EXFO Reports Third-Quarter Results for Fiscal 2014 - AZTV7/Cable 13, Me-TV 7.2, HSN 7.3, Phoenix-Prescott, AZ

EXFO Reports Third-Quarter Results for Fiscal 2014

Information contained on this page is provided by an independent third-party content provider. WorldNow and this Station make no warranties or representations in connection therewith. If you have any questions or comments about this page please contact pressreleases@worldnow.com.

SOURCE EXFO inc.

  • Sales reach US$63.9 million, up 24.8% sequentially and 8.5% year-over-year
  • Bookings attain US$66.5 million, book-to-bill ratio of 1.04
  • Gross margin* improves to 63.3%, adjusted EBITDA** amounts to US$7.3 million (11.5%)

QUEBEC CITY, June 25, 2014 /PRNewswire/ - EXFO Inc. (NASDAQ: EXFO; TSX: EXF) reported today financial results for the third quarter ended May 31, 2014.

Sales reached US$63.9 million in the third quarter of fiscal 2014 compared to US$58.9 million in the third quarter of 2013 and US$51.2 million in the second quarter of 2014.

Bookings attained US$66.5 million in the third quarter of fiscal 2014 compared to US$61.8 million in the same period last year and US$58.7 million in the second quarter of 2014. The company's book-to-bill ratio was 1.04 in the third quarter of 2014.

Gross margin before depreciation and amortization* improved to 63.3% of sales in the third quarter of fiscal 2014 from 61.7% in the third quarter of 2013 and 60.8% in the second quarter of 2014.

IFRS net earnings in the third quarter of fiscal 2014 totaled US$1.7 million, or US$0.03 per diluted share, compared to a net loss of US$0.9 million, or US$0.01 per share, in the same period last year and a net loss of US$1.3 million, or US$0.02 per share, in the second quarter of 2014. IFRS net earnings in the third quarter of 2014 included US$1.0 million in after-tax amortization of intangible assets, US$0.4 million in stock-based compensation costs and a foreign exchange loss of US$1.1 million.

Adjusted EBITDA** amounted to US$7.3 million, or 11.5% of sales, in the third quarter of fiscal 2014 compared to US$3.1 million, or 5.3% of sales, in the third quarter of 2013 and -US$1.0 million, or -2.0% of sales, in the second quarter of 2014.

During the third quarter of fiscal 2014, EXFO acquired the assets of ByteSphere, a Boston-area software company specializing in global IT management and network monitoring solutions. This transaction extends EXFO's service assurance offering into infrastructure performance visibility through highly scalable device and network element polling.

Following the quarter-end, EXFO acquired the business of Aito Technologies, a Finnish provider of customer experience analytics for mobile network operators, through an asset purchase deal. EXFO intends to combine the analytics software capabilities of Aito Technologies with its own wireless product portfolio to provide mobile operators with heightened, end-to-end visibility of their 3G and 4G/LTE networks.

"I am really pleased with our strong sequential and year-over-year sales growth, the strengthening of our backlog for a third consecutive quarter and leverage in our operating model with an adjusted EBITDA margin of 11.5% in the third quarter," said Germain Lamonde, EXFO's Chairman, President and CEO. "I am also delighted with our improved market position in the wireless industry, both through the recent acquisitions of ByteSphere and Aito Technologies but also with several recently introduced solutions. All these initiatives have greatly elevated EXFO's strategic relevance in the wireless industry as reflected by three recent contract wins, two of which occurred with tier-1 network operators after the quarter-end."

Selected Financial Information
(In thousands of US dollars)

                 


Q3 2014

Q2 2014

Q3 2013


 

 

 
Sales $ 63,882   $ 51,179   $ 58,865

     
     
Gross margin before depreciation and amortization* $ 40,413   $ 31,106   $ 36,291


63.3%  
60.8%

61.7%
Other selected information:        
     

IFRS net earnings (loss) $ 1,665   $ (1,339)   $ (862)

Amortization of intangible assets $ 1,025   $ 1,074   $ 1,586

Stock-based compensation costs $ 407   $ 402   $ 415

Net income tax effect of the above items $ (63)   $ (64)   $ (68)

Foreign exchange gain (loss) $ (1,126)   $ 2,292   $ 314

Adjusted EBITDA** $ 7,345   $ (1,002)   $ 3,131

 

Operating Expenses
Selling and administrative expenses totaled US$21.7 million, or 34.0% of sales, in the third quarter of fiscal 2014 compared to US$22.0 million, or 37.4% of sales, in the same period last year and US$21.5 million, or 42.1% of sales, in the second quarter of 2014.

