EXFO reports first quarter results for fiscal 2021

• Sales reached US$71.5 million
• Bookings attained US$69.0 million
• IFRS net earnings totaled US$3.6 million, US$0.06 per share
• Adjusted EBITDA amounted to US$9.9 million, 13.9% of sales

QUEBEC CITY, Jan. 12, 2021 /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, 2020.

"EXFO delivered a strong first-quarter performance in fiscal 2021 as compared to a coronavirus-free opening quarter in 2020," said EXFO's CEO Philippe Morin. "Robust sales and earnings results confirm market acceptance of our highly differentiated solutions related to fiber, cloud-native and 5G network deployments as we continue to develop new ways to engage and serve our global customer base in this virtualized environment. We're particularly pleased with our SASS offering's penetration into new accounts through the recently announced fiber monitoring deal with BT's subsidiary, Openreach, and five service assurance contracts secured in the fourth quarter of 2020."

First-Quarter Highlights

• Sales. Sales decreased 2.8% year-over-year in the first quarter of 2021 mainly due to the impact of the coronavirus pandemic, which was partially offset by stronger year-end calendar spending on the part of communications service providers. Test and Measurement (T&M) sales dropped 9.8% from a record US$55.9 million in first quarter of 2020, while Service Assurance, Systems and Services (SASS) sales increased 18.6% year-over-year. Sales in Europe, Middle East and Africa (EMEA) and Asia-Pacific improved 23.3% and 9.2% year-over-year, respectively, while sales in the Americas fell 20.4%. EXFO's top customer accounted for 4.3% of sales, while the top three represented 12.6%.
  
  
• Profitability. IFRS net earnings totaled US$3.6 million, or US$0.06 per share, in the first quarter of 2021, while adjusted EBITDA amounted to US$9.9 million, or 13.9% of sales. Net earnings included an after-tax wage subsidy of US$1.4 million under the Canada emergency wage subsidy program to help qualifying businesses alleviate the effects of the pandemic, as well as an after-tax insurance recovery of US$2.5 million related to the loss of assets.

Selected Financial Information
(In thousands of US dollars)
	Three months ended November 30,
	2020			2019
Test and measurement sales	$	50,473		$	55,947
Service assurance, systems and services sales		21,046		17,749
Foreign exchange losses on forward exchange contracts		(7)		(145)
Total sales	$	71,512		$	73,551
Test and measurement bookings	$	51,248		$	55,009
Service assurance, systems and services bookings		17,802		15,049
Foreign exchange losses on forward exchange contracts		(7)		(145)
Total bookings	$	69,043		$	69,913
Book-to-bill ratio (bookings/sales)		0.97		0.95
Gross margin before depreciation and amortization^*	$	41,643		$	43,310
		58.2%		58.9%
Other selected information:
IFRS net earnings (loss)	$	3,554		$	(63)
Amortization of intangible assets	$	2,549		$	1,632
Stock-based compensation costs	$	568		$	487
Restructuring charges	$	543		$	–
Net income tax effect of the above items	$	(530)		$	(249)
Foreign exchange loss	$	246		$	126
Adjusted EBITDA^*	$	9,949		$	7,544

Quarterly Overview
Sales decreased 2.8% to US$71.5 million in the first quarter of fiscal 2021 from US$73.6 million in the first quarter of 2020.

Bookings dropped 1.2% to US$69.0 million in the first quarter of fiscal 2021 from US$69.9 million for the same period in 2020. The company's book-to-bill ratio was 0.97 in the first quarter of 2021.

Gross margin before depreciation and amortization* amounted to 58.2% of sales in the first quarter of fiscal 2021 compared to 58.9% in the first quarter of 2020.

Selling and administrative expenses totaled US$21.6 million, or 30.2% of sales in the first quarter of fiscal 2021 compared to US$24.5 million, or 33.3% of sales, in the first quarter of 2020.

Net R&D expenses amounted to US$11.2 million, or 15.7% of sales, in the first quarter of fiscal 2021 compared to US$11.7 million, or 16.0% of sales, in the same period last year.

