- Sales reach US$66.9 M
- Gross margin* attains 64.7%
- Cash flows from operations total US$13.6 million
QUEBEC CITY, March 27, 2012 /CNW Telbec/ - EXFO Inc. (NASDAQ: EXFO; TSX: EXF) reported today financial results for the second quarter ended February 29, 2012.
Sales reached US$66.9 million in the second quarter of fiscal 2012 compared to US$72.0 million in the second quarter of 2011 and US$66.4 million in the first quarter of 2012.
Bookings reached US$60.6 million in the second quarter of fiscal 2012 compared to US$57.6 million in the same period last year and US$71.4 million in the first quarter of 2012. The company's book-to-bill ratio was 0.91 in the second quarter of 2012 and 0.99 at the mid-way mark of fiscal 2012.
Gross margin* amounted to 64.7% of sales in the second quarter of fiscal 2012 compared to 61.4% in the second quarter of 2011 and 64.8% in the first quarter of 2012.
IFRS net earnings in the second quarter of fiscal 2012 totaled US$1.0 million, or US$0.02 per diluted share, compared to US$1.7 million, or US$0.03 per diluted share, in the same period last year and US$2.9 million, or US$0.05 per diluted share, in the first quarter of 2012. Net earnings in the second quarter of 2012 included US$1.9 million in after-tax amortization of intangible assets and US$0.5 million in stock-based compensation costs. EXFO also incurred a foreign exchange loss of US$1.5 million in the second quarter of 2012.
Adjusted EBITDA** amounted to US$5.8 million, or 8.7% of sales, in the second quarter of fiscal 2012 compared to US$8.4 million, or 11.6% of sales, in the second quarter of 2011 and US$7.6 million, or 11.4% of sales, in the first quarter of 2012. Foreign exchange losses or gain are included in adjusted EBITDA**.
"EXFO performed well in the second quarter given typical seasonality, difficult European economic environment, near absence of year-end capital spending and some later approvals of 2012 spending budgets," said Germain Lamonde, EXFO's Chairman, President and CEO. "In the second half of our fiscal year, which is typically our strongest, we expect to benefit from major product launches, as well as continued market penetration with our wireless, 40G/100G and other Protocol solutions, to complete the year with at least single-digit sales growth. In terms of operating leverage, our corporate gross margin of 64.8% at the halfway mark of fiscal 2012 reached its highest level in the last 10 years and we generated healthy cash flows from operations and adjusted EBITDA. In short, we should continue growing both revenues and earnings despite a challenging environment in 2012, while significantly strengthening our long-term competitive position."
Selected Financial Information
(In thousands of US dollars)
| Q2 2012 | Q1 2012 | Q2 2011 | |||||||
| Sales | $ | 66,917 | $ | 66,388 | $ | 72,046 | |||
| Gross margin* | $ | 43,301 | $ | 43,018 | $ | 44,225 | |||
| 64.7% | 64.8% | 61.4% | |||||||
| Other selected information: | |||||||||
| IFRS net earnings | $ | 1,040 | $ | 2,914 | $ | 1,716 | |||
| Amortization of intangible assets | $ | 1,974 | $ | 1,921 | $ | 2,367 | |||
| Stock-based compensation costs | $ | 508 | $ | 555 | $ | 625 | |||
| Net income tax effect of the above items | $ | (56) | $ | (30) | $ | (157) | |||
| Foreign exchange gain (loss) | $ | (1,471) | $ | 1,664 | $ | (2,395) | |||
| Adjusted EBITDA** | $ | 5,847 | $ | 7,581 | $ | 8,351 | |||
Operating Expenses
Selling and administrative expenses totaled US$23.7 million, or 35.4% of sales, in the second quarter of fiscal 2012 compared to US$22.2 million, or 30.9% of sales, in the same period last year and US$24.6 million, or 37.1% of sales, in the first quarter of 2012.
Gross research and development expenses amounted to US$14.8 million, or 22.1% of sales, in the second quarter of fiscal 2012 compared to US$13.8 million, or 19.2% of sales, in the second quarter of 2011 and US$14.8 million, or 22.3% of sales, in the first quarter of 2012.
