- Sales increase 16.7% year-over-year to US$54.1 million
- Bookings improve 22.2% year-over-year to US$57.8 million, book-to-bill
ratio of 1.07
- Earnings from operations reach US$3.9 million or 7.3% of sales
- NetHawk acquisition expands reach into high-growth 3G and 4G/LTE
wireless market
QUEBEC CITY, March 30
/PRNewswire-FirstCall/ - EXFO Inc. (NASDAQ: EXFO; TSX: EXF)
reported today record sales and bookings for its second quarter
ended February 28, 2010.
Sales increased 16.7% to US$54.1
million in the second quarter of fiscal 2010 from
US$46.4 million in the second quarter
of 2009 and 18.8% from US$45.6
million in the first quarter of 2010. Net bookings improved
22.2% to US$57.8 million the second
quarter of fiscal 2010 from US$47.3
million in the same period last year and 10.8% from
US$52.2 million in the first quarter
of 2010. The company's book-to-bill ratio was 1.07 in the second
quarter of 2010.
Gross margin decreased to 60.0% of sales in the second quarter
of fiscal 2010 from 60.4% in the second quarter of 2009 and 63.9%
in the first quarter of 2010.
GAAP net earnings in the second quarter of fiscal 2010 totaled
US$1.2 million, or US$0.02 per diluted share, compared to
US$2.7 million, or US$0.04 per diluted share, in the same period
last year and US$0.3 million, or
US$0.01 per diluted share, in the
first quarter of fiscal 2010. It should be noted that EXFO recorded
a pre-tax, foreign exchange loss of US$1.0
million in the second quarter of fiscal 2010 compared to a
gain of US$1.1 million in the second
quarter of 2009 and a loss of US$1.1
million in the first quarter of 2010. GAAP net earnings in
the second quarter of fiscal 2010 included US$1.5 million in amortization of intangible
assets and US$0.5 million in
stock-based compensation costs. The former item resulted in an
income tax recovery of US$0.5
million.
Following the quarter-end, EXFO announced the acquisition of
NetHawk Oyj, the second-largest provider of 2G, 3G and 4G/LTE
protocol analyzers and network simulators in the wireless test
industry, in an all-cash transaction estimated at (euro)37.3
million for all outstanding shares on a fully diluted basis, or
(euro)27.6 million excluding NetHawk's net cash. EXFO initially
acquired 91% of NetHawk's outstanding shares and is in the process
of purchasing the remaining shares pursuant to a statutory
procedure under the Finnish Companies Act.
"I'm certainly delighted with the NetHawk acquisition, since its
leading 3G and 4G/LTE technologies transform EXFO into a major
force in the high-growth, high-margin wireless space and a top-five
player in the global telecom test and service assurance industry,"
said Germain Lamonde, EXFO's
Chairman, President and CEO. "I'm equally pleased with our record
level of sales and bookings in the second quarter. Given our
enhanced strategic positioning and overall improvement in our
end-markets, I'm confident this will enable us to accelerate
revenues and earnings even faster in the near future."
Unaudited Selected Financial Information
(In thousands of US dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Segmented results: Q2 2010 Q2 2009 Q1 2010
------------------------------------------
Sales:
Telecom Division $ 47,951 $ 41,367 $ 40,292
Life Sciences and Industrial
Division 6,159 5,005 5,268
------------------------------------------
Total $ 54,110 $ 46,372 $ 45,560
------------------------------------------
------------------------------------------
Earnings from operations:
Telecom Division $ 2,748 $ 2,117 $ 2,041
Life Sciences and Industrial
Division 1,187 482 687
------------------------------------------
Total $ 3,935 $ 2,599 $ 2,728
------------------------------------------
------------------------------------------
Other selected information:
GAAP net earnings $ 1,154 $ 2,655 $ 334
Selected items included in
GAAP net earnings:
Amortization of intangible
assets $ 1,502 $ 1,246 $ 1,469
Stock-based compensation
costs $ 469 $ 325 $ 418
Income tax effect of the
above selected items $ (484) $ (212) $ (471)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating Expenses
Selling and administrative expenses totaled US$16.9 million, or 31.3% of sales, in the second
quarter of fiscal 2010 compared to US$15.8
million, or 34.1% of sales, in the same period last year and
US$15.4 million, or 33.7% of sales,
in the first quarter of 2010.