IFRS net earnings totaled US$3.6 million, or US$0.06 per share, in the first quarter of fiscal 2021 compared to a net loss of US$0.1 million, or US$0.00 per share, in the first quarter of 2020. IFRS net earnings in the first quarter of 2021 included US$2.0 million in after-tax amortization of intangible assets, US$0.6 million in stock-based compensation costs, US$0.5 million in after-tax restructuring charges and a foreign exchange loss of US$0.2 million. IFRS net earnings also included an after-tax wage subsidy of US$1.4 million under the Canada emergency wage subsidy program to help qualifying businesses alleviate the effects of the coronavirus pandemic, as well as an after-tax insurance recovery of US$2.5 million related to the loss of assets.

For the first quarter of 2020, net loss included US$1.4 million in after-tax amortization of intangible assets, US$0.5 million in stock-based compensation costs and a foreign exchange loss of US$0.1 million.

Adjusted EBITDA* amounted to US$9.9 million, or 13.9% of sales, in the first quarter of fiscal 2021 compared to US$7.5 million, or 10.3% of sales, in the first quarter of 2020.

Conference Call and Webcast
EXFO will host a conference call today at 5 p.m. (Eastern time) to review first-quarter results for fiscal 2021. To listen to the conference call and participate in the question period via telephone, dial 1-323-289-6576. Please take note the following participant passcode will be required: 2900379. 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 19, 2021. The replay number is 1-719-457-0820 and the participant passcode is 2900379. 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, namely the impact of the coronavirus pandemic on our employees, customers and global operations, including the ability of our suppliers to fulfil raw material requirements and services and our ability to manufacture and deliver our products and services to our customers; the effects of emergency measures related to isolation periods for individuals in affected areas, lockdown restrictions imposed by national governments on businesses in countries where we operate and have employees, and limitations on travel to attract new customers and serve existing ones; deteriorating financial and market conditions as well as a potential recession; trade wars, and 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 earnings (loss) before interest and other income/expenses, income taxes, depreciation and amortization, stock-based compensation costs, restructuring charges and foreign exchange 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 earnings (loss) loss in thousands of US dollars:

Adjusted EBITDA

	Three months ended November 30,
	2020			2019
IFRS net earnings (loss) for the period	$	3,554		$	(63)
Add (deduct):
Depreciation and amortization	4,723			3,926
Interest and other (income) expenses	(1,866)			399
Income taxes	2,181			2,669
Stock-based compensation costs	568			487
Restructuring charges	543			–
Foreign exchange loss	246			126
Adjusted EBITDA for the period	$	9,949		$	7,544
Adjusted EBITDA in percentage of sales	13.9%			10.3%

EXFO Inc.
Condensed Unaudited Interim Consolidated Balance Sheets
(in thousands of US dollars)
	As at November 30, 2020			As at August 31, 2020
Assets
Current assets
Cash	$	15,392		$	32,818
Short-term investments	1,106			919
Accounts receivable
Trade	55,541			56,291
Other	6,090			4,055
Income taxes and tax credits recoverable	2,337			4,203
Inventories	41,769			38,865
Prepaid expenses	5,422			5,631
Other assets	4,009			5,493
	131,666			148,275
Tax credits recoverable	49,961			48,812
Property, plant and equipment	39,303			39,722
Lease right-of-use assets	9,228			10,758
Intangible assets	15,481			17,616
Goodwill	40,451			40,290
Deferred income tax assets	4,147			3,633
Other assets	1,521			1,548
	$	291,758		$	310,654
Liabilities
Current liabilities
Bank loan	$	16,314		$	32,737
Accounts payable and accrued liabilities	39,405			41,348
Provisions	2,333			3,792
Income taxes payable	242			43
Deferred revenue	24,345			25,785
Other liabilities	4,040			4,032
Current portion of lease liabilities	2,870			3,249
Current portion of long-term debt	1,880			2,076
	91,429			113,062
Provisions	2,784			2,782
Deferred revenue	8,887			8,858
Lease liabilities	6,715			7,334
Long-term debt	1,759			2,144
Deferred income tax liabilities	2,925			3,760
Other liabilities	144			151
	114,643			138,091
Shareholders' equity
Share capital	94,190			94,024
Contributed surplus	19,724			19,680
Retained earnings	106,187			102,633
Accumulated other comprehensive loss	(42,986)			(43,774)
	177,115			172,563
	$	291,758		$	310,654

