Annual General and Special Meeting

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1 Annual General and Special Meeting Germain Lamonde Founder and Executive Chairman Philippe Morin Chief Executive Officer

2 Forwardlooking 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 The Private Securities Litigation Reform Act of 1995 provides safeharbors for such forward-looking statements and we intend that any forwardlooking 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, refer to the Q news release on EXFO s website. All amounts in millions of US dollars, except otherwise noted EXFO Inc. All rights reserved. 2

- Geographic coverage - Strategic technology - Part of SASS product group INDUSTRY

3 FY 2018: Strategic transformations - Advanced optical test for Labs & NEMS - Non-material FY 18 - Part of T&M product group - Critical mass/scale - 2x customer base - Geographic coverage - Strategic technology - Part of SASS product group INDUSTRY RELEVANCE - Optical - 5G/IoT - NFV/SDN - Systems, AI & analytics 2019 EXFO Inc. All rights reserved. 3

4 FY 2018 results $269.5M $11.9M $17.2M $14.4M Revenue increase of 10.8% IFRS net loss attributable to parent interest 1 Adjusted EBITDA 2 margin of 6.4% Down 22% Cash flows from operations Up 12% 1 Represents net loss excluding share of the net loss attributable to Astellia s minority shareholders. 2 Adjusted EBITDA is a non-ifrs measure and represents net loss attributable to the parent interest before interest, income taxes, depreciation and amortization, stock-based compensation costs, restructuring charges, acquisition-related deferred revenue fair value adjustment, change in the fair value of the cash contingent consideration, share in net loss of an associate, gain on the deemed disposal of the investment in an associate, and foreign exchange gain EXFO Inc. All rights reserved. 4

Geographic split in 2018 Americas: flat YoY Reduced spending by US service providers Consolidation among tier-1s EMEA: +36% Astellia s revenue contribution Increased copper testing and fiber

5 Geographic split in 2018 Americas: flat YoY Reduced spending by US service providers Consolidation among tier-1s EMEA: +36% Astellia s revenue contribution Increased copper testing and fiber monitoring sales APAC: +6% Market-share gains, especially fiber monitoring $269,5 $243,3 $232,6 $134,7 $135,4 $127,5 $84,7 $57,2 $62,1 $47,9 $49,5 $46,5 Americas EMEA Asia-Pacific Global 50% 32% 18% FY 2016 FY 2017 FY 2018 In millions of US$ *Excludes gains/losses on FX contracts EXFO Inc. All rights reserved. 5

6 Strategic reorganization Accelerated integration of monitoring and analytics Fast-tracking integration of Astellia, Ontology and EXFO s technologies on a common platform Delivering highly differentiated solution based on wealth of data sources and rich analytics Announced ~5% workforce reduction Consolidating R&D activities in fewer sites to increase efficiency and lower operating costs Intensifying efforts in business segments with competitive advantages Committed to strengthen profitability Annualized cost savings estimated at $10.5M, including $8.0M in FY 2019 Restructuring costs of $8.0M (mainly in Q4 18 & Q1 19) Targeting adjusted EBITDA of $24.0M * for FY 2019 *The adjusted EBITDA target for FY 2019 is a forward-looking statement. As it excludes 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 measure has been provided EXFO Inc. All rights reserved. 6

7 New reporting structure Formerly Physical - Optical test - Copper access - Fiber monitoring - Yenista (2018) Protocol - Transport & datacom test - Service assurance and analytics New T&M Test & Measurement - Optical, transport, copper access portable testing - Yenista acquisition - T&M-related software and services - From field to labs - Global Top 2 (portables) New SASS Service Assurance, Systems & Services - Fiber, RF and active monitoring - Ontology topology - Astellia passive monitoring - Big data, analytics and AI - Global Top EXFO Inc. All rights reserved. 7

analytics, wireless Includes 7-month contribution from Astellia $95,8 $83,3 $81,9 FY 2016 FY 2017 FY

8 FY 18 in former revenue breakdown $151,9 $161,9 $172,9 Physical: +7% Optical testing and monitoring, copper testing Includes 11-month contribution from Yenista Protocol: +17% Transport testing, SA, analytics, wireless Includes 7-month contribution from Astellia $95,8 $83,3 $81,9 FY 2016 FY 2017 FY 2018 Physical Protocol In millions of US$ *Excludes gains/losses on FX contracts EXFO Inc. All rights reserved. 8

9 FY 18 in new revenue breakdown $185,3 $193,9 $197,4 T&M: +2% Optical, transport, copper testing Includes 11-month contribution from Yenista Unusual hiccup in test business SASS: +43% SA, analytics, fiber monitoring, wireless Includes 7-month contribution from Astellia Annual growth of 10% excluding Astellia $71,2 $49,9 $49,9 FY 2016 FY 2017 FY 2018 T&M SASS In millions of US$ *Excludes gains/losses on FX contracts EXFO Inc. All rights reserved. 9

EXFO s playground Market 1 $3.5B T&M SASS Market size $900M $2.6B Market growth 3-5% 8-10% Growth drivers FTTx, 100/400G, small cells 5G, NFV/SDN, IoT EXFO sales 18 $197.4M 3 $71.2M 3 Sales 2 $269.