Gross research and development expenses amounted to US$13.6 million, or 21.3% of sales, in the third quarter of fiscal 2014 compared to US$13.8 million, or 23.4% of sales, in the third quarter of 2013 and US$13.0 million, or 25.5% of sales, in the second quarter of 2014.

Net R&D expenses totaled US$11.7 million, or 18.4% of sales, in the third quarter of fiscal 2014 compared to US$11.6 million, or 19.7% of sales, in the same period last year and US$11.0 million, or 21.4% of sales, in the second quarter of 2014.

Third-Quarter Highlights

  • Sales. Sales improved 24.8% quarter-over-quarter and 8.5% year-over-year to US$63.9 million in the third quarter of 2014 mainly due to the typical seasonal release of network operators' capital spending budgets and increased traction of EXFO's optical and wireless solutions. Global sales originated 54% from the Americas, 28% from EMEA and 18% from Asia-Pacific.  EXFO's top customer accounted for 6.7% of sales in the third quarter, while the top three represented 15.3%. Following the quarter-end, two tier-1 mobile network operators (one from the Americas and the other from EMEA) selected EXFO as a strategic solutions partner.

  • Profitability. EXFO reported adjusted EBITDA of US$7.3 million, or 11.5% of sales, in the third quarter of 2014 which marked the company's best performance in the last nine quarters. Cash flows from operating activities totaled US$2.9 million in the third quarter of 2014 compared to US$1.3 million for the same period in 2013. EXFO's cash position amounted to US$52.7 million with no debt at the end of the third quarter of 2014. 
  • Innovation. EXFO completed the initial integration phase of ByteSphere's network element performance metrics solution into its latest BrixWorx service assurance release. EXFO also will combine the analytics software capabilities of Aito Technologies with its own wireless product portfolio in upcoming quarters to provide mobile operators with heightened, end-to-end visibility of their 3G and 4G/LTE networks. EXFO launched three new products in the third quarter of 2014, including among others the FTB-2 Pro Platform, the industry's smallest platform for high-speed, multi-technology testing in the field and a 10G multi-test solution for the turn-up, validation and troubleshooting of next-generation and legacy networks. Altogether, the company released 19 new products or major product upgrades since the beginning of the fiscal year.

Business Outlook
EXFO forecasts sales between US$60.0 million and US$65.0 million for the fourth quarter of fiscal 2014, while IFRS net earnings are expected to range between US$0.00 and US$0.04 per diluted share. Net earnings include US$0.02 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 third quarter of fiscal 2014. To listen to the conference call and participate in the question period via telephone, dial 1-416-981-9091. 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 July 2, 2014. The replay number is 1-402-977-9141 and the reservation number is 21716514. 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 a leading provider of next-generation test, service assurance and end-to-end quality of experience solutions for mobile and fixed network operators and equipment manufacturers in the global telecommunications industry. EXFO's intelligent solutions with contextually relevant analytics improve end-user quality of experience, enhance network performance and drive operational efficiencies throughout the network and service delivery lifecycle. Key technologies supported include 3G, 4G/LTE, VoLTE, IMS, video, Ethernet/IP, SNMP, OTN, FTTx, xDSL and various optical technologies accounting for more than 38% of the global portable fiber-optic test market. EXFO has a staff of approximately 1600 people in 25 countries, supporting more than 2000 customers worldwide. For more information, visit www.EXFO.com and follow us on the EXFO Blog, Twitter, LinkedIn, Facebook, Google+ and YouTube.

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, 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 statement that refers 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 as well as capital spending and network deployment levels in the telecommunications industry (including our ability to quickly adapt cost structures with 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 telecommunications test and service assurance industry and increased competition among vendors; capacity to adapt our future product offering to future technological changes; limited visibility with regards to customer orders and the timing of such orders; 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; our ability to successfully  integrate  businesses that we acquire; 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 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. The company uses these measures for the purpose of evaluating historical and prospective financial performance, as well as its performance relative to competitors. These measures also help the company to plan and forecast for 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 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 before depreciation and amortization represents sales less cost of sales, excluding depreciation and amortization.
   
