EXFO reports third quarter results for fiscal 2020

EXFO Inc., the communications industry’s test, monitoring and analytics experts, reported today financial results for the third quarter ended May 31, 2020.

“Despite constraints and restrictive measures in many countries, EXFO navigated through the coronavirus pandemic with a solid financial performance in the third quarter of 2020,” said EXFO’s CEO Philippe Morin. “We delivered encouraging sales in a difficult environment and proactively implemented cost-controls, while benefiting from a Canadian government wage subsidy program. The end-result was strong earnings amid end-markets that will necessarily improve as long-term drivers like fiber and 5G deployments remain intact.”

Third Quarter Highlights
Sales. Sales decreased 10.1% year-over-year to US$66.1 million in the third quarter of fiscal 2020 mainly due to the ongoing impact of the coronavirus pandemic. Test and Measurement (T&M) sales accounted for 75% of revenue in the third quarter of 2020, while Service Assurance, Systems and Services (SASS) sales represented 25%. Revenue distribution among the three main selling regions amounted to 45% in the Americas, 33% in Europe, Middle East and Africa (EMEA) and 22% in Asia-Pacific. EXFO’s top customer accounted for 9.6% of sales, while the top three totaled 18.2%.

Profitability. IFRS net earnings amounted to US$3.2 million, or US$0.06 per share, in the third quarter of fiscal 2020, while adjusted EBITDA totaled US$10.7 million, or 16.1% of sales. Net earnings included a wage subsidy of US$3.3M (US$2.4M after-tax) under the Canada emergency wage subsidy program to help qualifying businesses alleviate the effects of the coronavirus pandemic.

Quarterly Overview
Sales reached US$66.1 million in the third quarter of fiscal 2020 compared to US$73.6 million in the third quarter of 2019.

Bookings attained US$59.1 million in the third quarter of fiscal 2020 compared to US$69.6 million for the same period in 2019. The company’s book-to-bill ratio was 0.89 in the third quarter of 2020.

Gross margin before depreciation and amortization* amounted to 57.7% of sales in the third quarter of fiscal 2020 compared to 58.6% in the third quarter of 2019.

Selling and administrative expenses totaled US$18.9 million, or 28.6% of sales in the third quarter of fiscal 2020 compared to US$23.8 million, or 32.3% of sales, in the third quarter of 2019.

Net R&D expenses attained US$9.2 million, or 13.9% of sales, in the third quarter of fiscal 2020 compared to US$12.0 million, or 16.3% of sales, in the same period last year.

IFRS net earnings totaled US$3.2 million, or US$0.06 per share, in the third quarter of fiscal 2020 compared to net earnings of US$21,000, or US$0.00 per share, in the third quarter of 2019. IFRS net earnings in the third quarter of 2020 included US$1.4 million in after-tax amortization of intangible assets, US$0.5 million in stock-based compensation costs, and US$0.1 million in foreign exchange loss. Net earnings in the third quarter of 2020 also included US$2.4 million for an after-tax wage subsidy granted by the Canadian government to help qualifying businesses alleviate the effects of the coronavirus pandemic.

Adjusted EBITDA* amounted to US$10.7 million, or 16.1% of sales, in the third quarter of fiscal 2020 compared to US$7.9 million, or 10.7% of sales, in the third quarter of 2019.

During the third quarter of fiscal 2020, EXFO extended its revolving credit facilities, which had provided advances up to US$50.8 million (C$70.0 million), to US$65.3 million (C$90.0 million) until May 31, 2021, and will return to US$50.8 million (C$70.0 million) on June 1, 2021.

Conference Call and Webcast
EXFO will host a conference call today at 5 p.m. (Eastern time) to review third quarter results for fiscal 2020. To listen to the conference call and participate in the question period via telephone, dial 1-323-794-2093. Please take note the following participant passcode will be required: 8963518. Executive Chairman Germain Lamonde, CEO Philippe Morin and Pierre Plamondon, CPA, Chief Financial Officer and Vice–President of Finance, will participate in the call. An audio replay of the conference call will be available two hours after the event until 8 p.m. on July 15, 2020. The replay number is 1-719-457-0820 and the participant passcode is 8963518. 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.

-CT Bureau