Marketing with NB FinancialGermain LamondeChairman, President & CEOJanuary 10, 2013
Forward-Looking StatementsCertain statements in this presentation, or given in response to your questions, may constitutef...
EXFO at a GlanceWho We Are                         What We’ve Done                    Where We’re Going› No.2 supplier in ...
Segmented Sales — FY 2012                                               Americas                                          ...
Bandwidth Demand                                           Global IP traffic                                        Up 4X ...
US Carrier CAPEX                        Capital Intensity20.0%18.0%                                          15.6%        ...
Growth StrategyIncrease Wireless         Enable Operators      Expand Share of               Accelerate    Presence       ...
Riding the Right Waves                                  Market-Driven Innovation                                    › Wire...
Revenue Mix/Gross Margin Evolution   FY 2006          |    FY 2012                                     Gross Margin       ...
Telecom Market                                                                                                 PROTOCOL   ...
Telecom Market                                                                                                 PROTOCOL   ...
Physical-Layer Business       PORTABLE OPTICAL                      COPPER ACCESS› Market leader with >35% market     › Ne...
Protocol-Layer BusinessTRANSPORT AND DATACOM                               WIRELESS                         SERVICE ASSURA...
Protocol-Layer BusinessTRANSPORT AND DATACOM                               WIRELESS                         SERVICE ASSURA...
Key Differentiator     PUTTING INTELLIGENCE INTO OUR PLATFORMS!                                          © 2013 EXFO Inc. ...
FTB Ecosystem                                Asset management software                                › Test data pushed a...
FTB Ecosystem + EXFO Connect + EXFO Apps Store                                                                            ...
Financial Snapshot                  $300                                                                                  ...
We plan on increasing our sales volume to better absorb the cost ofbeing a global player, thus leveraging  economies of sc...
Annual Run-Rate of $350-$400M        WITHIN      3-4 YEARSGenerates EBITDA  Margin of 15%                  © 2013 EXFO Inc...
1            Annual Financial Results              (in US$ millions, except gross margin)                           Sales ...
Q1 2013 Highlights› Sales reached› Bookings attained $XX.X M, (B/B ratio of 1.0X)› Gross margin* improved to XX.X%› Adjust...
Strong Value Proposition       5 Good Reasons to Invest in EXFO1. Excellent track record of sales growth            Sales ...
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EXFO Mrk NB Financial - Jan 2013

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EXFO Marketing with NB Financial - January 2013 - Germain Lamonde

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EXFO Mrk NB Financial - Jan 2013

  1. 1. Marketing with NB FinancialGermain LamondeChairman, President & CEOJanuary 10, 2013
  2. 2. Forward-Looking StatementsCertain statements in this presentation, or given in response to your questions, may constituteforward-looking statements within the meaning of the Securities Act of 1934. The PrivateSecurities Litigation Reform Act of 1995 provides “safe-harbors” for such forward-lookingstatements and we intend that any forward-looking statements made today be subject to thesafe harbors. We caution you that any forward-looking statements are just predictions. Theyare not guarantees of future performance and involve risks and uncertainties. Actual resultsmay differ materially from those projected in forward-looking statements and we invite you toreview the company’s most recent filings with the Securities and Exchange Commission orCanadian securities commissions for a discussion of the factors at risk. These forward-lookingstatements speak only as of the date of this presentation and, unless required by law orapplicable regulations, we will not be reviewing or updating the material that is containedherein.Annual financial data in this presentation is prepared in accordance with international financialreporting standards (IFRS) and Canadian generally accepted accounting principles (GAAP).Quarterly financial data is prepared in accordance with IFRS standards. For a reconciliation ofEBITDA and adjusted EBITDA to net earnings (loss), refer to the Q1 2013 press release or“Non-IFRS Financial Measures” section on EXFO’s website. © 2013 EXFO Inc. All rights reserved.. 2
