Jul 14, 2021 MicroCapNewsDaily

EXFO reports third quarter results for fiscal 2021

<br /> EXFO reports third quarter results for fiscal 2021<br />

PR Newswire



  • Sales reached

    US$72.6 million


  • Bookings attained

    US$87.0 million

    , book-to-bill ratio of 1.20


  • IFRS net loss totaled

    US$3.7 million


  • Adjusted EBITDA amounted to

    US$4.3 million


  • Proxy circular forthcoming on board-approved, going-private transaction

QUEBEC CITY,

July 14, 2021

/PRNewswire/ – EXFO Inc. (NASDAQ: EXFO) (TSX: EXF), the communications industry’s test, monitoring and analytics experts, reported today financial results for the third quarter ended

May 31, 2021

.

“In the third quarter of 2021, EXFO delivered sales and adjusted EBITDA consistent with expectations while strong bookings were mainly driven by a recovery from the coronavirus pandemic and a good performance in EMEA,” said EXFO’s CEO

Philippe Morin

.


Third Quarter Highlights


  • Sales

    . Sales improved 9.8% year-over-year in the third quarter of 2021 mainly due to increased spending on fiber deployments in the Americas and

    Europe

    ,

    Middle East

    and

    Africa

    (EMEA) following a period of reduced investments caused by the coronavirus pandemic in 2020. Test and Measurement (T&M) sales grew 13.9% year-over-year in the third quarter of 2021, while Service Assurance, Systems and Services (SASS) sales dropped 9.6%. Sales in the Americas and EMEA increased 18.4% and 20.6% year-over-year, respectively, while sales in the

    Asia-Pacific

    region fell 23.8%. EXFO’s top customer accounted for 5.6% of sales, while the top three represented 14.1%.


  • Profitability

    . IFRS net loss totaled

    US$3.7 million

    , or –

    US$0.07

    per share, in the third quarter of 2021, while adjusted EBITDA

    *

    amounted to

    US$4.3 million

    , or 5.9% of sales.


Selected Financial Information



(In thousands of US dollars)



Three months

ended

May 31, 2021



Three months

ended

May 31, 2020



Nine months

ended

May 31, 2021



Nine months

ended

May 31, 2020


Test and Measurement sales


$


57,295


$


50,309


$


159,045


$


143,733


Service Assurance, Systems and Services sales


14,780


16,352


53,391


52,036


Foreign exchange losses on forward exchange


contracts


(569)


(514)


(974)


(758)


Total sales


$


72,644


$


66,147


$


213,410


$


195,011


Test and Measurement bookings


$


59,671


$


46,634


$


164,584


$


153,646


Service Assurance, Systems and Services bookings


26,766


12,988


69,840


49,000


Foreign exchange losses on forward exchange


contracts


(569)


(514)


(974)


(758)


Total bookings


$


87,006


$


59,108


$


235,398


$


201,888


Book-to-bill ratio (bookings/sales)


1.20


0.89


1.10


1.04


Gross margin before depreciation and amortization

*


$


42,346


$


38,199


$


122,820


$


113,026


58.3%


57.7%


57.6%


58.0%



Other selected information:


IFRS net earnings (loss)


$


(3,682)


$


3,177


$


(2,567)


$


(5,907)


Amortization of intangible assets


$


1,774


$


1,698


$


6,310


$


5,025


Stock-based compensation costs


$


1,193


$


523


$


2,778


$


1,446


Restructuring charges


$


108


$


–


$


651


$


–


Net income tax effect of the above items


$


(307)


$


(257)


$


(1,135)


$


(760)


Foreign exchange loss


$


826


$


141


$


1,199


$


649


Adjusted EBITDA

*


$


4,288


$


10,656


$


17,644


$


13,284


Quarterly Overview


Sales increased 9.8% to

US$72.6

million in the third quarter of fiscal 2021 from

US$66.1 million

in third quarter of 2020 which had been affected by the coronavirus pandemic.

