EXFO Inc (NASDAQ:EXFO) Q3 2019 Earnings Conference Call Transcript

Jul 10, 2019 • 05:00 pm ET

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EXFO Inc (NASDAQ:EXFO) Q3 2019 Earnings Conference Call Transcript

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Presentation
Executive
Pierre Plamondon

family in the third quarter of 2019 and some solution carry higher margin than others. These negative effects on our gross margin were partially offset by a stronger margin from our Test and Measurement product line year-over-year.

In terms of operating expenses, selling and administrative expenses totaled $23.8 million or 32.2% of sale in the third quarter of 2019 compared to $26 million or 35.9% of sale in the same period last year. The $2.2 million decrease in SG&A expenses year-over-year mainly reflects the positive impact of our recently completed restructuring plan with some help from the currency fluctuation on expenses, as the average value of the Canadian dollar, Euro, British pound and Indian Rupee decreased year-over-year compared to the US dollar.

Net R&D expenses reached $12 million or 16.3% of sales in the third quarter of 2019 compared to $16.1 million or 22.3% of sale in the same period last year. Likewise, the $4.1 million decrease in net R&D expenses is directly related to our restructuring plan with the added benefit of the currency translation. In addition, a shift in the mix of on the projects resulted in lower expense year-over-year.

IFRS net earnings in the third quarter 2019 totaled $21,000 or $0.00 per share in comparison IFRS net loss amounted to $6 million or $0.11 per share in the third quarter of 2018. IFRS net earnings in the third quarter of 2019 included $1.7 million in after tax amortization of intangible assets, $0.5 million in stock-based compensation costs and a foreign exchange gain of $0.1 million.

Geographically, the Americas accounted for 51% of sale in Q3'19. Europe, Middle East, Africa represented 30%, while Asia-Pacific totaled 19%. In comparison, the sale split was 49%, 35% and 16% among the three geographic regions in the third quarter of 2018.

In terms of customer mix, our top customer accounted for 6.9% of total sales in Q3'19, while our Top 3 represented 16.9%.

Turning to a few key points in the balance sheet, our cash position decreased to $15. 3 million at the end of Q3'19 from $27 million in the previous quarter. This $11.7 million decrease is mainly due to $5.2 million in cash flow used by operations, $3.8 million for the reduction of a bank loan, $1.6 million for the purchase of capital assets, $0.7 million for the repayment of the long-term debt, and $0.3 million of an underlying foreign exchange loss on cash and short-term investments denominated in Canadian dollar.

At the end of Q3'19, EXFO added a net cash position of $3.9 million and available revolving credit facility up to $55.2 million.

At this stag,e I would turn the call over to the operator for the start of the Q&A. Thank you.