EXFO Inc.
Q2 2015 Earnings Call Transcript

Published: 26 Mar 2015

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to EXFO’s Second Quarter Conference Call for Fiscal Year 2015. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions]. As a reminder this conference is being recorded Tuesday, March 24, 2015. At this time I wish to turn the conference over to Vance Oliver, Director of Investor Relations. Please go ahead, sir.

[Vance Oliver:]

Good afternoon, and welcome to EXFO’s second quarter conference call for fiscal 2015. With me on the line today are Germain Lamonde, EXFO’s Chairman, President and CEO; and Pierre Plamondon, Vice President of Finance and CFO. A reminder that this conference call will include certain forward-looking statements and our estimates concerning our intents, beliefs or expectations regarding future events that may affect EXFO. Please note that such comments will be affected by risks and/or uncertainties, which may cause the actual results of our company to be materially different from those expressed or implied today. For more information about EXFO I encourage you to review our Form 20-F, which is on file with the Securities and Exchange Commission. Our Annual Information Form is available with Canadian Securities Commission, as well. Please note that non-IFRS numbers may be used during this conference call. A detailed reconciliation of these non-IFRS results with our IFRS results is available in the Q2, 2015 press release on our website. All dollar amounts in this conference call are expressed in U.S. dollars unless otherwise indicated. So without further delay, I’ll turn the call over to Germain.

[Germain Lamonde:]