Net R&D expenses totaled US$12.3 million, or 18.4% of sales, in the second quarter of fiscal 2012 compared to US$11.2 million, or 15.6% of sales, in the same period last year and US$12.5 million, or 18.8% of sales, in the first quarter of 2012.
Second-Quarter Business Highlights
- EXFO's increased traction in the wireless sector allowed its Protocol solutions to achieve strong sales growth year-over-year, contributing to a significant increase in gross margin. The company signed a multi-million contract for the industry's highest-capacity wireless simulators with a major network equipment manufacturer (NEM). This unique EXFO solution enables NEMs and mobile network operators (MNOs) to fully simulate the impact that enormous traffic (data, SMS, calls, etc.) will have on wireless networks in order to assure end-to-end quality of service and interoperability of 4G/LTE, 3G and 2G services. The bulk of this order was shipped in the second quarter.
- EXFO's top customer accounted for 5.4% of sales in the second quarter, while the top three represented 13.7%. Global sales were diversified with 49% originating from the Americas, 31% from Europe, Middle East and Africa (EMEA), and 20% from Asia-Pacific.
- EXFO launched seven new products in the second quarter, including amongst others, the QA-805/QA-813 QualityAssurer, the industry's most scalable platform (simulates more than 12 million active subscribers) for load simulation and only one supporting converged 3G, LTE and IMS; EXFO Apps, a portal offering software applications that boost the capabilities and productivity of the FTB Ecosystem of smart platforms and test modules; a fully featured optical spectrum analyzer (IQS-5240S/B-P) for lab and manufacturing in 40G/100G coherent communication environments; and the MaxTester 630, a handheld tester that can characterize advanced capabilities like bonding and vectoring in VDSL2 technologies.
Profitable Growth
EXFO generated adjusted EBITDA** of US$5.8 million (8.7% of sales) in the second quarter of fiscal 2012 on revenue of US$66.9 million. Foreign exchange losses or gains are included in adjusted EBITDA**. See the section entitled "Non-IFRS Financial Measures" for a reconciliation of adjusted EBITDA** and IFRS net earnings. The company also reported US$13.6 million in cash flows from operations in the second quarter of 2012.
Business Outlook
EXFO forecasts sales between US$68.0 million and US$73.0 million for the third quarter of fiscal 2012, while net earnings are expected to range between US$0.01 and US$0.05 per diluted share. Net earnings include US$0.04 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, 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 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 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 April 3, 2012. The replay number is (402) 977-9141 and the reservation number is 21580650. 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
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.
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, 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 economic uncertainty (including our ability to quickly adapt cost structures with anticipated levels of business, ability to manage inventory levels with market demand); future economic, competitive, financial and market conditions; capital spending levels in the telecommunications industry; limited visibility with regards to customer orders and the timing of such orders; fluctuating exchange rates; our ability to successfully integrate our acquired and to-be-acquired businesses; 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 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 its 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 the 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.
* Gross margin represents sales less cost of sales, excluding depreciation and amortization.
** EBITDA is defined as net earnings 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 tables summarize the reconciliation of EBITDA and adjusted EBITDA to IFRS net earnings and additional information, in thousands of US dollars:
EBITDA and adjusted EBITDA
| Q2 2012 | Q1 2012 | Q2 2011 | |||||||
| IFRS net earnings for the period | $ | 1,040 | $ | 2,914 | $ | 1,716 | |||
| Add (deduct): | |||||||||
| Depreciation of property, plant and equipment | 1,546 | 1,568 | 1,597 | ||||||
| Amortization of intangible assets | 1,974 | 1,921 | 2,367 | ||||||
| Interest expenses (income) | (171) | 27 | (49) | ||||||
| Income taxes | 1,769 | 1,151 | 2,720 | ||||||
| EBITDA for the period | 6,158 | 7,581 | 8,351 | ||||||
| Changes in fair value of cash contingent consideration | (311) | - | - | ||||||
| Adjusted EBITDA for the period | $ | 5,847 | $ | 7,581 | $ | 8,351 | |||
| EBITDA in percentage of total sales | 9.2 % | 11.4 % | 11.6 % | ||||||
| Adjusted EBITDA in percentage of total sales | 8.7 % | 11.4 % | 11.6 % | ||||||
EXFO Inc.