Gross research and development expenses amounted to US$10.4 million, or 19.2% of sales, in the second
quarter of fiscal 2010 compared to US$8.8
million, or 19.0% of sales, in the second quarter of 2009
and US$9.8 million, or 21.5% of
sales, in the first quarter of 2010.
Net R&D expenses totaled US$8.8
million, or 16.3% of sales, in the second quarter of fiscal
2010 compared to US$7.3 million, or
15.8% of sales, in the same period last year and US$8.3 million, or 18.2% of sales, in the first
quarter of 2010.
Second-Quarter Highlights
IP Fixed-Mobile Network Convergence and Broadband Deployments -
EXFO announced several new product introductions in the second
quarter related to its key growth drivers: IP fixed-mobile network
convergence and broadband deployments. Major product launches
included the release of a service assurance solution for 4G/LTE
mobile broadband networks; the implementation of a new
standards-based test (EtherSAM) across EXFO's Ethernet product
offering; and a high-resolution optical spectrum analyzer (OSA) for
in-depth characterization of 40 Gbit/s or 100 Gbit/s networks.
Altogether, EXFO launched six new products in the second quarter of
fiscal 2010, while 41.3% of sales were derived from products on the
market two years or less. The company also reported that its
AXS-200/635 Triple-Play Test Set had been approved by four tier-1
network operators to support their respective deployments of
next-generation VDSL2 services and applications. Approximately
US$2 million in orders were
recognized in the second quarter of 2010.
Following the quarter-end EXFO announced the acquisition of
NetHawk, a leading supplier of 2G, 3G and 4G/LTE wireless test and
service assurance solutions. NetHawk enables EXFO not only to
expand into the high-growth 3G and 4G/LTE wireless market, but also
provide end-to-end solutions that assess the performance and
reliability of converged, IP fixed and mobile networks.
Profitable Growth Path - EXFO reported EBITDA of US$5.7 million, or 10.6% of sales, in the second
quarter of fiscal 2010 on revenue of US$54.1
million compared to EBITDA of US$6.0
million, or 12.6% of sales, in the second quarter of 2009 on
revenue of US$46.4 million. It should
be noted EXFO recorded a pre-tax, foreign exchange loss of
US$1.0 million in the second quarter
of 2010 compared to a gain of US$1.1
million in the same period in 2009. Foreign exchange losses
or gains are included in EBITDA. In contrast, the company generated
US$3.9 million in earnings from
operations, or 7.3% of sales, in the second quarter of 2010
compared to US$2.6 million, or 5.6%
of sales, in the second quarter of 2009.
Updated Corporate Performance Objectives
Following the recent acquisition of NetHawk, EXFO updated its
corporate performance objectives for the same three-year period
extending from fiscal 2010 to 2012.
-------------------------------------------------------------------------
Former Corporate Performance New Corporate Performance
Objectives Objectives
-------------------------------------------------------------------------
Increase sales by a CAGR of 20% Increase sales by a CAGR of at
least 25%
-------------------------------------------------------------------------
Raise gross margin to 64% Raise gross margin to 64%
-------------------------------------------------------------------------
Double EBITDA* in dollars Increase EBITDA* in dollars by a
(CAGR of 26%) CAGR of at least 30%
-------------------------------------------------------------------------
* EBITDA is defined as net earnings (loss) before interest, income
taxes, amortization of property, plant and equipment, amortization of
intangible assets, impairment of goodwill and extraordinary gain.
Business Outlook
EXFO forecasted sales between US$60
million and US$65 million and GAAP net results between a
loss of US$0.03 per share and
earnings of US$0.01 per share for the
third quarter of 2010. GAAP net results assume an after-tax foreign
exchange loss of US$0.02 per share
and 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, expected
bookings for the remainder of the quarter, current exchange rates,
as well as the preliminary allocation of the purchase price of the
NetHawk acquisition.