Bookings improved 47.2% to

US$87.0 million

in the third quarter of fiscal 2021 from

US$59.1 million

in the same period in 2020, driven by fiber deployment projects that had been delayed due to the pandemic and a good performance in EMEA. The company’s book-to-bill ratio was 1.20 in the third quarter of 2021. A previously announced service assurance lab evaluation with a tier-1 US network operator is ongoing, but it is taking longer than expected due to the level of transformation and functionality required.

Gross margin before depreciation and amortization* amounted to 58.3% of sales in the third quarter of fiscal 2021 compared to 57.7% in the third quarter of 2020.

Selling and administrative expenses totaled

US$25.0 million

, or 34.4% of sales in the third quarter of fiscal 2021 compared to

US$18.9 million

, or 28.6% of sales, in the third quarter of 2020.

Net R&D expenses attained

US$14.4 million

, or 19.8% of sales, in the third quarter of fiscal 2021 compared to

US$9.2 million

, or 13.9% of sales, in the same period last year.

IFRS net loss totaled

US$3.7 million

, or –

US$0.07

per share, in the third quarter of fiscal 2021 compared to net earnings of

US$3.2 million

, or

US$0.06

per share, in the third quarter of 2020. IFRS net loss in the third quarter of 2021 included

US$1.8 million

in amortization of intangible assets,

US$1.2 million

in stock-based compensation costs,

US$0.1 million

in restructuring charges,

US$0.8 million

in foreign exchange loss, and an income tax effect of the above items of

US$0.3 million

. Net loss for the third quarter of 2021 also included

US$0.4 million

for an after-tax wage subsidy by the Canadian government to help companies mitigate the impact of the coronavirus pandemic.

Adjusted EBITDA* amounted to

US$4.3 million

, or 5.9% of sales, in the third quarter of fiscal 2021 compared to

US$10.7 million

, or 16.1% of sales, in the third quarter of 2020.


Going-Private Transaction


On

June 7

, EXFO announced a going-private transaction, where Holders of Subordinate Voting Shares (other than the Excluded Shares) will receive

US$6.00

per Subordinate Voting Share in cash, representing a 62% premium to the closing price per Subordinate Voting Share on the Nasdaq Global Select Market on

June 4, 2021

, and a 63% premium to the 20-day volume-weighted average trading price for the Subordinate Voting Shares on the Nasdaq Global Select Market for the period ending on

June 4, 2021

, the last trading day prior to the date of the announcement.

“A Special Committee comprised of independent Directors, and the Board of Directors unanimously recommended that shareholders support the transaction. A proxy circular which includes full details regarding the offer will be issued and distributed to shareholders shortly,” said Claude Séguin, Chair of EXFO’s Special Committee of the Board.


Conference Call and Webcast


Given a going-private transaction has been initiated, no conference call/webcast will be held.


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 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



Three months

ended

May 31, 2021



Three months

ended

May 31, 2020



Nine months

ended

May 31, 2021



Nine months

ended

May 31,


2020


IFRS net earnings (loss) for the period



$



(3,682)


$


3,177



$



(2,567)


$


(5,907)


Add (deduct):


Depreciation and amortization



3,898


3,833



12,857


11,732


Interest and other (income) expense



396


291



(1,607)


975


Income taxes



1,549


2,691



4,333


4,389


Stock-based compensation costs



1,193


523



2,778


1,446


Restructuring charges



108


–



651


–


Foreign exchange loss



826


141



1,199


649


Adjusted EBITDA for the period



$



4,288


$


10,656



$



17,644


$


13,284


Adjusted EBITDA as a percentage of sales



5.9%


16.1%



8.3%


6.8%



EXFO Inc.



