Marketing Day with BMO Capital Markets - Germain Lamonde
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Transcript of Marketing Day with BMO Capital Markets - Germain Lamonde
2 © 2014 EXFO Inc. All rights reserved.
Certain statements in this presentation, or given in response to your questions, may constitute forward-looking statements within the meaning of the Securities Act of 1934. The Private Securities Litigation Reform Act of 1995 provides “safe-harbors” for such forward-looking statements and we intend that any forward-looking statements made today be subject to the safe harbors. We caution you that any forward-looking statements are just predictions. They are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected in forward-looking statements and we invite you to review the company’s most recent filings with the Securities and Exchange Commission or Canadian securities commissions for a discussion of the factors at risk. These forward-looking statements speak only as of the date of this presentation and, unless required by law or applicable regulations, we will not be reviewing or updating the material that is contained herein.
Annual financial data in this presentation is prepared in accordance with international financial reporting standards (IFRS) and Canadian generally accepted accounting principles (GAAP). Quarterly financial data is prepared in accordance with IFRS. For a reconciliation of adjusted EBITDA to net earnings, refer to the Q4 2014 press release or the “Non-IFRS Measures” section on EXFO’s website.
Forward-Looking Statements
3 © 2014 EXFO Inc. All rights reserved.
EXFO at a Glance
Who We Are › No.2 supplier in portable
telecom testing and innovation leader in IP service assurance
› Enabling network operators and equipment manufacturers to design, deploy and monitor IP fixed and mobile networks
What We’ve Done › History of market-share gains
› Ten-year sales CAGR of 14.6%
› Difficult markets in recent years › Sales down 4.7% in FY’14, but
bookings up 3.0% › Adjusted EBITDA1 margin of
6.2% in FY’14
Where We’re Going › Increase wireless presence
› Expand share of wallet with Tier-1 operators
› Evolve into solutions supplier
› Accelerate profitability
1Adjusted EBITDA represents net earnings before interest, income taxes, depreciation and amortization, stock-based compensation costs and foreign exchange gain.
4 © 2014 EXFO Inc. All rights reserved. 4 © 2014 EXFO Inc. All rights reserved..
Global Organization
› No. 1 in portable optical testing
› ~1600 employees in 25 countries
Americas
› FY 2014 Sales: $121.8 M › Sales Split: 53%
EMEA
› FY 2014 Sales: $64.0 M › Sales Split: 28%
Asia-Pacific
› FY 2014 Sales: $45.0 M › Sales Split: 19%
5 © 2014 EXFO Inc. All rights reserved. 5 © 2014 EXFO Inc. All rights reserved.
Global IP traffic Up ~3X from 2013-2018
Mobile IP traffic
Up ~11X from 2013-2018 (Cisco)
Bandwidth Demand
STRONG FUNDAMENTAL DRIVERS, MARKED BY INCREASED MOBILE TRAFFIC AND VIDEO
6 © 2014 EXFO Inc. All rights reserved.
Headwinds & Tailwinds
Tailwinds
›3G, 4G/LTE deployments ›Small cells and network density initiatives (DAS, RRH)
›Mobile backhaul upgrades ›100G network rollouts ›Pair bonding and vectoring on copper links (100 Mbit/s)
Headwinds
›Uneven economic conditions ›Delays in carrier investments due to major architectural changes to networks
7 © 2014 EXFO Inc. All rights reserved.
Growth Strategy
Sales to wireless customers on the rise
(~30% of sales in FY’14)
Increase Wireless Presence
Expand Share of Wallet with Tier-1
Operators
About 20% of network operators account for 80%
of total spending
Accelerate Profitability
Combining revenue growth with a tight
control on expenses
TOP-LINE-DRIVEN: INCREASE SALES AND GROSS MARGIN
Evolve Into Solutions Supplier
End-to-end solutions deliver higher margins
8 © 2014 EXFO Inc. All rights reserved.
Telecom Market
TAM
SAM
Major competitors
Sales growth ― FY ’14/’13
Five-year sales CAGR
Market growth rate
Sales ― FY 2014
Gross margin profile
$820 M
$685 M
JDSU, Anritsu
-6.3%
5.4%
0-5%
$132.1 M
55-60%
$3.8 B
$1.8 B
JDSU, IXIA, Tektronix
-1.2%
12.6%
10-15%
$99.6 M
70-75%
PHYS
ICAL
(O
ptic
al &
Acc
ess)
PROTOCOL TO DRIVE REVENUE & EARNINGS GROWTH
PRO
TOCO
L (W
irele
ss, S
erv.
Ass
uran
ce,
Tran
spor
t & D
atac
om)
9 © 2014 EXFO Inc. All rights reserved.
Physical-Layer Solutions
COPPER ACCESS › Most advanced product portfolio for
high-speed copper links › MaxTester secured contract wins
with several tier-1 operators › Supports pair bonding & vectoring
(100 Mb/s)
PORTABLE OPTICAL › No. 1 player with >38% market share › Market dominance in OTDR testing › Key differentiator: iOLM software › Market leader in dispersion testing › Unmatched product breadth & depth
10 © 2014 EXFO Inc. All rights reserved.