  3. 3. EXFO at a GlanceWho We Are What We’ve Done Where We’re Going› No.2 supplier in portable › Gained market share year-in › Increase wireless presence telecom testing and innovation and year-out for past 27 years › Enable network operators to leader in IP service assurance › Ten-year sales CAGR of 20% reduce operating expenses› Helping network operators and › Difficult market in FY 2012 › Expand share of wallet with equipment manufacturers › EXFO sales: -7% YoY Tier-1 operators design, deploy and monitor IP fixed and mobile networks › End-markets: Double-digit › Accelerate profitability through decreases execution © 2013 EXFO Inc. All rights reserved. 3
  4. 4. Segmented Sales — FY 2012 Americas › FY 2012 Sales: $130.6 M › Growth YoY: -4.6% › Sales Split: 52% EMEA › FY 2012 Sales: $71.0 M › Growth YoY: -16.4% › Sales Split: 29% Asia-Pacific› Protocol-layer sales increased 4.4% YoY› Physical-layer sales decreased 14.5% YoY › FY 2012 Sales: $47.3 M › Growth YoY: +1.2% › Sales Split: 19% BOTH PRODUCT GROUPS TO GROW IN FY 2013 IF END-MARKETS REMAIN STABLE © 2013 EXFO Inc. All rights reserved.. 4
  5. 5. Bandwidth Demand Global IP traffic Up 4X from 2011-2016 Mobile IP traffic Up 18X (Cisco)DESPITE STRONG FUNDAMENTAL DRIVERS, PAUSE IN CARRIER SPENDING © 2013 EXFO Inc. All rights reserved. © 2013 EXFO Inc. All rights reserved. 5 5
  6. 6. US Carrier CAPEX Capital Intensity20.0%18.0% 15.6% 14.6% 15.1%16.0% 12.7% 13.3%14.0%12.0%10.0% Source: Morgan Stanley8.0%6.0%4.0%2.0%0.0% 2010 2011 2012E 2013E 2014E AT&T Verizon Sprint T-Mobile Average 4G/LTE AND COMPETITION TO DRIVE INVESTMENTS © 2013 EXFO Inc. All rights reserved.. 6
  7. 7. Growth StrategyIncrease Wireless Enable Operators Expand Share of Accelerate Presence to Reduce OPEX Wallet with Tier-1 Profitability via Operators Execution Wireless sales to Key productivity Doing business Combining revenue continue growing differentiators, with ~80% of top-100 growth with a tight (~24% of sales FTB Ecosystem and operators worldwide control on expenses in FY 2012) EXFO Connect Growing market share for 27 consecutive years © 2013 EXFO Inc. All rights reserved.. 7
  8. 8. Riding the Right Waves Market-Driven Innovation › Wireless backhaul › 4G/LTE, 3G › FTTH, VDSL2 › 40G/100G upgrades Focus on Execution › Unmatched customer experienceINNOVATION AND EXECUTION ENABLE MARKET-SHARE GAINS © 2013 EXFO Inc. All rights reserved.. 8
  9. 9. Revenue Mix/Gross Margin Evolution FY 2006 | FY 2012 Gross Margin 70% 65%11% 60% 45% In % of sales 55% 55% 50% 89% 45%Sales: $107.4 M Sales: $250.0 M 40% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Protocol Other MOVING TOWARD HIGHER-MARGIN, PROTOCOL-LAYER SALES © 2013 EXFO Inc. All rights reserved.. 9
  10. 10. Telecom Market PROTOCOL PHYSICALTAM $700 M $3.2 BSAM $550 M $1.8 BAnnual growth rate ~5% ~15%Sales ― FY 2012 $135.1 M $113.7 MSales growth ― FY ’12/’11 -14.5% 4.4%Five-year sales CAGR 3.9% 46.1%Gross margin profile Low-60s (%) Mid-70s (%)Major competitors JDSU, Anritsu, Sunrise JDSU, IXIA, Tektronix PROTOCOL BUSINESS IS KEY GROWTH VECTOR © 2013 EXFO Inc. All rights reserved. 10
  11. 11. Telecom Market PROTOCOL PHYSICALTAM $700 M $3.2 BSAM $550 M $1.8 BAnnual growth rate ~5% ~15%Sales ― FY 2012 $135.1 M $113.7 MSales growth ― FY ’12/’11 -14.5% 4.4%Five-year sales CAGR 3.9% 46.1%Gross margin profile Low-60s (%) Mid-70s (%)Major competitors JDSU, Anritsu, Sunrise JDSU, IXIA, Tektronix PROTOCOL BUSINESS IS KEY GROWTH VECTOR © 2013 EXFO Inc. All rights reserved. 11
  12. 12. Physical-Layer Business PORTABLE OPTICAL COPPER ACCESS› Market leader with >35% market › New MaxTester series approved by share three Tier-1 NA carriers› Market dominance in FTTH testing › Supports pair bonding & vectoring (100 Mb/s) © 2013 EXFO Inc. All rights reserved. 12
  13. 13. Protocol-Layer BusinessTRANSPORT AND DATACOM WIRELESS SERVICE ASSURANCE› Multi-service analyzers for • Protocol analyzers: 4G/LTE and 3G › Probe-based systems targeted at SONET/SDH, OTN and Ethernet test solutions for deploying and medium to large network operators troubleshooting applications rates from 10M to 100G › Primary focus on active testing to • Network simulators: Large-scale› Pioneered new standard for Ethernet emulation of subscriber sessions to validate service-level agreements testing (EtherSam) test routers, gateways and session › Monitoring multi-play services on› Comprehensive portfolio for wireless border controllers a single platform is key differentiator backhaul • Stratgic partnership with Artiiza Networks for eNode B wraparound testing (air interface to EPC) © 2013 EXFO Inc. All rights reserved. 13