Condensed Unaudited Interim Consolidated Balance Sheets


(in thousands of US dollars)



As at



May 31,



2021



As at



August 31,



2020



Assets



Current assets


Cash


$


10,913


$


32,818


Short-term investments


1,621


919


Accounts receivable


Trade


55,753


56,291


Other


7,026


4,055


Income taxes and tax credits recoverable


6,858


4,203


Inventories


48,384


38,865


Prepaid expenses


5,934


5,631


Other assets


4,240


5,493


140,729


148,275



Tax credits recoverable


51,438


48,812



Property, plant and equipment


41,302


39,722



Right-of-use assets


8,730


10,758



Intangible assets


14,177


17,616



Goodwill


43,051


40,290



Deferred income tax assets


4,122


3,633



Other assets


1,674


1,548


$


305,223


$


310,654



Liabilities



Current liabilities


Bank loan


$


8,001


$


32,737


Accounts payable and accrued liabilities


50,902


41,348


Provisions


1,438


3,792


Income taxes payable


457


43


Deferred revenue


27,478


25,785


Other liabilities


4,126


4,032


Current portion of lease liabilities


3,130


3,249


Current portion of long-term debt


1,477


2,076


97,009


113,062



Provisions


2,900


2,782



Deferred revenue


9,071


8,858



Lease liabilities


5,573


7,334



Long-term debt


1,419


2,144



Deferred income tax liabilities


2,995


3,760



Other liabilities


161


151


119,128


138,091



Shareholders’ equity


Share capital


95,254


94,024


Contributed surplus


21,216


19,680


Retained earnings


100,066


102,633


Accumulated other comprehensive loss


(30,441)


(43,774)


186,095


172,563


$


305,223


$


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



May 31, 2021



Nine months



ended



May 31, 2021



Three months



ended



May 31, 2020



Nine months



ended



May 31, 2020



Sales


$


72,644


$


213,410


$


66,147


$


195,011


Cost of sales

(1)


30,298


90,590


27,948


81,985


Selling and administrative


24,986


69,485


18,898


67,705


Net research and development


14,373


39,120


9,168


33,483


Depreciation of property, plant and


equipment


1,346


4,159


1,291


4,158


Depreciation of lease right-of-use assets


778


2,388


844


2,549


Amortization of intangible assets


1,774


6,310


1,698


5,025


Interest and other (income) expense


396


(1,607)


291


975


Foreign exchange loss


826


1,199


141


649



Earnings (loss) before income taxes


(2,133)


1,766


5,868


(1,518)



Income taxes


1,549


4,333


2,691


4,389



Net earnings (loss) for the period


$


(3,682)


$


(2,567)


$


3,177


$


(5,907)



Basic and diluted net earnings (loss)



per share


$


(0.07)


$


(0.05)


$


0.06


$


(0.11)



Basic weighted average number of shares



outstanding (000’s)


56,031


55,906


55,678


55,573



Diluted weighted average number of



shares outstanding (000’s)


56,031


55,906


56,724


55,573


(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, 2021



Nine months



ended



May 31, 2021



Three months



ended



May 31, 2020



Nine months



ended



May 31, 2020



Net earnings (loss) for the period


$


(3,682)


$


(2,567)


$


3,177


$


(5,907)


Other comprehensive income (loss), net of


income taxes


Items that may be reclassified


subsequently to net earnings (loss)


Foreign currency translation


adjustment


7,680


12,323


(3,317)


(4,075)


Unrealized gains/losses on forward


exchange contracts


1,373


2,320


(1,052)


(1,805)


Reclassification of realized gains/losses


on forward exchange contracts


(490)


(959)


251


607


Deferred income tax effect on


gains/losses on forward exchange


contracts


(217)


(351)


206


322


Other comprehensive income (loss)


8,346


13,333


(3,912)


(4,951)



Comprehensive income (loss) for



the period


$


4,664


$


10,766


$


(735)


$


(10,858)



EXFO Inc.