Unaudited Interim Consolidated Balance Sheets
(in thousands of US dollars)
| |
As at February 29, 2012 |
As at August 31, 2011 |
||||
| Assets | ||||||
| Current assets | |
|||||
| Cash | $ | 71,249 | $ | 22,771 | ||
| Short-term investments | 5,144 | 47,091 | ||||
| Accounts receivable | ||||||
| Trade | 42,787 | 45,151 | ||||
| Other | 4,449 | 6,329 | ||||
| Income taxes and tax credits recoverable | 7,068 | 5,414 | ||||
| Inventories | 44,327 | 52,754 | ||||
| Prepaid expenses | 3,418 | 3,237 | ||||
| 178,442 | 182,747 | |||||
| Tax credits recoverable | 33,810 | 34,120 | ||||
| Forward exchange contracts | 309 | 149 | ||||
| Property, plant and equipment | 39,545 | 32,076 | ||||
| Intangible assets | 18,198 | 22,901 | ||||
| Goodwill | 29,750 | 30,942 | ||||
| Deferred income taxes | 16,471 | 17,314 | ||||
| $ | 316,525 | $ | 320,249 | |||
| Liabilities | ||||||
| Current liabilities | ||||||
| Bank loan | $ | - | $ | 784 | ||
| Accounts payable and accrued liabilities | 30,313 | 30,320 | ||||
| Provisions | 1,581 | 1,817 | ||||
| Income taxes payable | 1,218 | 876 | ||||
| Contingent liability | - | 338 | ||||
| Current portion of long-term debt | 597 | 645 | ||||
| Deferred revenue | 9,793 | 10,590 | ||||
| 43,502 | 45,370 | |||||
| Deferred revenue | 5,630 | 5,704 | ||||
| Long-term debt | 597 | 968 | ||||
| Other liabilities | 559 | 723 | ||||
| Deferred income taxes | 5,402 | 4,803 | ||||
| 55,690 | 57,568 | |||||
| Shareholders' equity | ||||||
| Share capital | 111,421 | 110,341 | ||||
| Contributed surplus | 17,345 | 18,017 | ||||
| Retained earnings | 117,392 | 113,438 | ||||
| Accumulated other comprehensive income | 14,677 | 20,885 | ||||
| 260,835 | 262,681 | |||||
| $ | 316,525 | $ | 320,249 | |||
EXFO Inc.
Unaudited Interim Consolidated Statements of Earnings
(in thousands of US dollars, except share and per share data)
| Three months ended February 29, 2012 |
Six months ended February 29, 2012 |
Three months ended February 28, 2011 |
Six months ended February 28, 2011 |
|||||||||
| Sales | $ | 66,917 | $ | 133,305 | $ | 72,046 | $ | 137,699 | ||||
| Cost of sales (1) | 23,616 | 46,986 | 27,821 | 52,606 | ||||||||
| Selling and administrative | 23,676 | 48,294 | 22,235 | 42,134 | ||||||||
| Net research and development | 12,307 | 24,790 | 11,244 | 22,845 | ||||||||
| Depreciation of property, plant and equipment | 1,546 | 3,114 | 1,597 | 3,243 | ||||||||
| Amortization of intangible assets | 1,974 | 3,895 | 2,367 | 4,933 | ||||||||
| Changes in fair value of cash contingent consideration | (311) | (311) | - | - | ||||||||
| Earnings from operations | 4,109 | 6,537 | 6,782 | 11,938 | ||||||||
| Interest income | 171 | 144 | 49 | 42 | ||||||||
| Foreign exchange gain (loss) | (1,471) | 193 | (2,395) | (3,508) | ||||||||
| Earnings before income taxes | 2,809 | 6,874 | 4,436 | 8,472 | ||||||||
| Income taxes | 1,769 | 2,920 | 2,720 | 5,549 | ||||||||
| Net earnings from continuing operations | 1,040 | 3,954 | 1,716 | 2,923 | ||||||||
| Net earnings from discontinued operations | - | - | - | 12,926 | ||||||||
| Net earnings for the period | $ | 1,040 | $ | 3,954 | $ | 1,716 | $ | 15,849 | ||||
| Basic net earnings from continuing operations per share | $ | 0.02 | $ | 0.07 | $ | 0.03 | $ | 0.05 | ||||
| Diluted net earnings from continuing operations per share | $ | 0.02 | $ | 0.06 | $ | 0.03 | $ | 0.05 | ||||
| Basic net earnings from discontinued operations per share | $ | - | $ | - | $ | - | $ | 0.22 | ||||
| Diluted net earnings from discontinued operations per share | $ | - | $ | - | $ | - | $ | 0.21 | ||||
| Basic net earnings per share | $ | 0.02 | $ | 0.07 | $ | 0.03 | $ | 0.27 | ||||
| Diluted net earnings per share | $ | 0.02 | $ | 0.06 | $ | 0.03 | $ | 0.26 | ||||
| Basic weighted average number of shares outstanding (000's) | 60,441 | 60,391 | 59,900 | 59,782 | ||||||||
| Diluted weighted average number of shares outstanding (000's) | 61,606 | 61,685 | 61,524 | 61,314 | ||||||||
(1) The cost of sales is exclusive of depreciation and amortization, shown separately.
