EXFO reports second quarter results for fiscal 2021

• Sales reached US$69.3 million
• Bookings attained US$79.3 million, up 8.9% year-over-year
• IFRS net loss totaled US$2.4 million
• Adjusted EBITDA amounted to US$3.4 million

QUEBEC CITY, April 7, 2021 /CNW Telbec/ - EXFO Inc. (NASDAQ: EXFO) (TSX: EXF), the communications industry's test, monitoring and analytics experts, reported today financial results for the second quarter ended February 28, 2021.

"EXFO delivered another solid performance in the second quarter of 2021, marked by a robust book-to-bill ratio of 1.15 and healthy cash flows from operations of US$14.7 million," said EXFO's CEO Philippe Morin. "I am particularly pleased with our strong bookings that reflect increased market demand, driven by catch-up spending and early deployments of 5G, cloud-based networks, as communications service providers get a better handle on transforming their networks during the coronavirus pandemic. Recent success in securing multi-year contracts bodes well for the footprint expansion of our Nova Adaptive Service Assurance platform with a growing number of RFPs (requests for proposals) for 5G standalone network monitoring systems expected in 2021 and 2022."

Second Quarter Highlights

• Sales. The coronavirus outbreak had forced a one-month shutdown of EXFO's manufacturing facility in Shenzhen, China in February 2020, which negatively impacted second quarter revenues in 2020. With this in mind, sales increased 25.2% year-over-year in the second quarter of 2021 with Test and Measurement (T&M) sales growing 36.8% and Service Assurance, Systems and Services (SASS) sales dropping 2.1%. Sales in the Americas and Europe, Middle East and Africa (EMEA) improved 25.7% and 54.7% year-over-year, respectively, while sales in the Asia-Pacific region fell 18.3%. EXFO's top customer accounted for 6.8% of sales, while the top three represented 14.3%.
• Profitability. IFRS net loss totaled US$2.4 million, or -US$0.04 per share, in the second quarter of 2021, while adjusted EBITDA* amounted to US$3.4 million, or 4.9% of sales. The company generated US$14.7 million in cash flows from operations in the second quarter of 2021 and had a net cash position* of US$10.2 million at the end of the quarter.

Selected Financial Information
(In thousands of US dollars)

	Q2 2021			Q2 2020			H1 2021			H1 2020
Test and Measurement sales	$	51,277		$	37,477		$	101,750		$	93,424
Service Assurance, Systems and Services sales	17,565			17,935			38,611			35,684
Foreign exchange gains (losses) on forward exchange contracts	412			(99)			405			(244)
Total sales	$	69,254		$	55,313		$	140,766		$	128,864
Test and Measurement bookings	$	53,665		$	52,003		$	104,913		$	107,012
Service Assurance, Systems and Services bookings	25,272			20,963			43,074			36,012
Foreign exchange gains (losses) on forward exchange contracts	412			(99)			405			(244)
Total bookings	$	79,349		$	72,867		$	148,392		$	142,780
Book-to-bill ratio (bookings/sales)	1.15			1.32			1.05			1.11
Gross margin before depreciation and amortization^*	$	38,831		$	31,517		$	80,474		$	74,827
	56.1%			57.0%			57.2%			58.1%
Other selected information:
IFRS net earnings (loss)	$	(2,439)		$	(9,021)		$	1,115		$	(9,084)
Amortization of intangible assets	$	1,987		$	1,695		$	4,536		$	3,327
Stock-based compensation costs	$	1,017		$	436		$	1,585		$	923
Restructuring charges	$	‒		$	‒		$	543		$	‒
Net income tax effect of the above items	$	(298)		$	(254)		$	(828)		$	(503)
Foreign exchange loss	$	127		$	382		$	373		$	508
Adjusted EBITDA^*	$	3,407		$	(4,916)		$	13,356		$	2,628

Quarterly Overview
Sales increased 25.2% to US$69.3 million in the second quarter of fiscal 2021 from US$55.3 million in the coronavirus-impacted second quarter of 2020, which had been marked by a one-month shutdown of the company's manufacturing facility in Shenzhen, China.

Bookings improved 8.9% to US$79.3 million in the second quarter of fiscal 2021 from US$72.9 million in the same period in 2020. The company's book-to-bill ratio was 1.15 in the second quarter of 2021.

Gross margin before depreciation and amortization* amounted to 56.1% of sales in the second quarter of fiscal 2021 compared to 57.0% in the second quarter of 2020.

Selling and administrative expenses totaled US$22.9 million, or 33.1% of sales in the second quarter of fiscal 2021 compared to US$24.3 million, or 44.0% of sales, in the second quarter of 2020.

Net R&D expenses attained US$13.5 million, or 19.6% of sales, in the second quarter of fiscal 2021 compared to US$12.6 million, or 22.7% of sales, in the same period last year.

