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EXFO Inc EBITDA dropped on 30.3% and Revenue decreased on 7.4%

07.10.2020 • About EXFO Inc ($EXF) • By InTwits

EXFO Inc reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • EXFO Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.8%. At the same time it's a lot of higher than industry average of 5.4%.
  • CAPEX is quite volatile: 2 CADm in FY2020, 7 CADm in FY2019, 1 CADm in FY2018, 15 CADm in FY2017, 36 CADm in FY2016
  • The company has unprofitable business model: ROIC is -1.1%
  • It operates with high leverage: Net Debt/EBITDA is 1.1x while industry average is 0.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability


The company's Revenue decreased on 7.4%. Annual revenue decline showed slowdown in FY20Q4 - revenue increased slightly on 0.57%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased slightly on 1.6 pp from 6.6% to 5.0% in FY2020.

Gross Margin decreased slightly on 1.8 pp from 58.6% to 56.9% in FY2020. Gross Margin stuck to a declining trend at -1.4 pp per annum in the last 5 years. SG&A as a % of Revenue showed almost no change in FY2020.

Net Income margin decreased on 2.7 pp from -0.86% to -3.6% in FY2020.

Investments (CAPEX, working capital and M&A)


EXFO Inc's CAPEX/Revenue was 2.9% in FY2020. The company showed almost no change in CAPEX/Revenue from FY2017 to FY2020. For the last three years the average CAPEX/Revenue was 3.1%. EXFO Inc invested a big chunk of EBITDA (57.7%) to CAPEX which didn't stop revenue from falling.

Return on investment


The company operates at negative ROIC (-1.1%) and ROE (-5.5%). ROIC decreased on 3.4 pp from 2.4% to -1.1% in FY2020. ROE decreased on 4.1 pp from -1.4% to -5.5% in FY2020.

Leverage (Debt)


Debt level is 1.1x Net Debt / EBITDA and 3.6x Debt / EBITDA. Net Debt / EBITDA jumped on 1.4x from -0.3x to 1.1x in FY2020. Debt jumped on 343% while cash jumped on 98.7%.

EXFO Inc has short term refinancing risk: cash is only 86.2% of short term debt.

Financial and operational results


FY ended 31.08.2020

EXFO Inc ($EXF) key annual financial indicators

mln. $201620172018201920202020/2019
P&L
Revenue232.6243.3269.5286.9265.6-7.4%
Gross Profit145.5149.0164.5168.2151.0-10.2%
SG&A82.286.398.898.692.3-6.4%
EBITDA20.715.911.319.013.2-30.3%
Net Income8.90.9-11.9-2.5-9.5
Balance Sheet
Cash43.238.412.816.532.898.7%
Short Term Debt0.00.013.67.438.1411.0%
Long Term Debt0.00.05.93.39.5187.8%
Cash flow
Capex4.47.210.57.57.62.0%
Ratios
Revenue growth4.7%4.6%10.8%6.4%-7.4%
EBITDA growth90.5%-22.9%-28.8%67.6%-30.3%

Gross Margin62.6%61.2%61.0%58.6%56.9%-1.8%
EBITDA Margin8.9%6.5%4.2%6.6%5.0%-1.6%
SG&A, % of revenue35.3%35.5%36.7%34.4%34.8%0.4%
Net Income Margin3.8%0.3%-4.4%-0.9%-3.6%-2.7%
CAPEX, % of revenue1.9%2.9%3.9%2.6%2.9%0.3%

ROIC9.1%4.6%-2.2%2.4%-1.1%-3.4%
ROE5.0%0.5%-6.4%-1.4%-5.5%-4.1%
Net Debt/EBITDA-2.1x-2.4x0.6x-0.3x1.1x1.4x

EXFO Inc ($EXF) key quoterly financial indicators

mln. $FY20Q1FY20Q2FY20Q3FY20Q4 YoY change
P&L
Revenue74556671 6.3%-25.2%-10.1%0.6%
EBITDA7-5101 --174.6%37.0%-75.5%
Net Income-0-93-4 --273.7%15,028.6%-
Balance Sheet
Cash15191733 -16.8%-22.8%25.3%98.7%
Short Term Debt19193938 -23.1%59.8%415.3%411.0%
Long Term Debt109109 90.5%94.8%146.9%187.8%
Ratios
Gross Margin58.9%57.0%57.7%53.8% 0.6%-3.7%-0.9%-3.0%
EBITDA Margin 9.6% -9.7% 15.3% 2.0% 11.5%-19.4%5.3%-6.2%
Net Income Margin -0.1% -16.3% 4.8% -5.1% 10.7%-23.3%4.8%-4.8%

