• Sales reached US$63.4 million in the first quarter of fiscal 2018, ended November 30, 2017, compared to US$61.8 million in the first quarter of 2017 and US$63.0 million in the fourth quarter of 2017.
• Exfo forecasts sales between US$59.0 million and US$64.0 million for the second quarter of fiscal 2018,

 
# First Quarter Financial Summary :

• Sales total US$63.4 million
• Bookings attain US$65.9 million
• Gross margin improves to 63.3% of sales
• Adjusted EBITDA reaches US$6.1 million, 9.6% of sales

 
Bookings attained US$65.9 million in the first quarter of fiscal 2018 compared to US$65.9 million in the same period last year and US$66.3 million in the fourth quarter of 2017.

Gross margin before depreciation and amortization* amounted to 63.3% of sales in the first quarter of fiscal 2018 compared to 63.1% in the first quarter of 2017 and 61.9% in the fourth quarter of 2017.

IFRS net earnings in the first quarter of fiscal 2018 totaled US$2.7 million compared US$3.3 million, in the same period last year and US$0.8 million, in the fourth quarter of 2017. IFRS net earnings in the first quarter of 2018 included US$0.9 million in after-tax amortization of intangible assets, US$0.4 million in stock-based compensation costs, US$0.2 million for the positive change of the fair value of the cash contingent consideration related to the Ontology Systems acquisition, US$0.8 million in after-tax acquisition-related costs and a foreign exchange gain of US$1.2 million.

Adjusted EBITDA* totaled US$6.1 million, or 9.6% of sales, in the first quarter of fiscal 2018 compared to US$6.3 million, or 10.2% of sales, in the first quarter of 2017 and US$8.5 million, or 13.6% of sales, in the fourth quarter of 2017.

In the first quarter of fiscal 2018, Exfo acquired a 33.1% stake in France-based Astellia, a provider of network and subscriber intelligence for mobile network operators, for a cash consideration of US$10.3 million with the intent to purchase the remaining equity through a public tender offer that opened on December 15, 2017 and is scheduled to close on January 23, 2018. In late December, Exfo increased its investment in Astellia to 40.3% of the total shares outstanding by acquiring an additional 7.2% off-market for a cash consideration of US$2.2 million. The entirety of Astellia’s equity is valued at approximately US$30.3 million.

Exfo also closed the acquisition of Yenista Optics, a supplier of complementary optical test instruments for the lab and manufacturing markets, in the first quarter of 2018 for a total cash consideration of US$9.5 million, net of cash acquired. At the end of the first quarter of 2018, Exfo held a cash position of US$19.5 million.

Following the quarter-end, Exfo increased its credit facilities to C$70.0 million (US$54.3 million) and US$9.0 million. The new credit facilities will be used to finance the acquisition of Astellia’s remaining equity as well as working capital and general corporate purposes.

Selling and administrative expenses totaled US$23.2 million, or 36.6% of sales in the first quarter of fiscal 2018 compared to US$21.6 million, or 35.0% of sales, in the same period last year and US$20.8 million, or 33.1% of sales, in the fourth quarter of 2017. Selling and administrative expenses in the first quarter of 2018 included US$0.8 million in acquisition-related costs as well as three months’ impact of Ontology Systems expenses and two months of Yenista Optics.

Net R&D expenses totaled US$11.3 million, or 17.8% of sales, in the first quarter of fiscal 2018 compared to US$11.3 million, or 18.3% of sales, in the first quarter of 2017 and US$11.3 million, or 17.9% of sales, in the fourth quarter of 2017. Net R&D expenses in the first quarter of 2018 included three months’ impact of Ontology Systems expenses and two months of Yenista Optics.

Sales increased 2.6% year-over-year mainly due to the ongoing 100G optical investment cycle as well as the positive impact of the recent Yenista Optics and Ontology Systems acquisitions. Physical-layer sales accounted for 67% of total revenue in the first quarter of 2018, while Protocol-layer sales totaled 33%. Revenue distribution among the three main selling regions in the first quarter amounted to 53% in the Americas, 23% in Europe, Middle East and Africa (EMEA) and 24% in Asia-Pacific. Exfo’s top customer accounted for 13.8% of sales, while the top three represented 21.6%.

Profitability. Exfo generated adjusted EBITDA of US$6.1 million, or 9.6% of sales, in the first quarter of 2018 compared to US$6.3 million, or 10.2% of sales, in the first quarter of 2017. The company also delivered US$2.4 million in cash flows from operating activities in the first quarter of 2018.

Exfo forecasts sales between US$59.0 million and US$64.0 million for the second quarter of fiscal 2018, while IFRS net loss is expected to range between US$0.08 and US$0.04 per share. IFRS net loss includes US$0.02 per share in after-tax amortization of intangible assets and stock-based compensation costs, US$0.03 per share for acquisition expenses related to the Astellia transaction, US$0.03 per share to account for the effects of the new US tax reform on Exfo’s deferred US tax assets, and an anticipated foreign exchange loss of US$0.02 per share.

This guidance, which excludes financial results of the pending Astellia acquisition to be accounted by Exfo, was established by management based on existing backlog as of the date of this news release, seasonality, expected bookings for the remaining of the quarter, as well as exchange rates as of the day of this news release.
 

*Non-IFRS Measures
Exfo provides non-IFRS measures (gross margin before depreciation and amortization and adjusted EBITDA) as supplemental information regarding its operational performance. The company uses these measures for the purpose of evaluating historical and prospective financial performance, as well as its performance relative to competitors. These measures also help the company to plan and forecast for future periods as well as to make operational and strategic decisions. Exfo believes that providing this information, in addition to IFRS measures, allows investors to see the company’s results through the eyes of management, and to better understand its historical and future financial performance.