EXFO reports third quarter results for fiscal 2021

Tanya J. Montague 3 years ago
  • 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

SOURCE EXFO Inc.

Related Links

www.exfo.com

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EXFO reports third quarter results for fiscal 2021

Tanya J. Montague 3 years ago
  • 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

SOURCE EXFO Inc.

Related Links

www.exfo.com

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