Well thanks Vance, and good afternoon everyone. Sales were a bit soft in the second quarter of 2015 due to a typically seasonally -- to typical seasonality for the second quarter and more challenging macroeconomic market conditions in the EMEA region. Otherwise, I’m relatively happy with the way our markets are developing in both the Americas and the APAC, so far at the midpoint of this fiscal 2015, and I remain confident with delivering bookings and revenue growth in these two regions during our fiscal 2015. A few words on currencies, we’ve all witnessed important fluctuations recently in currency exchange rates as a reflection of sudden unexpected changes in the price of oil. This led to a rapid surge in the US dollars versus the Canadian dollar and the Euros which impacted negatively to our revenues in the second quarter given that we generate certain percentage of our sales in Canadian dollars, in Euros, and in pounds as we report them in our fiscal results in US dollars. Moreover, these rapid currency fluctuations also negatively impacted revenues due to a negative impact related to our currency hedging programs. So conversely a stronger US dollar means lower operating expenses for EXFO, so it helps our profitability. But just to provide the magnitude of changes during the second quarter of 2015, the average value of the US dollar increased by 10% year on year versus the Canadian dollar so going from a $1.20 to a $1.09 and 14% against the Euro 0.85 versus 0.73, so we estimate a surge in US dollar had a negative impact on our year on year sales of about $2 million in the second quarter and about $3 million in the first half of 2015. So, despite the recent market conditions in India and the impact of currencies on revenues, sales during the last quarter were $51 million and $107.7 million so far in the first half of 2015 so therefore very much stable versus the same period of 2014. Now despite the stable revenues, I’m pleased we completed the first half of 2015 with our gross margin increasing by 60 basis points to 62.1%, while more importantly our adjusted EBITDA has made good improvement going from 13.1 million to $4.4 million year on year. So going from $1.2 million to $4.4 million year on year. As I’ve mentioned in each of our recent quarterly announcements, significantly increasing EBITDA is of paramount importance to me and my team in this fiscal year, so at this midpoint of fiscal 2015, I remain very committed and very confident we will deliver a strong EBITDA improvement during our fiscal 2015, and that even if revenues were to remain about flattish. Putting aside financial results for a moment, I would like to say a few words about our presence earlier this month at Mobile World Congress in Barcelona, the largest gathering of seasoned executives in the mobile industry. I’m particularly pleased with the number and quality meetings we’ve hosted at Mobile World Congress and even more so with the excitement level that was generated by the many new services and systems that were introduced during this pivotal event where we more than doubled the number of executives and CTO meetings compared to 2014. This meeting of the minds allowed us to confirm that a number of strategic initiatives underway at EXFO are right on mark. So first of all, our gradual transformation into an end to end solutions supplier is precisely what network operators are looking for as they cope with real world challenges like increasing network capacity and coverage, reducing operating expenses, and ensuring quality of experience for end customers. One key theme that Mobile World Congress network executives this year made crystal clear is the need for end-to-end network analytics, and that’s exactly one of the reasons why we made two acquisitions in the last fiscal year and we're finally now starting to make an impact with this. It was therefore very timely that EXFO was showcasing Xtract, our analytics platform that leverages both data from a multitude of sources including test probes and network elements. Such a solution is vital for visualization and managing constantly expanding networks while deploying new services. Xtract provides automation of performance assessment and the accurate pinpointing of service-affecting events. Secondly, EXFO demonstrated the power of its mobile experience in the analytic solution from Aito Technologies through the release of quality of experience benchmarking platform that works in tandem with our Brix Mobile Agent, a software application that converts a regular smartphone into a real time probe. And finally, our EXFO Connect Solution continues to make the levers out of network operators who are stressing the process efficiency and process compliance to their field technicians and to contractors. So with EXFO Connect, that’s within [indiscernible] dramatically now we pushed out from the cloud into the affordable FTB test units and ensure the proper job gets done the right way the first time. Key example include turn ups and testing of FTTA or Fiber-to-the-Antenna in the wireless front haul, ethernet backhaul, services to the towers, and many other applications. So to summarize our achievement at Mobile World Congress, EXFO is now is a far more prominent supplier in the growing and lucrative network visibility and mobile analytic space. Just to provide you with the measure of our success, bookings in this segment is up by more than 20% [meeting] all the solutions, they are more than 20% so far year-on-year. Given that key product launches and go to market initiatives related to network visibility, analytics are yet to be fully reflected in our results and very confident we will increase revenues in the second half of 2015 and in turn improve adjusted EBITDA significantly. Turning to our recent completed substantial issuer bid, we repurchased $6.5 million shares at a price CAD4.60 per share for a total cost of CAD13 million or USD24 million and that’s excluding the fees and expenses related to this offering. We believe this offering created value for existing shareholders while allowing others with the differing investment criteria or shorter term investment strategies to seamlessly exit the stock. We're also of the opinion that the very oversubscribed offering was made at the right size and right conditions and represents a good use of cash. Following this tender process and with the $5.3 million in cash flow from operations we generated in the second quarter of 2015, our balance sheet now stands still and still remains very solid with the short term cash position of $32.9 million at the end of the second quarter, and we still have a [indiscernible]. Looking at financial outlook 2015, before we talk specifically about our third quarter guidance I'd love to say a few words on our outlook. While our 2014 revenues were stronger than our second half with the split of 46.5% versus 53.5% for H1 and H2 in 2014 I also do expect our revenues to be stronger in our second half of 2015. Overall I would expect our 2015 revenues to be about flattish year-on-year and I remain confident we’re going to have a stronger second half there is a number of reasons including of course a strong [follow] for mid to larger size deals in which EXFO is involved which will turn either in Q3 or Q4 and sometimes it hard to break the exact date of such large deals. Some small traction also from several products and solutions we have introduced in the last quarters and that are now like very well received by customers and we have managed so far our cost very tightly during the last quarter and we clearly intended to be doing so with even more cost reduction in the quarters to come as driving basically higher profitability it's critical to us. And as mentioned earlier we believe we really deliver a significant earning [EBITDA] improvement even if revenues were to be about flat. So at this stage, let's now turning to our financial outlook for the third quarter of fiscal 2015. We're forecasting sales to stand between $56 million to $61 million for the reporting period extending from March 1st to May 31, 2015 and looking at the bottom line IFRS results are expected to range between a net loss of $0.01 per share and an earnings of $0.03 per share for the third quarter of 2015. IFRS net results include $0.01 per share and after-tax amortization of intangible assets and stock based compensation. Amortization expenses will be down considerably in Q3 2015 compared to previous quarters since intangible assets relative to the acquisition of [net half] are now probably amortized. So at this point I will turn the call over to Pierre to discuss our financial results in more details.