IFRS net loss totaled US$2.4 million, or -US$0.04 per share, in the second quarter of fiscal 2021 compared to US$9.0 million, or -US$0.16 per share, in the second quarter of 2020. IFRS net loss in the second quarter of 2021 included US$2.0 million in amortization of intangible assets, US$1.0 million in stock-based compensation costs, US$0.1 million in foreign exchange loss, and an income tax effect of the above items of $0.3 million. Net loss also included US$0.3 million for an after-tax wage subsidy granted by the Canadian government to help qualifying companies alleviate the effects of the pandemic, as well as US$0.7 million for the excess of the fair value of net identifiable assets acquired over fair value of the total consideration for inOpticals Inc. (now EXFO Taiwan), net of cash acquired for the acquisition.

Adjusted EBITDA* amounted to US$3.4 million, or 4.9% of sales, in the second quarter of fiscal 2021 compared to -US$4.9 million, or -8.9% of sales, in the second quarter of 2020.

Conference Call and Webcast
EXFO will host a conference call today at 5 p.m. (Eastern time) to review second-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: 8977218. 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 April 14, 2021. The replay number is 1-719-457-0820 and the participant passcode is 8977218. 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 (net cash position, gross margin before depreciation and amortization and adjusted EBITDA) as supplemental information regarding its operational performance. Net cash position represents cash and short-term investments, less bank loan and long-term debt. Gross margin before depreciation and amortization represents sales, less cost of sales, excluding depreciation and amortization. Adjusted EBITDA represent net earnings (loss) before interest and other income/expense, 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 historical and prospective financial performance, as well as its performance relative to competitors. These non-IFRS measures are also used by financial analysts to evaluate and compare EXFO's performance against that of competitors and industry players in the company's sector.

Finally, these measures help EXFO plan and forecast future periods as well as 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 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), in thousands of US dollars:

Adjusted EBITDA

	Q2 2021			Q2 2020			H1 2021			H1 2020
IFRS net earnings (loss) for the period	$	(2,439)		$	(9,021)		$	1,115		$	(9,084)
Add (deduct):
Depreciation and amortization	4,236			3,973			8,959			7,899
Interest and other (income) expense	(137)			285			(2,003)			684
Income taxes	603			(971)			2,784			1,698
Stock-based compensation costs	1,017			436			1,585			923
Restructuring charges	–			–			543			–
Foreign exchange loss	127			382			373			508
Adjusted EBITDA for the period	$	3,407		$	(4,916)		$	13,356		$	2,628
Adjusted EBITDA as a percentage of sales	4.9%			(8.9%)			9.5%			2.0%

EXFO Inc. Condensed Unaudited Interim Consolidated Balance Sheets
(in thousands of US dollars)
		As at February 28, 2021			As at August 31, 2020
Assets
Current assets
Cash		$	23,868		$	32,818
Short-term investments		458			919
Accounts receivable
Trade		51,521			56,291
Other		5,168			4,055
Income taxes and tax credits recoverable		5,883			4,203
Inventories		41,835			38,865
Prepaid expenses		5,057			5,631
Other assets		3,595			5,493
		137,385			148,275
Tax credits recoverable		48,457			48,812
Property, plant and equipment		39,462			39,722
Right-of-use assets		9,082			10,758
Intangible assets		15,025			17,616
Goodwill		41,453			40,290
Deferred income tax assets		4,110			3,633
Other assets		1,656			1,548
		$	296,630		$	310,654
Liabilities
Current liabilities
Bank loan		$	10,999		$	32,737
Accounts payable and accrued liabilities		45,856			41,348
Provisions		1,280			3,792
Income taxes payable		384			43
Deferred revenue		26,341			25,785
Other liabilities		4,086			4,032
Current portion of lease liabilities		3,167			3,249
Current portion of long-term debt		1,548			2,076
		93,661			113,062
Provisions		2,898			2,782
Deferred revenue		9,155			8,858
Lease liabilities		6,213			7,334
Long-term debt		1,532			2,144
Deferred income tax liabilities		2,795			3,760
Other liabilities		149			151
		116,403			138,091
Shareholders' equity
Share capital		95,164			94,024
Contributed surplus		20,102			19,680
Retained earnings		103,748			102,633
Accumulated other comprehensive loss		(38,787)			(43,774)
		180,227			172,563
		$	296,630		$	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 February 28, 2021			Six months ended February 28, 2021			Three months ended February 29, 2020			Six months ended February 29, 2020
Sales		$	69,254		$	140,766		$	55,313		$	128,864
Cost of sales ^(1)		30,423			60,292			23,796			54,037
Selling and administrative		22,893			44,499			24,303			48,807
Net research and development		13,548			24,747			12,566			24,315
Depreciation of property, plant and equipment		1,472			2,813			1,424			2,867
Depreciation of right-of-use assets		777			1,610			854			1,705
Amortization of intangible assets		1,987			4,536			1,695			3,327
Interest and other (income) expense		(137)			(2,003)			285			684
Foreign exchange loss		127			373			382			508
Earnings (loss) before income taxes		(1,836)			3,899			(9,992)			(7,386)
Income taxes		603			2,784			(971)			1,698
Net earnings (loss) for the period		$	(2,439)		$	1,115		$	(9,021)		$	(9,084)
Basic and diluted net earnings (loss) per share		$	(0.04)		$	0.02		$	(0.16)		$	(0.16)
Basic weighted average number of shares outstanding (000's)		55,940			55,844			55,603			55,521
Diluted weighted average number of shares outstanding (000's)		55,940			57,233			55,603			55,521