Protocol-Layer Solutions
WIRELESS › Protocol analyzers: 4G/LTE and
3G test solutions for deployment and troubleshooting applications
› Network simulators: Large-scale emulation of subscriber sessions to test routers, gateways and session border controllers
SERVICE ASSURANCE › Probe-based systems targeted at
medium to large network operators › Primary focus on active testing to
validate service-level agreements › Monitoring multi-play services with
a single platform is key differentiator
TRANSPORT AND DATACOM › Multi-service analyzers for
SONET/SDH, OTN and Ethernet rates from 10M to 100G
› Comprehensive portfolio for wireless backhaul
› Pioneered new standard for Ethernet testing (EtherSam)
11 © 2014 EXFO Inc. All rights reserved.
Innovation That Makes A Difference
TravelHawk Pro FTB-88100NGE FTB-2 Pro Platform
Portable, multiservice test solution supports
transmission rates from 10M to 100G
4G/LTE troubleshooting tool selected by three of
top-5 LTE operators
Most compact platform for high-speed, multi-service field testing
ENABLING NETWORK OPERATORS TO REDUCE OPEX
12 © 2014 EXFO Inc. All rights reserved.
EXFO Connect
› Test Equipment Manager › Test Data Manager › GPS/route optimization › Work ticket management › License sharing or rental › Training management › Etc. (from EXFO or 3rd parties)
Search and request custom configuration
Download applications and configurations onto platform
Load configuration and immediately start testing
Automatically upload test results
Pass results
› Notification › Billing › Signature › Next work
order › Etc.
Automatically close job ticket
FTB Ecosystem (20+ optical, transport, datacom and copper acces test modules)
Corporate OSS
EXFO Apps Store Contains: S/W releases & updates, new applications, training material,
productivity tools, etc
REDUCES OPEX for Operators & NEMs
› Established base of ~40,000 compliant platforms
13 © 2014 EXFO Inc. All rights reserved. Revenue Adjusted EBITDA Margin
In U
S$ M
illio
ns
0%
20%
50%
10%
30%
40%
70%
60%
$50
$100
$150
$200
$250
$300
Gross Margin
Financial Snapshot
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Revenue
› $230.8 M in FY’14 › Revenue down 4.7% YoY,
but bookings up 3.0% › Challenging end-markets
Gross Margin
› 62.4% in FY’14 › Up 8X in last 10 years › Shift to higher-margin
software solutions
Adjusted EBITDA Margin
› 6.2% in FY’14 › Cost savings of $6.2 M YoY › Medium-term: 15% Pe
rcen
tage
of S
ales
36% 34% 21% 24% -6% 32% 33% -7% -3% -5%
14 © 2014 EXFO Inc. All rights reserved.
Annual Financial Results1 (in US$ millions, except gross margin)
1 All financial results from continuing operations, except net earnings/loss and adjusted EBITDA. 2 Fiscal 2011-2014 financial results according to IFRS; prior years according to Canadian GAAP. 3 Gross margin before depreciation and amortization is a non-IFRS financial measure and represents sales less cost of sales, excluding depreciation and amortization. 4 Adjusted EBITDA represents net earnings (loss) before interest, income taxes, depreciation and amortization, stock-based compensation costs, restructuring charges, changes in the fair value of the cash contingent consideration, gain from the disposal of discontinued operations and foreign exchange gain or loss.
Sales
Gross Margin3 Net R&D Expenses Adjusted EBITDA4
Net Earnings/Loss2 SG&A Expenses
15 © 2014 EXFO Inc. All rights reserved.
Financial Highlights
1 Gross margin before depreciation and amortization is a non-IFRS measure and represents sales less cost of sales, excluding depreciation and amortization.
2 Adjusted EBITDA represents net earnings before interest, income taxes, depreciation and amortization, stock-based compensation costs and foreign exchange gain or loss.
Q4 2014
• Sales totaled $59.7 M
• Bookings attained $57.3 M (book-to-bill ratio of 0.96)
• Gross margin1 amounted to 63.0%
• IFRS net earnings totaled $1.2 M
• Adjusted EBITDA2 reached $5.8 M
FY 2014
• Sales totaled $230.8 M
• Bookings attained $240.4 M (book-to-bill ratio of 1.04)
• Gross margin1 amounted to 62.4%
• Cost savings of $6.2 M YoY
• IFRS net earnings totaled $0.8 M
• Adjusted EBITDA2 reached $14.4 M
16 © 2014 EXFO Inc. All rights reserved.
Strong Value Proposition Why Invest?
1. History of market-share gains Captured market share in growth and downward markets
2. Well positioned for key growth drivers 3G, 4G/LTE, wireless backhaul, small cells, DAS, RRH, FTTx, 100G
3. Balancing sales growth and profitability Targeting adjusted EBITDA1 margin of 15% for medium term
4. Solid balance sheet Cash position of $59.8 M and no debt — as at August 31, 2014
5. Experienced and disciplined management team More than 15 years average in sales, marketing, R&D, manufacturing, finance, HR
1Adjusted EBITDA represents net earnings before interest, income taxes, depreciation and amortization, stock-based compensation costs and foreign exchange gain or loss.