EXFO Inc.
Unaudited Interim Consolidated Statements of Comprehensive Income (Loss)
(in thousands of US dollars)
| Three months ended February 29, 2012 |
Six months ended February 29, 2012 |
Three months ended February 28, 2011 |
Six months ended February 28, 2011 |
||||||||||
| Net earnings for the period | $ | 1,040 | $ | 3,954 | $ | 1,716 | $ | 15,849 | |||||
| Other comprehensive income (loss), net of income taxes | |||||||||||||
| Foreign currency translation adjustment | 6,148 | (5,604) | 12,760 | 18,987 | |||||||||
| Unrealized gains on forward exchange contracts | 963 | 144 | 1,794 | 3,238 | |||||||||
| Reclassification of realized gains on forward exchange contracts in net earnings | (355) | (980) | (464) | (653) | |||||||||
| Deferred income tax effect of the components of other comprehensive income (loss) | (163) | 232 | (365) | (703) | |||||||||
| Other comprehensive income (loss) | 6,593 | (6,208) | 13,725 | 20,869 | |||||||||
| Comprehensive income (loss) for the period | $ | 7,633 | $ | (2,254) | $ | 15,441 | $ | 36,718 | |||||
EXFO Inc.
Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity
(in thousands of US dollars)
| Six months ended February 28, 2011 | ||||||||||||||||
| Share capital |
Contributed surplus | Retained earnings | Accumulated other comprehensive income |
Total shareholders' equity |
||||||||||||
| Balance as at September 1, 2010 | $ | 106,126 | $ | 18,563 | $ | 91,152 | $ | 1,016 | $ | 216,857 | ||||||
| Exercise of stock options | 1,280 | - | - | - | 1,280 | |||||||||||
| Reclassification of stock-based compensation costs | 2,152 | (2,152) | - | - | - | |||||||||||
| Stock-based compensation costs | - | 1,210 | - | - | 1,210 | |||||||||||
| Net earnings for the period | - | - | 15,849 | - | 15,849 | |||||||||||
| Other comprehensive income | ||||||||||||||||
| Foreign currency translation adjustment | - | - | - | 18,987 | 18,987 | |||||||||||
| Changes in unrealized gains on forward exchange contracts, net of deferred income taxes of $703 | - | - | - | 1,882 | 1,882 | |||||||||||
| Total comprehensive income for the period | - | - | 15,849 | 20,869 | 36,718 | |||||||||||
| Balance as at February 28, 2011 | $ | 109,558 | $ | 17,621 | $ | 107,001 | $ | 21,885 | $ | 256,065 | ||||||
| |
||||||||||||||||
| Six months ended February 29, 2012 | ||||||||||||||||
| Share Capital |
Contributed Surplus | Retained earnings | Accumulated other comprehensive income |
Total shareholders' equity |
||||||||||||
| Balance as at September 1, 2011 | $ | 110,341 | $ | 18,017 | $ | 113,438 | $ | 20,885 | $ | 262,681 | ||||||
| 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 | - | - | 3,954 | - | 3,954 | |||||||||||
| Other comprehensive loss | ||||||||||||||||
| Foreign currency translation adjustment | - | - | - | (5,604) | (5,604) | |||||||||||
| Changes in unrealized gains on forward exchange contracts, net of deferred income taxes of $232 | - | - | - | (604) | (604) | |||||||||||
| Total comprehensive loss for the period | - | - | 3,954 | (6,208) | (2,254) | |||||||||||
| Balance as at February 29, 2012 | $ | 111,421 | $ | 17,345 | $ | 117,392 | $ | 14,677 | $ | 260,835 | ||||||
EXFO Inc.
