EXFO Reports Fiscal Q3 Growth
QUEBEC CITY -- 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, 2019.
Sales increased 1.9% to US$73.6 million in the third quarter of fiscal 2019 from US$72.2 million in the third quarter of 2018. After nine months in fiscal 2019, sales improved 8.2% year-over-year to US$216.7 million. Astellia contributed nine months to EXFO's financial results in 2019 versus four months for the same period in 2018.
Bookings decreased 4.8% to US$69.6 million for a book-to-bill ratio of 0.95 in the third quarter of fiscal 2019 from US$73.1 million for the same period of 2018. After nine months in fiscal 2019, bookings increased 10.9% year-over-year to US$226.9 million for a book-to-bill ratio of 1.05.
Gross margin before depreciation and amortization* amounted to 58.6% of sales in the third quarter of fiscal 2019 compared to 59.9% in the third quarter of 2018.
IFRS net earnings in the third quarter of fiscal 2019 totaled US$21,000, or US$0.00 per share, compared to a net loss of US$6.0 million, or US$0.11 per share, in the third quarter of 2018. IFRS net earnings in the third quarter of 2019 included US$1.7 million in after-tax amortization of intangible assets, US$0.5 million in stock-based compensation costs and a foreign exchange gain of US$0.1 million. After nine months in fiscal 2019, IFRS net loss attributable to the parent interest1 amounted to US$2.3 million compared to US$8.0 million for the same period in 2018.
Adjusted EBITDA* totaled US$7.9 million, or 10.7% of sales, in the third quarter of fiscal 2019 compared to US$2.5 million, or 3.5% of sales, in the third quarter of 2018. After nine months in fiscal 2019, adjusted EBITDA surged 74.5% year-over-year to US$19.4 million.
"I am pleased with our execution so far in fiscal 2019 with significant year-over-year increases in sales, bookings and adjusted EBITDA, including third quarter revenue above the midpoint of guidance and an adjusted EBITDA margin greater than 10% for a second consecutive quarter," said EXFO's CEO Philippe Morin. "This heightened level of consistency reflects a strong performance against our growth strategy, leveraging fiber buildouts, data center interconnects as well as 5G deployments and network virtualization, while maintaining a sound financial discipline. We are confident that we will at least achieve our adjusted EBITDA target of US$24 million for fiscal 2019."
Selling and administrative expenses reached US$23.8 million, or 32.3% of sales in the third quarter of fiscal 2019 compared to US$26.0 million, or 35.9% of sales, in the same period last year.
Net R&D expenses attained US$12.0 million, or 16.3% of sales, in the third quarter of fiscal 2019 compared to US$16.1 million, or 22.3% of sales, in the third quarter of 2018.
Growth. Sales increased 1.9% year-over-year despite a negative currency impact. The increase in sales can be attributed to heightened demand for EXFO's Test and Measurement product line, especially 100G/200G/400G optical transport solutions for communications service providers and advanced equipment for the R&D labs and factories of network equipment manufacturers. Service Assurance, Systems and Services (SASS) sales were down year-over-year mainly due to a market slowdown to evaluate how to optimally transform network architectures into virtualized 5G infrastructures.
Test and Measurement sales accounted for 74% of total revenue in the third quarter of 2019, while SASS sales totaled 26%. Revenue breakdown among the three main selling regions amounted to 51% in the Americas, 30% in Europe, Middle East and Africa (EMEA) and 19% in Asia-Pacific (APAC). EXFO's top customer accounted for 6.9% of sales, while the top three represented 16.9%.
Profitability. IFRS net earnings attained the break-even mark in the third quarter of 2019, while adjusted EBITDA reached US$7.9 million, or 10.7% of sales. After nine months in fiscal 2019, IFRS net loss amounted to US$2.3 million while adjusted EBITDA totaled US$19.4 million.
Innovation. EXFO introduced a new category of fiber testing solutions with the launch of the industry's first optical fiber multimeter (OFM) following the quarter-end. This revolutionary test instrument, branded Optical Xplorer™, greatly simplifies and accelerates the task of frontline technicians by automatically evaluating the quality of fiber links in a matter of seconds. Business Outlook
EXFO forecasts sales between US$66.0 million and US$71.0 million for the fourth quarter of fiscal 2019.
IFRS net results are expected to range between a loss of US$0.02 per share and earnings of US$0.02 per share in the fourth quarter of 2019. IFRS net results include US$0.04 per share in after-tax amortization of intangible assets and stock-based compensation costs.
EXFO (Nasdaq: EXFO; Toronto: EXF)