[Pierre Plamondon:]

Thank you Germain. Good afternoon everybody. Sale of 51 million in the second quarter of 2015 were stable compared to 51.2 million in the second quarter of 2014 while decreased 10.1% from 56.7 million in the first quarter of 2015. Booking decreased 6.9% to 54.7 million in the second quarter of 2015 from 58.7 million in the same period last year but increased 1% from 54.2 million in the first quarter of 2015. Our booked to book-to-bill amounted to 1.07 in the second quarter 2015. As Germain mentioned, our sales and booking through results were negatively affected by U.S currency headwinds and market weakness in EMEA region in the third quarter and first half of 2015. Gross margin reached 61.7% of sale in the second quarter of 2015 compared to 60.8% in the second quarter of 2014 and 62.6% in the first quarter of 2015. Gross margin increased year-over-year mainly due a more favorable product mix despite a higher AOF on pointers contract accountant against sales as per ageing per policy. On the sequential basis our gross margin decreased as lower sales volume cost, lower absorption of fixed cost and also due to a higher loss on FX contract. Overall our gross margin improved to 62.1% in the first half of 2015 compared to 61.5% in the same period last year. In terms of operating expenses selling and administrative expenses totaled 20.2 million, or 39.6% of sales in the second quarter of 2015 compared to 21.5 million, or 42.1% of sales, in the same period last year and 21 million, or 37.1% of sales, in the first quarter of 2015. SG&A dollar decreased year over year sequentially and year to date in the first half of 2015 mainly due to a high control on the expense and the decrease in the average value of the Canadian dollar and Euro versus the U.S dollars. Net R&D expenses reached 10.5 million, or 20.6% of sales, in the second quarter of 2015 compared to 11 million, or 21.4% of sales, in the same period last year and 11.7 million, or 20.6% of sales, in the first quarter of 2015. Likewise the year over year and sequential decrease in net R&D dollars can be mainly attributed to the drop in the average value of the Canadian dollar and the Euro versus the U.S dollar. It should be mentioned that R&D expenses for the first half of 2015 are roughly flat year over year. This is not worthy since we added cost related to acquisition of ByteSphere and Aito significantly in the second half of 2015 and we experienced a decrease in R&D tax [rate of around] of about 0.8 million due to reduce tax credit rate in Canada. IFRS net earnings in the second quarter of 2015 totaled 0.9 million, or $0.02 per diluted share, compared to a net loss of 1.3 million, or $0.02 per share, in the same period last year and net earnings of 1.5 million, or $0.02 per diluted share, in the first quarter of 2015. IFRS net earnings in the second quarter of 2015 included 1.0 million in after-tax amortization of intangible assets, 0.4 million in stock-based compensation costs and a foreign exchange gain of 3.0 million. Adjusted EBITDA amounted to 1.2 million, or 2.3% of sales, in the second quarter of 2015 compared to minus 1 million, or 2% of sales, in the second quarter of 2014 and 3.2 million, or 5.6% of sales, in the first quarter of 2015. Geographically the Americas accounted for 53% of total sales in Q2 '15, Europe, Middle East, Africa represented 25% while Asia-Pacific totaled 22%. In comparison the sales split was 45%, 32% and 23% among the three geographic regions in the second quarter of 2014. In term of customer mix, our top customer accounted for 5.6% of total sales in Q2 '15, while our top three represented 15.2%. Turning to a few key points on the balance sheet, our cash position decreased to 32.9 million at the end of Q2 '15 from $57.6 million in the previous quarter. This 24.7 million decrease is mainly due to the 24.2 million for the redemption of share capital under our substantial issuer bid, 2 million for the purchase of captive assets and 4.4 million for unrealized foreign exchange loss from our cash and short term investments denominated in Canadian dollar. These items were partially offset by 5.2 million in cash flow from operating activities in the quarter. DSO decreased to 74 days in the second quarter of 2015 from 77 days in Q1 14 while investor return slightly dropped to 2.45 during the same period. Finally following our SIB our fully diluted share count at the end of the quarter was 54.5 million, at this time I will now turn the call over to the operator for the start of the Q & A.