Condensed Unaudited Interim Consolidated Statements of Changes in Shareholders’ Equity


(in thousands of US dollars)



Nine months ended May 31, 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


1,505


(1,505)


–


–


–


Redemption of share capital


(212)


(13)


–


–


(225)


Stock-based compensation costs


–


1,471


–


–


1,471


Net loss for the period


–


–


(5,907)


–


(5,907)


Other comprehensive loss


Foreign currency translation


adjustment


–


–


–


(4,075)


(4,075)


Changes in unrealized gains/losses


on forward exchange contracts,


net of deferred income taxes


of $322


–


–


–


(876)


(876)


Total comprehensive income for the period


(10,858)


Balance as at May 31, 2020


$


93,999


$


19,149


$


106,266


$


(56,462)


$


162,952



Nine months ended May 31, 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


1,395


(1,395)


–


–


–


Issuance of share capital


414


–


–


–


414


Share issue expenses


(14)


–


–


–


(14)


Redemption of share capital


(565)


157


–


–


(408)


Stock-based compensation costs


–


2,774


–


–


2,774


Net loss for the period


–


–


(2,567)


–


(2,567)


Other comprehensive income


Foreign currency translation


adjustment


–


–


–


12,323


12,323


Changes in unrealized gains/losses


on forward exchange contracts,


net of deferred income taxes


of $351


–


–


–


1,010


1,010


Total comprehensive income for the period


10,766


Balance as at May 31, 2021


$


95,254


$


21,216


$


100,066


$


(30,441)


$


186,095



EXFO Inc.



Condensed Unaudited Interim Consolidated Statements of Cash Flows


(in thousands of US dollars)



Three months



ended



May 31, 2021



Nine months



ended



May 31, 2021



Three months



ended



May 31, 2020



Nine months



ended



May 31, 2020



Cash flows from operating activities


Net earnings (loss) for the period


$


(3,682)


$


(2,567)


$


3,177


$


(5,907)


Add (deduct) items not affecting cash


Stock-based compensation costs


1,193


2,778


523


1,446


Depreciation and amortization


3,898


12,857


3,833


11,732


Gain on disposal of capital assets


–


(17)


–


–


Write-off of capital assets


43


53


–


216


Other income


–


(669)


–


–


Deferred revenue


(768)


(849)


(329)


(3,144)


Deferred income taxes


11


(1,608)


493


(161)


Changes in foreign exchange gain/loss


(910)


(911)


869


1,750


(215)


9,067


8,566


5,932


Changes in non-cash operating items


Accounts receivable


(2,366)


4,017


(25,485)


(6,874)


Income taxes and tax credits


(1,106)


(883)


44


(2,618)


Inventories


(4,236)


(4,917)


(2,282)


(6,233)


Prepaid expenses


(585)


543


(773)


215


Other assets


(252)


1,411


(256)


(712)


Accounts payable, accrued liabilities


and provisions


3,854


2,601


3,253


(6,020)


Other liabilities


5


(1)


53


95


(4,901)


11,838


(16,880)


(16,215)



Cash flows from investing activities


Additions to short-term investments


(1,122)


(1,627)


(1,927)


(2,074)


Disposal of short-term investments


–


978


–


1,264


Purchases of capital assets


(2,084)


(4,367)


(1,880)


(6,066)


Business combination, net of cash acquired


(1,099)


(300)


–


–


(4,305)


(5,316)


(3,807)


(6,876)



Cash flows from financing activities


Bank loan


(3,202)


(24,895)


19,934


28,304


Repayment of lease liabilities


(778)


(2,388)


(844)


(2,534)


Additions to long-term debt


274


274


–


–


Repayment of long-term debt


(487)


(1,646)


(292)


(1,607)


Redemption of share capital


–


(408)


–


(225)


(4,193)


(29,063)


18,798


23,938



Effect of foreign exchange rate changes



on cash


444


636


(167)


(295)



Change in cash during the period


(12,955)


(21,905)


(2,056)


552



Cash – Beginning of the period


23,868


32,818


19,126


16,518



Cash – End of the period


$


10,913


$


10,913


$


17,070


$


17,070

EXFO-F

Cision
View original content:

https://www.prnewswire.com/news-releases/exfo-reports-third-quarter-results-for-fiscal-2021-301334131.html

SOURCE EXFO Inc.

PR Newswire
July 14, 2021 – 1:10 PM PDT

Energy