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 2010. To listen to the
conference call and participate in the question period via
telephone, dial 1-416-359-1270. 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 6,
2010. The replay number is 1-402-977-9141 and the
reservation number is 21462627. 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 is a leading provider of next-generation test and service
assurance solutions for wireless and wireline network operators and
equipment manufacturers in the global telecommunications industry.
The Telecom Division, which accounts for more than 90% of the
company's revenues, offers core-to-edge solutions that assess the
performance and reliability of converged, IP fixed and mobile
networks. Key technologies supported include 3G, 4G/LTE, IMS,
Ethernet, OTN, xDSL, and various optical technologies accounting
for an estimated 33% of the portable fiber-optic test market. The
Life Sciences and Industrial Division provides solutions in medical
device and opto-electronics assembly, fluorescence microscopy and
other life science sectors. EXFO has a staff of approximately 1,600
people in 25 countries, supporting more than 2,000 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
forward-looking statements due to various factors including our
ability to successfully integrate our acquired and to-be-acquired
businesses; fluctuating exchange rates; consolidation in the global
telecommunications test, measurement and service assurance industry
and increased competition among vendors; capital spending levels in
the telecommunications, life sciences and high-precision assembly
sectors; concentration of sales; the effects of the additional
actions we have taken in response to economic uncertainty
(including our ability to quickly adapt cost structures with
anticipated levels of business, ability to manage inventory levels
with market demand); market acceptance of our new products and
other upcoming products; limited visibility with regards to
customer orders and the timing of such orders; our ability to
successfully expand international operations; the retention of key
technical and management personnel; and future economic,
competitive, financial and market condition.
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
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-GAAP Financial Measure
EXFO provides a non-GAAP financial measure (EBITDA*) as
supplemental information regarding its operational performance.
EXFO uses EBITDA for the purposes of evaluating its historical and
prospective financial performance, as well as its performance
relative to competitors. This measure also helps EXFO's management
to plan and forecast future periods as well as to make operational
and strategic decisions. EXFO believes that providing this
information to investors, in addition to GAAP measures, allows them
to see the company's results through the eyes of management, and to
better understand historical and future financial performance.
The presentation of this additional information is not prepared
in accordance with GAAP. 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 GAAP.
The following table summarizes the reconciliation of EBITDA to
GAAP net earnings (in thousands of US dollars):
Q2 2010 Q2 2009 Q1 2010
------------- ----------------------------
GAAP net earnings for the
period $ 1,154 $ 2,655 $ 334
Add (deduct):
Amortization of property,
plant and equipment 1,312 1,049 1,291
Amortization of intangible
assets 1,502 1,246 1,469
Interest (income) expense 76 (175) 42
Income taxes 1,668 1,209 1,243
------------- ------------- --------------
EBITDA for the period $ 5,712 $ 5,984 $ 4,379
------------- ------------- --------------
------------- ------------- --------------
EDITDA in percentage of sales 10.6% 12.9% 9.6%
------------- ------------- --------------
------------- ------------- --------------
* EBITDA is defined as net earnings before interest, income taxes,
amortization of property, plant and equipment and amortization of
intangible assets.
EXFO Inc.
Unaudited Interim Consolidated Balance Sheet
(in thousands of US dollars)
As at As at
February 28, August 31,
2010 2009
------------- --------------
Assets
Current assets
Cash $ 15,879 $ 10,611
Short-term investments 55,876 59,105
Accounts receivable
Trade 31,961 22,946
Other 4,442 2,752
Income taxes and tax credits recoverable 3,752 2,353
Inventories 35,286 30,863
Prepaid expenses 2,755 2,043
Future income taxes 5,559 5,538
------------- --------------
155,510 136,211
Tax credits recoverable 29,970 26,762
Forward exchange contracts 398 428
Property, plant and equipment 18,981 19,100
Intangible assets 15,311 16,859
Goodwill 23,420 22,478
Future income taxes 15,644 18,533
------------- --------------
$ 259,234 $ 240,371
------------- --------------
------------- --------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 25,189 $ 21,650
Deferred revenue 9,193 6,481
------------- --------------
34,382 28,131
Deferred revenue 4,845 4,195
------------- --------------
39,227 32,326
------------- --------------
Shareholders' equity
Share capital 105,583 104,846
Contributed surplus 17,992 17,758
Retained earnings 45,397 43,909
Accumulated other comprehensive income 51,035 41,532
------------- --------------
220,007 208,045
------------- --------------
$ 259,234 $ 240,371
------------- --------------
------------- --------------
EXFO Inc.
