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National Bank Conference

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NFB Annual Quebec Conference
At EXFO, we make network smarter
Philippe Morin
Chief Executive Officer
May 2018

Published in: Technology
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National Bank Conference

  1. 1. May 30, 2018 Philippe Morin Chief Executive Officer NBF Annual Quebec Conference At EXFO, we make networks smarter
  2. 2. © 2018 EXFO Inc. All rights reserved. 2 Forward- looking statements 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. For a reconciliation of adjusted EBITDA to IFRS net loss attributable to the parent interest, refer to the Q2 2018 press release on EXFO’s website. All amounts in millions of US dollars, except otherwise noted.
  3. 3. © 2018 EXFO Inc. All rights reserved. 3 No.1 in optical test equipment market Top 5 in communications monitoring market 2000 employees in 25+ countries The test, monitoring and analytics experts.
  4. 4. $0.9M IFRS net earnings EXFO by numbers © 2018 EXFO Inc. All rights reserved. 4 * Adjusted EBITDA represents net earnings before interest, income taxes, depreciation and amortization, stock-based compensation costs, restructuring charges, change in fair value of cash contingent consideration and foreign exchange loss. $22.0M Adjusted EBITDA* margin of 9.1% $243.3M Revenue increase of 4.6% in FY 2017 $12.9M Cash flows from operations
  5. 5. Revenue $64.7M © 2018 EXFO Inc. All rights reserved. 5 Bookings $65.6M IFRS net loss attributable to parent interest -$4.7M Adjusted EBITDA* $2.5M Cash flows from operations of $6.3M Q2 2018 results * Adjusted EBITDA represents net loss attributable to the parent interest before interest, income taxes, depreciation and amortization, stock-based compensation costs, change in fair value of cash contingent consideration, acquisition-related deferred revenue fair value adjustment, share in net loss of an associate, gain on the deemed disposal of the investment in an associate and foreign exchange gain.
  6. 6. Major customer groups © 2018 EXFO Inc. All rights reserved. 6 Webscale companies Communications service providers Equipment manufacturers
  7. 7. Bandwidth: Growing almost 3X in 5 years Connected devices 27.1 Billion (>3X world population by 2021) Broadband networks 53 Mbit/s (average speed to nearly double by 2021) Video 82% of IP traffic (from 73% in 2016) Source: Cisco VNI, June 2017 Annual IP traffic: 1.2 ZB in 2016 to 3.3 ZB in 2021 © 2018 EXFO Inc. All rights reserved. 7
  8. 8. Growth drivers © 2018 EXFO Inc. All rights reserved. 8 Fiber 5G Network virtualization Cloud
  9. 9. © 2018 EXFO Inc. All rights reserved. 9 Test instruments Built-in intelligence, automation and ease-of-use across entire optical, transport and copper test portfolio.
  10. 10. Monitoring and analytics Offering end-to-end network performance, service reliability and subscriber insights for fixed and mobile networks. © 2018 EXFO Inc. All rights reserved. 10
  11. 11. © 2018 EXFO Inc. All rights reserved. 11 EXFO markets * Excludes losses on FX contracts Market size $600M $2.0B $2.6B EXFO sales―FY 2017 $161.9M $81.9M $243.8M* Growth rate―FY 2017 6.6% -1.7% 4.6% Gross margin profile 55-60% 70-75% 60-65% Major competitors Viavi, Anritsu Viavi, NetScout PROTOCOL (T&D, SA, analytics, wireless) PHYSICAL (Optical and copper) TOTAL
  12. 12. 12 Astellia acquisition – Global leader in performance analysis of mobile networks and subscriber experience – EXFO gained full control of Astellia’s share capital in late February after successful public tender offer in France – Multi-phase integration plan with initial focus on sales completed to maximize revenues – Astellia’s total equity valued at US$32.1M What they do --Passive monitoring for 3G/4G/LTE --Virtualized monitoring solutions --Rich subscriber analytics --Strong professional services
  13. 13. Brings significant scale to EXFO within mobile service assurance market --Astellia posted IFRS revenue of US$45.7M in CY 2017, 120 customers and 400 employees Acquisition rationale 13 Complements EXFO’s service assurance offering, customers and end-markets --Creates unique platform with active and passive SA, network topology discovery and rich analytics --No overlap with EXFO’s technology portfolio, customer footprint and geographic focus Positions EXFO for upcoming 5G investment cycle --Standalone standards for 5G NR to be ratified in 2018 with commercial deployments in 2019-20 --Timing of acquisition aligned with next wave of spending by communications service providers
  14. 14. 1 Leveraging cross-selling opportunities (between $10M and $20M of additional revenue in FY 2019) 2 Combining active and passive technology platforms for comprehensive monitoring solution with big data analytics 3 Extending Astellia’s professional services offering across EXFO’s customer base © 2018 EXFO Inc. All rights reserved. 14 Deal synergies
  15. 15. Former goal (Prior to Astellia deal) Adj. EBITDA2 of $26M © 2018 EXFO Inc. All rights reserved. 15 Financial metrics1 Updated goal (Includes Astellia) Adj. EBITDA of $22M FY 2018 New goal (Includes Astellia) Adj. EBITDA of $30M 1These goals are forward-looking statements. In addition, as they exclude items that pertain to future events that are not currently estimable with a reasonable degree of accuracy, such as foreign exchange gain or loss and income taxes, no corresponding IFRS measures have been provided. 2Adjusted EBITDA represents net earnings (loss) attributable to the parent interest before interest, income taxes, depreciation and amortization, stock-based compensation costs, change in fair value of cash contingent consideration, acquisition-related deferred revenue fair value adjustment, share in net loss of an associate, gain on the deemed disposal of the investment in an associate and foreign exchange gain or loss. FY 2019
  16. 16. Why invest? 2. Strong innovation engine – History of launching disruptive solutions (iOLM, EtherSAM, SkyRAN, etc.) that provide a first-mover advantage 3. Robust cash flows – Generated $12.9 M in cash flows from operations in FY 2017 – Delivered $24.4 M in cash flows from operations in FY 2016 4. Dynamic leadership team – One-two tandem of Executive Chairman Germain Lamonde and CEO Philippe Morin – Stable and experienced – Deep telecom knowledge 1. Well positioned for growth drivers – Fiber – Cloud – Network virtualization – 5G © 2018 EXFO Inc. All rights reserved. 16

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