Peers in Communications


Below you can find EXFO Inc benchmarking vs. other companies in Communications industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Armada Data Corp ($ARD)-5.9%23.4%-2.3%13.7%
Vecima Networks Inc ($VCM)--34.1%9.3%8.9%13.4%
iSIGN Media Solutions Inc ($ISD)-70.9%-90.9%38.5%10.1%
Uniserve Communications Corp ($USS)-12.5%24.1%39.0%0.9%
Plaintree Systems Inc ($NPT)--18.4%11.1%52.0%-20.0%
 
Median (5 companies)2.4%12.5%9.3%38.5%10.1%
EXFO Inc ($EXF)-4.6%10.8%6.4%-7.4%


Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Vecima Networks Inc ($VCM)57.0%51.8%53.6%52.8%54.2%
Uniserve Communications Corp ($USS)50.2%48.9%44.4%36.9%34.2%
Plaintree Systems Inc ($NPT)11.5%11.6%27.6%28.4%22.2%
iSIGN Media Solutions Inc ($ISD)12.7%25.7%-84.0%19.9%20.1%
 
Median (4 companies)40.1%30.8%36.2%32.6%28.2%
EXFO Inc ($EXF)62.6%61.2%61.0%58.6%56.9%


Top companies by EBITDA margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Vecima Networks Inc ($VCM)30.3%21.6%15.6%5.9%17.0%
Plaintree Systems Inc ($NPT)-4.4%-3.8%15.7%16.3%7.3%
Armada Data Corp ($ARD)19.2%14.7%14.2%-0.1%6.3%
Uniserve Communications Corp ($USS)-8.7%2.9%-28.9%-14.9%-6.3%
iSIGN Media Solutions Inc ($ISD)-1,086.3%-2,802.8%-5,722.9%-4,580.9%-3,394.1%
 
Median (5 companies)6.8%2.9%12.8%-0.1%6.3%
EXFO Inc ($EXF)8.9%6.5%4.2%6.6%5.0%


Top companies by CAPEX/Revenue, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Uniserve Communications Corp ($USS)3.7%2.4%9.8%0.6%1.5%
Vecima Networks Inc ($VCM)4.8%2.2%2.3%22.3%1.2%
Armada Data Corp ($ARD)0.2%0.3%0.2%0.4%0.3%
Plaintree Systems Inc ($NPT)2.2%1.9%2.0%3.2%0.1%
iSIGN Media Solutions Inc ($ISD)0.0%0.0%0.0%6.0%0.0%
 
Median (5 companies)2.8%1.9%2.0%3.2%0.3%
EXFO Inc ($EXF)1.9%2.9%3.9%2.6%2.9%


Top companies by ROIC, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Armada Data Corp ($ARD)68.1%48.3%52.5%-1.0%12.5%
Plaintree Systems Inc ($NPT)-44.7%-174.1%269.1%72.4%2.7%
Vecima Networks Inc ($VCM)19.3%5.1%1.8%-3.6%0.1%
Uniserve Communications Corp ($USS)---652.3%-243.8%-155.8%
iSIGN Media Solutions Inc ($ISD)-78.9%-1,170.0%---
 
Median (5 companies)0.1%5.1%18.0%-2.3%1.4%
EXFO Inc ($EXF)9.1%4.6%-2.2%2.4%-1.1%


Top companies by Net Debt / EBITDA

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Plaintree Systems Inc ($NPT)--0.9x0.3x0.9x
Vecima Networks Inc ($VCM)-0.6x-0.1x-0.7x-3.6x-0.7x
Armada Data Corp ($ARD)0.1x-0.8x-0.9x--0.7x
 
Median (3 companies)1.6x0.7x0.1x-1.6x-0.7x
EXFO Inc ($EXF)-2.1x-2.4x0.6x-0.3x1.1x