[Operator:]

[Operator Instructions] Our first question comes from the line of Thanos Moschopoulos with BMO Capital Markets, your line is open please proceed.

[Thanos Moschopoulos:]

Hi, good afternoon. Germain, can you elaborate a little in terms of what you're seeing in the geographies? From your commentary, it sounds like spending has now started to come back in the Americas region. Is that the right takeaway?

[Germain Lamonde:]

Thanks Thanos for your question, in fact I will say that you know I’m happy with the way we are progressing within the Americas region. We sent out this data, the end markets remain challenging but I’m glad the way in fact EXFO has been delivering within that region as of now so far this year, bookings are up, so things are going well, but the end markets remain very challenging, and I want to say that this is just like walking in the park right now, but it is encouraging. EMEA is the area that’s been the most challenging partially because of course whether we talk about Russia and the whole economy in Europe is challenging, but I don’t think this is basically unique for EXFO, and when it comes to the Asia Pacific there’s of course natural trends towards the price competitive market, but it’s a market that really requires more of our key solutions and key products we bring to the marketplace, and I’m quite positive about the outlook for this fiscal year in APAC.

[Thanos Moschopoulos:]

Great. You mentioned that your network visibility in analytics products bookings were up 20% year-over-year for those areas. Could you maybe provide some color in terms of what proportion of maybe your pipeline or of your revenue base you think those products represent going forward, or is that maybe color that you might not want to provide?

[Germain Lamonde:]

Okay, I’ll just make a little correction, basically what I said is that our solutions sales which means like systems and software and things of that nature were up by 20% year on year, I didn’t mean that it was strictly about analytics, analytics basically is a brand new area in which we’re just getting into. We’ve got a lot of excitement around the solutions we bring into it. The good news is some of our analytics will actually be sold on top of many of our current systems that we’ve sold like we have a large established base of network operators, be it mobile or fixed operators using our [indiscernible] assurance systems, they will now be able to leverage our -- utilize our analytics solutions, and so basically this is really about an impact we’ve already been feeling in the first half of this fiscal year in our bookings. It’s not yet fully reflected in our revenues, but this is something that I’m increasingly confident is going to have an impact in our business in 2015 and beyond.

[Thanos Moschopoulos:]

Okay. Maybe a couple for Pierre. It seems that the change in OpEx was predominantly driven by currency. Was headcount pretty much flat quarter on quarter?

[Pierre Plamondon:]

Yes, relatively flat quarter over quarter, that’s correct.

[Thanos Moschopoulos:]

Okay, and then what would be the level of ForEx translation, gain or loss that's embedded in your guidance for Q3?

[Pierre Plamondon:]

We assume no gain no loss as we were fixed again in at the rate of 125 which is roughly where we stand today.

[Thanos Moschopoulos:]

Okay, and just finally, what amortization expense should we look for given that some of it’s dropping off?

[Pierre Plamondon:]

On the intangible, probably you will see a decrease of about 600,000 so amortization of intangible assets will range about 400,000 to 500,000 next quarter.

[Operator:]

And our next question comes from the line of Angelica Uruena with GMP Securities, your line is open please proceed.

[Angelica Uruena:]

Hi, thanks for taking my question. I know last quarter you guys had defined what you considered as tier 1, you talked about 15 of them. Just wondering if you can give a penetration rate on those 15 tier-one operators you had identified?