Unaudited Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
| Three months ended February 29, 2012 |
Six months ended February 29, 2012 |
Three months ended February 28, 2011 |
Six months ended February 28, 2011 |
||||||||||
| Cash flows from operating activities | |||||||||||||
| Net earnings for the period | $ | 1,040 | $ | 3,954 | $ | 1,716 | $ | 15,849 | |||||
| Add (deduct) items not affecting cash | |||||||||||||
| Change in discount on short-term investments | 12 | 43 | (9) | (27) | |||||||||
| Stock-based compensation costs | 508 | 1,063 | 625 | 1,363 | |||||||||
| Depreciation and amortization | 3,520 | 7,009 | 3,964 | 8,194 | |||||||||
| Gain on disposal of discontinued operations | - | - | - | (13,212) | |||||||||
| Changes in fair value of cash contingent consideration | (311) | (311) | - | - | |||||||||
| Deferred revenue | 488 | (653) | 3,250 | 679 | |||||||||
| Deferred income taxes | 888 | 1,623 | 2,619 | 4,609 | |||||||||
| Foreign exchange gain/loss | 175 | (1,039) | 1,054 | 1,591 | |||||||||
| 6,320 | 11,689 | 13,219 | 19,046 | ||||||||||
| Change in non-cash operating items | |||||||||||||
| Accounts receivable | 5,504 | 2,607 | 9,085 | 4,605 | |||||||||
| Income taxes and tax credits | (1,547) | (1,419) | (2,260) | (3,319) | |||||||||
| Inventories | 7,050 | 7,643 | (2,098) | (3,460) | |||||||||
| Prepaid expenses | (228) | (213) | (324) | (709) | |||||||||
| Accounts payable, accrued liabilities and provisions | (3,432) | (35) | 3,074 | 1,850 | |||||||||
| Other liabilities | (91) | (152) | 17 | 152 | |||||||||
| 13,576 | 20,120 | 20,713 | 18,165 | ||||||||||
| Cash flows from investing activities | |||||||||||||
| Additions to short-term investments | (9,876) | (67,798) | (88,804) | (314,950) | |||||||||
| Proceeds from disposal and maturity of short-term investments | 16,987 | 107,766 | 70,313 | 279,918 | |||||||||
| Additions to capital assets | (6,691) | (11,177) | (1,316) | (3,295) | |||||||||
| Net proceeds from disposal of discontinued operations | - | - | (61) | 22,063 | |||||||||
| Business combination | - | - | (111) | (243) | |||||||||
| 420 | 28,791 | (19,979) | (16,507) | ||||||||||
| Cash flows from financing activities | |||||||||||||
| Bank loan | - | (785) | - | - | |||||||||
| Repayment of long-term debt | (296) | (296) | (296) | (296) | |||||||||
| Exercise of stock options | 78 | 78 | 1,219 | 1,280 | |||||||||
| Redemption of share capital | (263) | (626) | - | - | |||||||||
| (481) | (1,629) | 923 | 984 | ||||||||||
| Effect of foreign exchange rate changes on cash | 1,564 | 1,196 | 784 | 1,128 | |||||||||
| Change in cash | 15,079 | 48,478 | 2,441 | 3,770 | |||||||||
| Cash - Beginning of the period | 56,170 | 22,771 | 23,438 | 22,109 | |||||||||
| Cash - End of the period | $ | 71,249 | $ | 71,249 | $ | 25,879 | $ | 25,879 | |||||
Vance Oliver
Manager, Investor Relations
(418) 683-0913, Ext. 23733
[email protected]
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