,817 13,507 239,817 253,281 $ 288,349 $ 306,683
Condensed Unaudited Interim Consolidated Statements of Earnings
(in thousands of US dollars, except share and per share data)
Three Three months Six months months Six months ended ended ended ended February February February February 28, 28, 29, 29, 2013 2013 2012 2012 Sales $ 62,576 $ 122,397 $ 66,917 $ 133,305 Cost of sales (1) 23,664 47,321 23,616 46,986 Selling and administrative 23,074 45,364 23,676 48,294 Net research and development 11,960 23,562 12,307 24,790 Depreciation of property, plant and equipment 1,504 3,109 1,546 3,114 Amortization of intangible assets 1,922 3,884 1,974 3,895 Change in fair value of cash contingent consideration - - (311) (311) Earnings (loss) from operations 452 (843) 4,109 6,537 Interest income (expenses) (25) 8 54 (17) Foreign exchange gain (loss) 1,700 2,456 (1,471) 193 Earnings before income taxes 2,127 1,621 2,692 6,713 Income taxes 2,088 3,220 1,738 2,872 Net earnings $ $ $ $ (loss) for the period 39 (1,599) 954 3,841 Basic and $ $ $ $ diluted net earnings (loss) per share 0.00 (0.03) 0.02 0.06 Basic weighted average number of shares outstanding (000's) 60,392 60,391 60,441 60,391 Diluted weighted average number of shares outstanding (000's) 61,175 61,195 61,606 61,685 (1) The cost of sales is exclusive of depreciation and amortization, shown separately.
Condensed Unaudited Interim Consolidated Statements of Comprehensive
(in thousands of US dollars)
Three Six Three Six months months months months ended ended ended ended February February February February 28, 28, 29, 29, 2013 2013 2012 2012 Net earnings $ $ $ $ (loss) for the period 39 (1,599) 954 3,841 Other comprehensive income (loss), net of income taxes Items that will not be reclassified subsequently to net earnings Foreign currency translation adjustment (9,184) (10,892) 6,200 (5,627) Items that may be reclassified subsequently to net earnings Unrealized gains/losses on forward exchange contracts (679) (762) 963 144 Reclassification of realized gains on forward exchange contracts in net earnings (loss) (130) (329) (355) (980) Deferred income tax effect of gains/losses on forward exchange contracts 217 293 (163) 232 Other comprehensive income (loss) (9,776) (11,690) 6,645 (6,231) Comprehensive $ $ $ $ income (loss) for the period (9,737) (13,289) 7,599 (2,390)
Condensed Unaudited Interim Consolidated Statements of Changes in
(in thousands of US dollars)
Six months ended February 29, 2012 Accumulated other Total Share Contributed Retained comprehensive shareholders' capital surplus earnings income equity Balance as at $ $ $ $ $ September 1, 2011 110,341 18,017 115,104 21,049 $ 264,511 Exercise of stock options 78 - - - 78 Redemption of share capital (404) (222) - - (626) Reclassification of stock-based compensation Costs 1,406 (1,406) - - - Stock-based compensation costs - 956 - - 956 Net earnings for the period - - 3,841 - 3,841 Other comprehensive loss Foreign currency translation adjustment - - - (5,627) (5,627) Changes in unrealized gains on forward exchange contracts, net of deferred income taxes of $232 - - - (604) (604) Total other comprehensive income (loss) for the period - - 3,841 (6,231) (2,390) Balance as at $ $ $ $ $ February 29, 2012 111,421 17,345 118,945 14,818 262,529 Six months ended February 28, 2013 Accumulated other Total Share Contributed Retained comprehensive shareholders' capital surplus earnings income equity Balance as at $ $ $ $ $ September 1, 2012 110,965 17,298 111,511 13,507 253,281 Exercise of stock options 87 - - - 87 Redemption of share capital (913) (227) - - (1,140) Reclassification of stock-based compensation Costs 1,261 (1,261) - - - Stock-based compensation costs - 878 - - 878 Net loss for the period - - (1,599) - (1,599) Other comprehensive loss Foreign currency translation adjustment - - - (10,892) (10,892) Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes of $293 - - - (798) (798) Total other comprehensive loss for the period - - (1,599) (11,690) (13,289) Balance as at $ $ $ $ $ February 28, 2013 111,400 16,688 109,912 1,817 239,817
Condensed Unaudited Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
Three Six Three months months months Six months ended ended ended ended February February February February 28, 28, 29, 29, 2013 2013 2012 2012 Cash flows from operating activities Net earnings $ $ $ $ (loss) for the period 39 (1,599) 954 3,841 Add (deduct) items not affecting cash Change in discount on short-term investments (3) (1) 12 43 Stock-based compensation costs 468 916 508 1,063 Depreciation and amortization 3,426 6,993 3,520 7,009 Change in fair value of cash contingent consideration - - (311) (311) Deferred revenue 111 (1,420) 488 (653) Deferred income taxes 988 1,721 857 1,575 Change in foreign exchange gain/loss (775) (798) 175 (1,039) 4,254 5,812 6,203 11,528 Change in non-cash operating items Accounts receivable 2,016 (6,088) 5,504 2,607 Income taxes and tax credits (1,313) (3,186) (1,430) (1,258) Inventories 1,213 1,053 7,050 7,643 Prepaid expenses (414) (55) (228) (213) Accounts payable, accrued liabilities and provisions (3,687) (50) (3,432) (35) Other liabilities (15) (210) (91) (152) 2,054 (2,724) 13,576 20,120 Cash flows from investing activities Additions to short-term investments (10,236) (34,769) (9,876) (67,798) Proceeds from disposal and maturity of short-term investments 13,283 37,810 16,987 107,766 Additions to capital assets (2,504) (4,493) (6,691) (11,177) 543 (1,452) 420 28,791 Cash flows from financing activities Bank loan - - - (785) Repayment of long-term debt (293) (293) (296) (296) Exercise of stock options 36 87 78 78 Redemption of share capital (167) (1,140) (263) (626) (424) (1,346) (481) (1,629) Effect of foreign exchange rate changes on cash (1,566) (1,921) 1,564 1,196 Change in cash 607 (7,443) 15,079 48,478 Cash - Beginning of the period 50,818 58,868 56,170 22,771 Cash - End of $ $ $ $ the period 51,425 51,425 71,249 71,249 Supplementary information Interest paid $ 17 $ 26 $ 31 $ 58 Income taxes $ $ $ $ paid 552 937 255 990
SOURCE EXFO inc.