  14. 14. Protocol-Layer BusinessTRANSPORT AND DATACOM WIRELESS SERVICE ASSURANCE› Multi-service analyzers for • Protocol analyzers: 4G/LTE and 3G › Probe-based systems targeted at SONET/SDH, OTN and Ethernet test solutions for deploying and medium to large network operators troubleshooting applications rates from 10M to 100G › Primary focus on active testing to • Network simulators: Large-scale› Pioneered new standard for Ethernet emulation of subscriber sessions to validate service-level agreements testing (EtherSam) test routers, gateways and session › Monitoring multi-play services on› Comprehensive portfolio for wireless border controllers a single platform is key differentiator backhaul • Stratgic partnership with Artiiza Networks for eNode B wraparound testing (air interface to EPC) © 2013 EXFO Inc. All rights reserved. 14
  15. 15. Key Differentiator PUTTING INTELLIGENCE INTO OUR PLATFORMS! © 2013 EXFO Inc. All rights reserved. 15
  16. 16. FTB Ecosystem Asset management software › Test data pushed and stored in the Cloud › Units traced via GPS › Customized test reports Applications that make life easier › Software releases and upgrades › Utilities for full operability › How-to videos FTB-1, FTB-200 & FTB-500 › ~40,000 smart platforms › Windows architecture › Multiple connectivity (3G, Wi-Fi, Bluetooth) REDUCES CARRIER OPEX © 2013 EXFO Inc. All rights reserved.. 16
  17. 17. FTB Ecosystem + EXFO Connect + EXFO Apps Store › EXFO Apps Store › Test Equipment Manager Test Data Manager Contains: S/W releases & › GPS/Route Optimization updates, new applications, training › Work Ticket Management material, productivity tools, etc › License sharing or rental › Training Management › Etc (from EXFO or 3rd parties)FTB Ecosystem Download applications and(20+ optical, transport, datacom configurations onto platform Automatically and copper acces test modules) close job ticket › Notification Corporate › Billing OSS › Signature Search and Pass › Next work request custom results order configuration › Etc. Automatically upload test results REDUCES Op/Ex for Operators & Load configuration and immediately start testing NEMs › Established base of ~40,000 compliant platforms © 2013 EXFO Inc. All rights reserved.. 17
  18. 18. Financial Snapshot $300 Revenue 70.0% › $250 M (-7% YoY) $250 60.0% › Gained market share › FY’13: 6-10% growth 50.0% (estimate) Sales CAGR of 20% $200 over last 10 Years 40.0% Gross Margin › Improved to 63.3% $150 30.0% › Up 9X out of 10 years › FY’13-15: Trending up 20.0% $100 10.0% Adjusted EBITDA Margin $50 0.0% › From 3.0% to 7.3%In US$ Millions › Mid-term goal: 15% 36% 34% 21% 24% -5% 32% 33% -7% -10.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenue Gross Margin Adjusted EBITDA Margin © 2013 EXFO Inc. All rights reserved.. 18
  19. 19. We plan on increasing our sales volume to better absorb the cost ofbeing a global player, thus leveraging economies of scale. Germain Lamonde EXFO CEO © 2013 EXFO Inc. All rights reserved. 19
  20. 20. Annual Run-Rate of $350-$400M WITHIN 3-4 YEARSGenerates EBITDA Margin of 15% © 2013 EXFO Inc. All rights reserved.. 20
  21. 21. 1 Annual Financial Results (in US$ millions, except gross margin) Sales Net R&D Expenses Net Earnings/Loss2 Gross Margin SG&A Expenses Adjusted EBITDA31 All financial results from continuing operations, except net earnings/loss and adjusted EBITDA.2 Fiscal 2011 and 2012 financial results according to IFRS; prior years according to Canadian GAAP.3 EBITDA is defined as net earnings (loss) before interest, income taxes, depreciation of property, plant and equipment, amortization of intangible assets, impairment of goodwill and extraordinary gain. Adjusted EBITDA represents EBITDA excluding the change in the fair value of the cash contingent consideration and the gain from the disposal of discontinued operations. © 2013 EXFO Inc. All rights reserved.. 21
  22. 22. Q1 2013 Highlights› Sales reached› Bookings attained $XX.X M, (B/B ratio of 1.0X)› Gross margin* improved to XX.X%› Adjusted EBITDA** amounted to $X.X M (X.X% of sales)› Signed partnership with Artiza Networks to offer the industry’s highest-capacity, end-to-end 4G/LTE simulation solution› Announced contract wins at three tier-1 North American operators for MaxTester copper/DSL series› Introduced floating test licenses for FTB Ecosystem © 2013 EXFO Inc. All rights reserved.. 22
  23. 23. Strong Value Proposition 5 Good Reasons to Invest in EXFO1. Excellent track record of sales growth Sales CAGR of 20% in last 10 years2. Well-positioned for key growth drivers Bandwidth expansion and IP network convergence3. Balancing sales growth and profitability Targeting EBITDA* margin of 15% on revenue of $350 to $400 M4. Solid balance sheet Cash position of $67.1 M and negligible debt ― as at August 31, 20125. Experienced and disciplined management team Deep knowledge of managing business in growth and downward markets * EBITDA is defined as net earnings before interest, income taxes, depreciation of property, plant and equipment, and amortization of intangible assets. © 2013 EXFO Inc. All rights reserved. 23
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