marketing with rbc capital markets - oct 9 2015

Marketing with RBC Capital Markets

Germain LamondeChairman, President & CEOOctober 9, 2015

2© 2015 EXFO Inc. All rights reserved.

Certain 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.

For a reconciliation of adjusted EBITDA to net earnings, refer to the Q4 2015 press release orthe “Non-IFRS Measures” section on EXFO’s website.

All amounts in millions of US dollars, except otherwise noted.

Forward-Looking Statements

Trusted partner to global operators and NEMs for improving operational efficiency, service delivery and consumer experience

EXFO in a Few Words ...

#EXFO Top-two supplier in portable telecom testing.

#EXFO Network service assurance on a massive scale.

#EXFO Analytics, visibility, and proactive CEA.

#EXFO Smart test platform strategy with EXFO Connect.

#EXFO Focused on process efficiency and compliance.


EXFO By Numbers

IN PORTABLEOPTICAL TESTING

(>38% MARKET SHARE)

LEADER

FY 2015 SALES OF $222.1 M(GLOBAL NO.2 PLAYER)

SCALE

GEOGRAPHICAL SALES FOR FY 2015

DIVERSIFIED

1500EMPLOYEES

IN 25 COUNTRIES

GLOBAL

OF TOTAL BOOKINGSIN FY 2015

WIRELESS

30%

CASH RETURNED TO SHAREHOLDERS VIA SHARE

REPURCHASE PLANS

SHAREHOLDER VALUE


Lengthy Troubleshooting to Network Visualization and Predictive Analytics

Fixed to Mobile Networks

Hardware to Virtualized Architectures


Major Shifts in Network Operator Spending


Growth StrategyTop-line driven: Bolster sales and gross margin

INCREASEWireless presence. Bookings to wireless customers reached 30-32% of total bookings in FY 2015.

EVOLVEInto a solutions supplier. Customers are seeking end-to-end solutions to manage their networks.

ACCELERATEProfitability. Combining revenue growth with a tight control on costs.

EXPANDShare of wallet with tier-1 network operators. Top-15 operators account for ~60% of total spending.


Transformation into Solutions SupplierEnabling Network Operators to Cope with Real-World Challenges

• Seven-plus years with Brix Networks (SA solution)

• Launched EXFO Xtract, a real-time analytics platform in 2015

• EXFO Connect represents unique advantage

• Important wins in 2015

DEPLOY NEW REVENUE–GENERATINGSERVICES

INCREASE NETWORK CAPACITY

REDUCE OPERATING COSTS

IMPROVE QUALITY OF EXPERIENCE


Intelligent Platforms

Contextual AnalyticsEXFO Connect

Service & Network Assurance

Leveraging Key Assets


PROTOCOL(Fixed & Wireless Test, SA, Network Visibility & Analytics)

PHYSICAL(Optical & Access)

Telecom Market

TAM

SAM

Major competitors

Market growth rate

Sales ― FY 2015

Gross margin profile

$850 M$525 M

Viavi, Anritsu

0-5%

$144.1 M

55-60%

$4.1 B$2.1 B

Viavi, IXIA, Netscout

10-15%

$80.6 M

70-75%

PROTOCOL TO DRIVE REVENUE AND EARNINGS GROWTH

*Excludes losses on FX contracts.

$4.9 B$2.6 B

Single-digit

$224.7 M*

63%-65%

TOTAL


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


Protocol-Layer and Software Solutions

SERVICE ASSURANCE Probe-based systems (physical &

virtual) targeted at medium to large network operators

Comprehensive E2E solutions enabling active testing, passive monitoring and infrastructure polling to validate and assure service-level agreements

Monitoring multi-play services with a single platform is key differentiator

NETWORK VISIBILITY & ANALYTICS

Leveraging data from a multitude of sources (field instruments, test probes and network elements) with analytics software to deliver end-to-end network & service visibility

Open analytics platform enables network operators to accelerate deployment of new services, while assuring end-user experience

FIXED AND WIRELESS TEST Multi-service 10M to 100G analyzers

for Ethernet, OTN and SONET/SDH LTE and 3G protocol analyzers for

deployment and troubleshooting applications

Network simulators: High-capacity emulation of IMS, WebRTC subscriber sessions to test routers, gateways and session border controllers

NFV-App


Highlights

1 Adjusted EBITDA represents net earnings before interest, income taxes, depreciation and amortization, restructuringcharges, stock-based compensation costs and foreign exchange gain or loss.

2 Constant currency data is a non-IFRS measure.3 Gross margin before depreciation and amortization is a non-IFRS measure and represents sales less cost of sales,

excluding depreciation and amortization.

Q4 2015

• Sales totaled $56.6 M

• Bookings attained $54.9 M(book-to-bill ratio of 0.97)

• IFRS net earnings totaled $2.3 M

• Adjusted EBITDA1 reached $5.0 M

• Restructuring to deliver annual costsavings of $3.5 M

• Announced Philippe Morin will joinEXFO in new role as COO

FY 2015

• Sales totaled $222.1 M, stable on a constant currency basis 2

• Bookings attained $223.1 M (book-to-bill ratio of 1.00)

• Gross margin3 amounted to 61.7%

• OPEX decreased by $6.7 M YoY

• IFRS net earnings totaled $5.3 M

• Adjusted EBITDA1 reached $13.8 M


Annual Financial Results1

(in US$ millions, except gross margin)

1 All financial results from continuing operations, except net earnings/loss and adjusted EBITDA.2 Gross margin before depreciation and amortization is a non-IFRS financial measure and represents sales less cost of sales, excluding depreciation and amortization.3 Adjusted EBITDA represents net earnings (loss) before interest, income taxes, depreciation and amortization, restructuring charges, stock-based compensation costs,

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 Margin2 Net R&D Expenses Adjusted EBITDA3

Net Earnings/LossSG&A Expenses


Strong Value PropositionWhy Invest?

1. History of market-share gainsCaptured market share in growth and downward markets

2. Well positioned for key growth drivers3G, 4G/LTE, wireless backhaul, small cells, DAS, RRH, FTTx, 100G

3. Balancing sales growth and profitabilityTargeting Adj. EBITDA of $20 M at a revenue level of about $230 M for FY 2016

4. Solid balance sheet Cash position of $27.4 M and no debt — as at Aug. 31, 2015

5. Experienced and disciplined management teamAveraging >15 years of experience 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.

marketing with rbc capital markets - oct 9 2015

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