10 EXFO s playground Market 1 $3.5B T&M SASS Market size $900M $2.6B Market growth 3-5% 8-10% Growth drivers FTTx, 100/400G, small cells 5G, NFV/SDN, IoT EXFO sales 18 $197.4M 3 $71.2M 3 Sales 2 $269.5M EXFO growth 18 2% 43% 4 Key competitors Anritsu, Viavi Netscout, Viavi 1 Based on EXFO s estimates. 2 Reported sales for FY Excludes gains on FX contracts. 4 Annual growth of 10% excluding Astellia EXFO Inc. All rights reserved. 10

11 FY priorities: Profit & Cash Profitability Focused on execution FY 2019 adjusted EBITDA target of $24.0M 1 Cash flows from operations Generating strong cash flows from operations ($14.4M in 2018, up 12% YoY) Low net debt 2 of $9.3M (after Q1 2019) Available revolving credit facilities of $40.6M No meaningful acquisitions in the short-term 1 The adjusted EBITDA target for FY 2019 is a forward-looking statement. As it excludes 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 measure has been provided. 2 Net debt is a non-ifrs measure and represents bank loan and long-term debt, less cash and short-term investments EXFO Inc. All rights reserved. 11

15 Accelerating digital transformations 5G deployments Multiple use cases Enhanced mobile broadband (embb): smartphones, UHD video, AR, VR Massive machine type communications (mmtc): smart meters, IoT Ultra-reliable, low latency communications (URLLC): self-driving cars, industrial automation Stringent requirements Peak data rate: 20 Gbit/s Connection density: 1M devices/km 2 Latency: 1 ms Enabled by network slicing Multiple virtual networks sharing a common physical infrastructure 2019 EXFO Inc. All rights reserved. 15

16 Network slicing Edge cloud Core cloud UHD vbbu MEC cache UHD video slice vcore Internet vbbu vbbu vcore V2X server Telephony slice Critical IoT slice vcore vims Independent slices Transport network Each network slice will require monitoring to ensure SLAs 2019 EXFO Inc. All rights reserved. 16

17 Unique platform architecture END USERS Field operations Network operations Service operations Customer care Marketing PLATFORMS BIG DATA FRAMEWORK Artificial intelligence FIBER TROUBLESHOOTING/ MONITORING MOBILE ASSURANCE ACTIVE TOPOLOGY WIRELINE ASSURANCE EXFO Astellia Ontology EXFO Machine learning DATA SOURCES FIELD TEST DATA NETWORK AND SERVICE MONITORING THIRD-PARTY Portable instruments Third-party instruments Fiber probes Active probes Passive probes Virtual probes Network elements OSS/BSS, CRM data Inventory/ topology 2019 EXFO Inc. All rights reserved. 17

Fully virtualized monitoring and analytics solution Using NFV and cloud-based technologies Improves network performance, service agility, cost effectiveness Key multimillion dollar contract win We

18 Fully virtualized monitoring and analytics solution Using NFV and cloud-based technologies Improves network performance, service agility, cost effectiveness Key multimillion dollar contract win We decided to go with EXFO s probebased, big data analytics solution as we feel the company has the right mindset and approach to NFV. Prasath Jagathrakshakalu OSS Technical Design Authority, 3UK 2019 EXFO Inc. All rights reserved. 18

19 Beware of water buffalo, snakes and mozzies! Fiber Guardian remote units rolled out nationwide across NBN s transit network Fiber monitored 24/7 from NOC in Melbourne Drastically reduces response time and costs EXFO s fiber monitoring solution deployed Down Under 2019 EXFO Inc. All rights reserved. 19

20 Revenue $69.2M +9.2% YoY Bookings $81.2M Q results IFRS net loss $7.5M Book-to-bill ratio of 1.17 Adjusted EBITDA* $2.7M *Adjusted EBITDA is a non-ifrs measure and represents net loss before interest, income taxes, depreciation and amortization, stockbased compensation costs, restructuring charges, acquisition-related deferred revenue fair value adjustment, and foreign exchange gain EXFO Inc. All rights reserved. 20

21 Major contract win (after quarter-end) Valued at $4.9M Accelerates network transformation at tier-1 service provider Real-time active topology solution Unique software maps network resources (legacy and next-gen) with related services Delivers millions of dollars in cost savings Potential for follow-on business 2019 EXFO Inc. All rights reserved. 21

22 Q Guidance Revenue Between $70M and $75M IFRS net earnings* Between $0.05 and $0.09 per share *IFRS net earnings include net expenses of $0.06 per share in after-tax amortization of intangible assets, stock-based compensation costs, acquisition-related fair value adjustment of deferred revenue, after-tax restructuring charges, and an anticipated foreign exchange gain. IFRS net earnings also include $0.03 per share for an after-tax gain on disposal of a capital asset and $0.04 per share for a one-time deferred income tax recovery EXFO Inc. All rights reserved. 22

MARKETING WITH BMO CAPITAL MARKETS. Germain Lamonde Chairman, President & CEO January 7, 2016

MARKETING WITH BMO CAPITAL MARKETS Germain Lamonde Chairman, President & CEO January 7, 2016 FORWARD-LOOKING STATEMENTS Certain statements in this presentation, or given in response to your questions,