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,
	2020			2019
Sales	$	71,512		$	73,551
Cost of sales ^(1)	29,869			30,241
Selling and administrative	21,606			24,504
Net research and development	11,199			11,749
Depreciation of property, plant and equipment	1,341			1,443
Depreciation of lease right-of-use assets	833			851
Amortization of intangible assets	2,549			1,632
Interest and other (income) expense	(1,866)			399
Foreign exchange loss	246			126
Earnings before income taxes	5,735			2,606
Income taxes	2,181			2,669
Net earnings (loss) for the period	$	3,554		$	(63)
Basic and diluted net earnings (loss) per share	$	0.06		$	(0.00)
Basic weighted average number of shares outstanding (000's)	55,749			55,439
Diluted weighted average number of shares outstanding (000's)	57,023			55,439

(1)  The cost of sales is exclusive of depreciation and amortization, shown separately.

EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Comprehensive Income
(in thousands of US dollars)
	Three months ended November 30,
	2020			2019
Net earnings (loss) for the period	$	3,554		$	(63)
Other comprehensive income (loss), net of income taxes
Items that may be reclassified subsequently to net earnings (loss)
Foreign currency translation adjustment	722			561
Unrealized gains/losses on forward exchange contracts	256			(35)
Reclassification of realized gains/losses on forward exchange contracts in net earnings (loss)	(156)			183
Deferred income tax effect of gains/losses on forward exchange contracts	(34)			(30)
Other comprehensive income	788			679
Comprehensive income for the period	$	4,342		$	616

EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity
(in thousands of US dollars)
	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
	Three months ended November 30, 2020
	Share capital			Contributed surplus			Retained earnings			Accumulated other comprehensive loss			Total shareholders' equity
Balance as at September 1, 2020	$	94,024		$	19,680		$	102,633		$	(43,774)		$	172,563
Reclassification of stock-based compensation costs	704			(704)			–			–			–
Redemption of share capital	(538)			158			–			–			(380)
Stock-based compensation costs	–			590			–			–			590
Net earnings for the period	–			–			3,554			–			3,554
Other comprehensive income
Foreign currency translation adjustment	–			–			–			722			722
Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes of $34	–			–			–			66			66
Total comprehensive income for the period													4,342
Balance as at November 30, 2020	$	94,190		$	19,724		$	106,187		$	(42,986)		$	177,115

EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
	Three months ended November 30,
	2020			2019
Cash flows from operating activities
Net earnings (loss) for the period	$	3,554		$	(63)
Add (deduct) items not affecting cash
Stock-based compensation costs	568			487
Depreciation and amortization	4,723			3,926
Write-off of capital assets	10			216
Deferred revenue	(1,600)			(4,372)
Deferred income taxes	(1,318)			(442)
Changes in foreign exchange gain/loss	212			(21)
	6,149			(269)
Changes in non-cash operating items
Accounts receivable	(831)			72
Income taxes and tax credits	1,220			516
Inventories	(2,605)			(3,493)
Prepaid expenses	579			378
Other assets	1,391			35
Accounts payable, accrued liabilities and provisions	(3,833)			(3,693)
Other liabilities	(8)			(16)
	2,062			(6,470)
Cash flows from investing activities
Additions to short-term investments	(230)			(147)
Disposal of short-term investments	30			563
Purchases of capital assets	(1,111)			(2,040)
	(1,311)			(1,624)
Cash flows from financing activities
Bank loan	(16,338)			8,354
Repayment of lease liabilities	(833)			(844)
Repayment of long-term debt	(581)			(676)
Redemption of share capital	(380)			(225)
	(18,132)			6,609
Effect of foreign exchange rate changes on cash	(45)			12
Change in cash	(17,426)			(1,473)
Cash – Beginning of the period	32,818			16,518
Cash – End of the period	$	15,392		$	15,045

EXFO-F

SOURCE EXFO Inc.

Vance Oliver, Director, Investor Relations, [phone], Ext. 23733, [email protected]

Related Links

www.exfo.com