Unaudited Interim Consolidated Statements of Earnings
(in thousands of US dollars, except share and per share data)
Three months Six months Three months Six months
ended ended ended ended
February 28, February 28, February 28, February 28,
2010 2010 2009 2009
------------- ------------- ------------- --------------
Sales $ 54,110 $ 99,670 $ 46,372 $ 92,735
Cost of sales
(1,2) 21,633 38,071 18,353 35,833
------------- ------------- ------------- --------------
Gross margin 32,477 61,599 28,019 56,902
------------- ------------- ------------- --------------
Operating
expenses
Selling and
administrative(1) 16,919 32,280 15,800 32,891
Net research and
development(1) 8,809 17,082 7,325 14,546
Amortization of
property, plant
and equipment 1,312 2,603 1,049 2,208
Amortization of
intangible
assets 1,502 2,971 1,246 2,565
------------- ------------- ------------- --------------
Total operating
expenses 28,542 54,936 25,420 52,210
------------- ------------- ------------- --------------
Earnings from
operations 3,935 6,663 2,599 4,692
Interest income
(expense) (76) (118) 175 641
Foreign exchange
gain (loss) (1,037) (2,146) 1,090 5,658
------------- ------------- ------------- --------------
Earnings before
income taxes 2,822 4,399 3,864 10,991
Income taxes
Current (236) (149) 297 236
Future 1,904 3,060 912 2,813
------------- ------------- ------------- --------------
1,668 2,911 1,209 3,049
------------- ------------- ------------- --------------
Net earnings for
the period $ 1,154 $ 1,488 $ 2,655 $ 7,942
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
Basic net
earnings per
share $ 0.02 $ 0.03 $ 0.04 $ 0.12
Diluted net
earnings per
share $ 0.02 $ 0.02 $ 0.04 $ 0.12
Basic weighted
average number
of shares
outstanding
(000's) 59,427 59,406 60,875 64,108
Diluted weighted
average number
of shares
outstanding
(000's) 60,529 60,325 61,375 64,546
(1) Stock-based
compensation
costs
included
in:
Cost of
sales $ 43 $ 84 $ 31 $ 60
Selling and
adminis-
trative 302 570 198 399
Net
research and
development 124 233 96 188
------------- ------------- ------------- --------------
$ 469 $ 887 $ 325 $ 647
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
(2) The cost of sales is exclusive of amortization, shown separately.
EXFO Inc.
Unaudited Interim Consolidated Statements of Comprehensive Income (Loss)
and Accumulated Other Comprehensive Income
(in thousands of US dollars)
Comprehensive income (loss)
Three months Six months Three months Six months
ended ended ended ended
February 28, February 28, February 28, February 28,
2010 2010 2009 2009
------------- ------------- ------------- --------------
Net earnings for
the period $ 1,154 $ 1,488 $ 2,655 $ 7,942
Foreign currency
translation
adjustment 989 8,802 (4,646) (41,579)
Changes in
unrealized losses
on short-term
investments - - - 22
Unrealized gains
(losses) on
forward exchange
contracts 158 1,322 (1,734) (8,663)
Reclassification
of realized
gains (losses)
on forward
exchange
contracts in
net earnings (382) (305) 1,371 1,234
Future income
taxes effect of
the above items 69 (316) 113 2,303
------------- ------------- ------------- --------------
Comprehensive
income (loss) $ 1,988 $ 10,991 $ (2,241) $ (38,741)
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
Accumulated other comprehensive income
Six months ended
February 28,
----------------------------
2010 2009
------------- --------------
Foreign currency translation adjustment
Cumulative effect of prior periods $ 40,458 $ 51,129
Current period 8,802 (41,579)
------------- --------------
49,260 9,550
------------- --------------
Unrealized gains (losses) on forward
exchange contracts
Cumulative effect of prior periods 1,076 (96)
Current period, net of realized gains
(losses) and future income taxes 701 (5,126)
------------- --------------
1,777 (5,222)
------------- --------------
Unrealized losses on short-term investments
Cumulative effect of prior periods (2) (24)
Current period, net of future income taxes - 22
------------- --------------
(2) (2)
------------- --------------
Accumulated other comprehensive income $ 51,035 $ 4,326
------------- --------------
------------- --------------
Total retained earnings and accumulated other comprehensive income
amounted to $72,762 and $96,432 as at February 28, 2009 and 2010,
respectively.
