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 /PRNewswire/ - 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 As at
November 30, August 31,
2020 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 Contributed Retained Accumulated Total
capital surplus earnings other shareholders'
comprehensive equity
loss
---
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 Contributed Retained Accumulated Total
capital surplus earnings other shareholders'
comprehensive equity
loss
---
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
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SOURCE EXFO Inc.