(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 February 28, 2021			Six months ended February 28, 2021			Three months ended February 29, 2020			Six months ended February 29, 2020
Net earnings (loss) for the period		$	(2,439)		$	1,115		$	(9,021)		$	(9,084)
Other comprehensive income (loss), net of income taxes
Items that may be reclassified subsequently to net earnings (loss)
Foreign currency translation adjustment		3,921			4,643			(1,319)			(758)
Unrealized gains/losses on forward exchange contracts		691			947			(718)			(753)
Reclassification of realized gains/losses on forward exchange contracts		(313)			(469)			173			356
Deferred income tax effect of gains/losses on forward exchange contracts		(100)			(134)			146			116
Other comprehensive income (loss)		4,199			4,987			(1,718)			(1,039)
Comprehensive income (loss) for the period		$	1,760		$	6,102		$	(10,739)		$	(10,123)

EXFO Inc. Condensed Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity
(in thousands of US dollars)
		Six months ended February 29, 2020
		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		1,333			(1,333)			–			–			–
Redemption of share capital		(212)			(13)			–			–			(225)
Stock-based compensation costs		–			930			–			–			930
Net loss for the period		–			–			(9,084)			–			(9,084)
Other comprehensive loss
Foreign currency translation adjustment		–			–			–			(758)			(758)
Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes of $116		–			–			–			(281)			(281)
Total comprehensive loss for the period														(10,123)
Balance as at February 29, 2020		$	93,827		$	18,780		$	103,089		$	(52,550)		$	163,146
		Six months ended February 28, 2021
		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		1,305			(1,305)			–			–			–
Issuance of share capital		414			–			–			–			414
Share issue expenses		(14)			–			–			–			(14)
Redemption of share capital		(565)			157			–			–			(408)
Stock-based compensation costs		–			1,570			–			–			1,570
Net earnings for the period		–			–			1,115			–			1,115
Other comprehensive income
Foreign currency translation adjustment		–			–			–			4,643			4,643
Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes of $134		–			–			–			344			344
Total comprehensive income for the period														6,102
Balance as at February 28, 2021		$	95,164		$	20,102		$	103,748		$	(38,787)		$	180,227

EXFO Inc. Condensed Unaudited Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
		Three months ended February 28, 2021			Six months ended February 28, 2021			Three months ended February 29, 2020			Six months ended February 29, 2020
Cash flows from operating activities
Net earnings (loss) for the period		$	(2,439)		$	1,115		$	(9,021)		$	(9,084)
Add (deduct) items not affecting cash
Stock-based compensation costs		1,017			1,585			436			923
Depreciation and amortization		4,236			8,959			3,973			7,899
Gain on disposal of capital assets		(17)			(17)			–			–
Write-off of capital assets		–			10			–			216
Other income		(669)			(669)			–			–
Deferred revenue		1,519			(81)			1,557			(2,815)
Deferred income taxes		(301)			(1,619)			(212)			(654)
Changes in foreign exchange gain/loss		(213)			(1)			902			881
		3,133			9,282			(2,365)			(2,634)
Changes in non-cash operating items
Accounts receivable		7,214			6,383			18,539			18,611
Income taxes and tax credits		(997)			223			(3,178)			(2,662)
Inventories		1,924			(681)			(458)			(3,951)
Prepaid expenses		549			1,128			610			988
Other assets		272			1,663			(491)			(456)
Accounts payable, accrued liabilities and provisions		2,580			(1,253)			(5,580)			(9,273)
Other liabilities		2			(6)			58			42
		14,677			16,739			7,135			665
Cash flows from investing activities
Additions to short-term investments		(275)			(505)			–			(147)
Disposal of short-term investments		948			978			701			1,264
Purchases of capital assets		(1,172)			(2,283)			(2,146)			(4,186)
Cash acquired in a business combination		799			799			–			–
		300			(1,011)			(1,445)			(3,069)
Cash flows from financing activities
Bank loan		(5,355)			(21,693)			16			8,370
Repayment of lease liabilities		(777)			(1,610)			(846)			(1,690)
Repayment of long-term debt		(578)			(1,159)			(639)			(1,315)
Redemption of share capital		(28)			(408)			–			(225)
		(6,738)			(24,870)			(1,469)			5,140
Effect of foreign exchange rate changes on cash		237			192			(140)			(128)
Change in cash during the period		8,476			(8,950)			4,081			2,608
Cash – Beginning of the period		15,392			32,818			15,045			16,518
Cash – End of the period		$	23,868		$	23,868		$	19,126		$	19,126

EXFO-F

SOURCE EXFO Inc.

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

Related Links

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