EXFO Inc.
Unaudited Interim Consolidated Statements of Retained Earnings
and Contributed Surplus
(in thousands of US dollars)
Retained earnings
Six months ended
February 28,
----------------------------
2010 2009
------------- --------------
Balance - Beginning of the period $ 43,909 $ 60,494
Add
Net earnings for the period 1,488 7,942
------------- --------------
Balance - End of the period $ 45,397 $ 68,436
------------- --------------
------------- --------------
Contributed surplus
Six months ended
February 28,
----------------------------
2010 2009
------------- --------------
Balance - Beginning of the period $ 17,758 $ 5,226
Add (deduct)
Stock-based compensation costs 858 639
Reclassification of stock-based compensation
costs to share capital upon exercise of
stock awards (627) (452)
Discount on redemption of share capital 3 11,257
------------- --------------
Balance - End of the period $ 17,992 $ 16,670
------------- --------------
------------- --------------
EXFO Inc.
Unaudited Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
Three months Six months Three months Six months
ended ended ended ended
February 28, February 28, February 28, February 28,
2010 2010 2009 2009
------------- ------------- ------------- --------------
Cash flows from
operating
activities
Net earnings for
the period $ 1,154 $ 1,488 $ 2,655 $ 7,942
Add (deduct)
items not
affecting cash
Change in
discount on
short-term
investments 7 9 135 591
Stock-based
compensation
costs 469 887 325 647
Amortization 2,814 5,574 2,295 4,773
Deferred revenue 3,465 2,923 3,070 3,423
Future income
taxes 1,904 3,060 912 2,813
Change in
unrealized
foreign
exchange
(gain) loss 273 1,043 (601) (4,057)
------------- ------------- ------------- --------------
10,086 14,984 8,791 16,132
Change in non-cash
operating items
Accounts
receivable (5,127) (9,229) 4,508 (2,817)
Income taxes
and tax credits (1,866) (3,371) 352 (344)
Inventories (762) (3,113) 488 121
Prepaid expenses (10) (615) 308 (234)
Accounts payable
and accrued
liabilities 2,645 3,675 1,849 762
------------- ------------- ------------- --------------
4,966 2,331 16,296 13,620
------------- ------------- ------------- --------------
Cash flows from
investing
activities
Additions to
short-term
investments (101,643) (180,597) (133,364) (255,464)
Proceeds from
disposal and
maturity of
short-term
investments 104,926 186,262 149,501 276,106
Additions
to capital
assets(1) (1,464) (2,809) (2,946) (4,460)
------------- ------------- ------------- --------------
1,819 2,856 13,191 16,182
------------- ------------- ------------- --------------
Cash flows from
financing
activities
Exercise of stock
options 127 127 5 31
Redemption of
share capital - (14) (25,631) (26,078)
------------- ------------- ------------- --------------
127 113 (25,626) (26,047)
------------- ------------- ------------- --------------
Effect of foreign
exchange rate
changes on cash (135) (32) (72) (439)
------------- ------------- ------------- --------------
Change in cash 6,777 5,268 3,789 3,316
Cash - Beginning
of period 9,102 10,611 5,441 5,914
------------- ------------- ------------- --------------
Cash - End of
period $ 15,879 $ 15,879 $ 9,230 $ 9,230
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
(1) As at February 28, 2009 and 2010, unpaid purchases of capital assets
amounted to $614 and $67, respectively.
SOURCE EXFO INC.