** Adjusted EBITDA represents net earnings (loss) before interest, income taxes, depreciation and amortization, 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:

Adjusted EBITDA

    Q3 2014     Q2 2014  
Q3 2013
                 
IFRS net earnings (loss) for the period $ 1,665   $ (1,339)   $ (862)


 
 
     
Add (deduct):  
   
   

               
Depreciation of property, plant and equipment
1,219  
1,243  
1,473
Amortization of intangible assets   1,025  
1,074  
1,586
Interest and other income
(220)  
(49)  
(68)
Income taxes
2,123     (41)  
901
Stock-based compensation costs
407  
402  
415
Foreign exchange (gain) loss
1,126  
(2,292)  
(314)
Adjusted EBITDA for the period $ 7,345   $ (1,002)   $ 3,131
   
     
 
Adjusted EBITDA in percentage of sales
11.5%
  (2.0)%

5.3%

 


EXFO Inc.
Condensed Unaudited Interim Consolidated Balance Sheets

(in thousands of US dollars)


    As at
May 31,
2014
  As at
August 31,
2013
Assets            
             
Current assets            
Cash   $ 47,423   $ 45,386
Short-term investments     5,321     4,868
Accounts receivable            
  Trade     52,930     50,117
  Other     2,332     2,778
Income taxes and tax credits recoverable     6,326     6,525
Inventories     37,376     35,705
Prepaid expenses     2,612     2,561
      154,320     147,940
             
Tax credits recoverable     42,388     41,719
Property, plant and equipment     43,166     45,523
Intangible assets     6,745     7,543
Goodwill     26,527     27,313
Deferred income taxes     10,323     10,807
Other assets     786     693
             
    $ 284,255   $ 281,538
Liabilities            
             
Current liabilities            
Accounts payable and accrued liabilities   $ 35,919   $ 26,253
Provisions     572     756
Income taxes payable     777     679
Current portion of long-term debt      -     296
Deferred revenue     9,480     9,467
      46,748     37,451
             
Deferred revenue     3,131     3,932
Deferred income taxes     4,090     3,226
Other liabilities     452     477
      54,421     45,086
             
Shareholders' equity            
Share capital      111,491     109,837
Contributed surplus     16,081     17,186
Retained earnings     112,431      112,852
Accumulated other comprehensive loss     (10,169)     (3,423)
      229,834     236,452
             
    $ 284,255   $ 281,538



EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Earnings

(in thousands of US dollars, except share and per share data)

    Three months
ended
May 31, 2014
  Nine months
ended
May 31, 2014
  Three months
ended
May 31, 2013
  Nine months
ended
May 31, 2013
                         
Sales   $ 63,882   $ 171,064   $ 58,865   $ 181,262
                         
Cost of sales (1)     23,469     64,727     22,574     69,895
Selling and administrative     21,730     64,975     22,002     67,366
Net research and development     11,745     33,999     11,573     35,135
Depreciation of property, plant and equipment     1,219     3,737     1,473     4,582
Amortization of intangible assets     1,025     3,281     1,586     5,470
Interest and other income     (220)     (296)     (68)     (76)
Foreign exchange (gain) loss     1,126     (1,968)     (314)      (2,770)
Earnings before income taxes     3,788     2,609     39     1,660
                         
Income taxes     2,123     3,030     901     4,121
                         
Net earnings (loss) for the period   $ 1,665   $ (421)   $ (862)   $ (2,461)
                         
Basic and diluted net earnings (loss) per share   $ 0.03   $ (0.01)   $ (0.01)   $ (0.04)
                         
Basic weighted average number of shares outstanding (000's)     60,339     60,323     60,377     60,386
                         
Diluted weighted average number of shares outstanding (000's)     60,986     60,323     60,377     60,386

(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
May 31, 2014
  Nine months
ended
May 31, 2014
  Three months
ended
May 31, 2013
  Nine months
ended
May 31, 2013
                         
Net earnings (loss) for the period   $ 1,665   $ (421)   $ (862)   $ (2,461)
Other comprehensive income (loss), net of income taxes                        
Items that will not be reclassified subsequently to net earnings                        
  Foreign currency translation adjustment     4,736     (6,792)     (1,252)     (12,144)
Items that may be reclassified subsequently to net earnings                        
  Unrealized gains/losses on forward exchange contracts     835     (694)     (112)     (874)
  Reclassification of realized gains/losses on forward exchange contracts in net earnings (loss)     391     756     48     (281)
  Deferred income tax effect of gains/losses on forward exchange contracts     (328)     (16)     17     310
Other comprehensive income (loss)     5,634     (6,746)     (1,299)     (12,989)
                         
Comprehensive income (loss) for the period   $ 7,299   $ (7,167)   $ (2,161)   $ (15,450)



EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity

(in thousands of US dollars)

    Nine months ended May 31, 2013
    Share
capital
  Contributed
surplus
  Retained
earnings
  Accumulated
other
comprehensive
income
  Total
shareholders'
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     (1,892)     (409)     -     -     (2,301)
Reclassification of stock-based compensation costs     1,350     (1,350)     -     -     -
Stock-based compensation costs     -     1,333     -     -     1,333
Net loss for the period     -     -     (2,461)     -     (2,461)
Other comprehensive loss                              
  Foreign currency translation adjustment     -     -     -     (12,144)     (12,144)
  Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes of $310     -     -     -     (845)     (845)
                               
Total comprehensive loss for the period     -     -     (2,461)     (12,989)     (15,450)
                               
Balance as at May 31, 2013   $ 110,510   $ 16,872   $ 109,050   $ 518   $ 236,950
   
    Nine months ended May 31, 2014
    Share
capital
  Contributed
surplus
  Retained
earnings
  Accumulated
other
comprehensive
loss
  Total
shareholders'
equity
                               
Balance as at September 1, 2013   $ 109,837   $ 17,186   $ 112,852   $ (3,423)   $ 236,452
Exercise of stock options     225     -     -     -     225
Redemption of share capital     (831)     (106)     -     -     (937)
Reclassification of stock-based compensation
costs
    2,260     (2,260)     -     -     -
Stock-based compensation costs     -     1,261     -     -     1,261
Net loss for the period     -     -     (421)     -     (421)
Other comprehensive income (loss)                              
  Foreign currency translation adjustment     -     -     -     (6,792)     (6,792)
  Changes in unrealized losses on forward exchange contracts, net of deferred income taxes of $16     -     -     -     46     46
                               
Total comprehensive loss for the period     -     -     (421)     (6,746)     (7,167)
                               
Balance as at May 31, 2014   $  111,491   $ 16,081   $ 112,431   $ (10,169)   $ 229,834



EXFO Inc.
Condensed Unaudited Interim Consolidated Statements of Cash Flows

(in thousands of US dollars)

    Three months
ended
May 31, 2014
  Nine months
ended
May 31, 2014
  Three months
ended
May 31, 2013
  Nine months
ended
May 31, 2013
                         
Cash flows from operating activities                        
Net earnings (loss) for the period   1,665   (421)   (862)   (2,461)
Add (deduct) items not affecting cash                        
  Changes in discount on short-term investments     -     -     1     -
  Stock-based compensation costs     407     1,272     415     1,331
  Depreciation and amortization     2,244     7,018     3,059     10,052
  Deferred revenue     209     (519)     1,661     241
  Deferred income taxes     1,147     1,448     263     1,984
  Changes in foreign exchange gain/loss     378     (523)     (78)     (876)
      6,050     8,275     4,459     10,271
Changes in non-cash operating items                        
  Accounts receivable     (8,208)     (3,683)     (4,569)     (10,657)
  Income taxes and tax credits     (759)     (1,702)     985     (2,201)
  Inventories     727     (2,806)     (262)     791
  Prepaid expenses     492     (124)     (804)     (859)
  Other assets     53     19     -     -
  Accounts payable, accrued liabilities and provisions     4,565     9,956     1,553     1,503
  Other liabilities     (35)     (78)     (25)     (235)
      2,885     9,857     1,337     (1,387)
Cash flows from investing activities                        
Additions to short-term investments     (9,821)     (24,392)     (9,934)     (44,703)
Proceeds from disposal and maturity of short-term investments     9,244     23,806     9,921     47,731
Additions to capital assets      (2,750)     (5,146)      (1,459)     (5,952)
      (3,327)     (5,732)     (1,472)     (2,924)
Cash flows from financing activities                        
Repayment of long-term debt     -     (307)      -     (293)
Exercise of stock options     30     225     -     87
Redemption of share capital         (937)     (1,161)     (2,301)
      30     (1,019)     (1,161)     (2,507)
Effect of foreign exchange rate changes on cash     771     (1,069)     (271)     (2,192)
                         
Change in cash     359     2,037     (1,567)     (9,010)
Cash - Beginning of the period      47,064     45,386     51,425     58,868
                         
Cash - End of the period   47,423   47,423   49,858   49,858

 

 

 

©2012 PR Newswire. All Rights Reserved.

Powered by WorldNow
All content © Copyright 2000 - 2014 WorldNow and AZ-TV. All Rights Reserved.
For more information on this site, please read our Privacy Policy and Terms of Service.