[Germain Lamonde:]

Okay well basically, thanks Angelica for this question, what we define as Tier 1 operator tends to be what we call the larger telecom operators, there’s no real industry definition for what is a tier 1 operator, but we call typically the tier 1s those that are the 15 largest revenue producers in the industry meaning like the 15 largest operators from a revenue standpoint.

[Angelica Uruena:]

Yes, and so what is your penetration rate with them? So how many are you serving of those top 15?

[Germain Lamonde:]

Okay, that’s a very good question. We don’t disclose basically the numbers but we've done some level of business with all of them, now one thing I said in fact in the past is that this is an area where EXFO has been increasingly focused into because we believe this is an area where we are underrepresented. So we do a higher ratio penetration in the tier 2 and tier 3 accounts than we do in the tier 1s, so the tier 1s for us is more of a very strategically hunting ground area where we're putting a little effort to expand our business and we're making good inroads in that segment with expanding into existing accounts. It's not necessarily about new accounts because it's like [indiscernible]we have sold to all of them, but it's about getting deeper market, deeper penetration of all of these 15 largest telecom operators.

[Unidentified Analyst:]

Okay, that's fair. And just in the EMEA region, are you seeing order delays or just simply a stall in operator spending?

[Germain Lamonde:]

It's order delays, it's not like that we see like deals that we lose, it's not about, but we're seeing operators to be very cautious. We're seeing operators to be very prudent. Of course, Russia is a significant piece of the overall EMEA region, this is a bit impacted, there is a number of reasons from a geopolitical standpoint that are driving to bit of slowdown in some of the, especially economy whether this is Middle East, Russia, or other regions within the whole EMEA region. But generally speaking, the global, the microeconomic is still a bit challenging in the EMEA zone. There has been a bit of delays for EMEA operators to very much embrace LTE aggressively because we have strong technology and infrastructure from a 3G point of view. So, basically that’s moving down a little bit the process. The euro is also going south which makes some of our products sold in typically or sometime in U.S dollars becoming a bit more expensive, so that means sometime we have to recognize lower revenues. When we convert euro sales to U.S. dollars, it gives us less U.S. dollars. So that's why generally speaking for us reporting in U.S. dollars, it makes the euro zone a bit more challenging right now.

[Unidentified Analyst:]

Okay, and then just on pricing pressure, if you've seen any in this first half of this year, and how do you expect pricing pressure to compare this year versus last year?

[Germain Lamonde:]

Yes, I would say, I mean there is pricing pressure we can't deny that it's basically a market where there is very few suppliers, where number one, number two were basically always in top few in the market we play, it would be wrong to say that we walk away with the orders and supplier, our basically customers are not trying to get the best possible pricing. I don’t think it's actually going worst I think it's just the nature of the business right now. I expect that to remain status quo, I don’t expect improvements but I expect further deterioration. I think it's just going to remain in an industry where you bring innovation, innovation basically can be valued you have to position your innovation very strongly. But eventually, someone is going to catch up, someone is going to bring something equivalent or although are priced but less performance and at the end of the day you have to find the best compromise with customers.

[Operator:]

Our next question comes from the line of Robert Young with Canaccord Genuity. Your line is open, please proceed.

[Robert Young:]

I was hoping to ask a few questions about the bookings. Inside Q2, I guess there is service renewals in Q2 if I have that correct. I was wondering how much of the bookings number would have been those renewals this quarter?

[Germain Lamonde:]

Good question, it's in the range of $7.4 million.

[Robert Young:]

Okay, and the bookings level of I guess $55 million relative to the guidance $56 million to $61 million, a good chunk of those bookings are service renewals, I'm a bit worried about the bridge between that bookings number to the guidance. Is there a level of bookings that you need to get in order to hit that guidance, or are you relatively confident there?

[Germain Lamonde:]

I mean we need to of course to book orders there is no questions about that. We are relatively confident about that, of course we did not want to account for too many large deals, sometimes some of the large deals we can be expect in the recent quarter. Sometimes it can be difficult to predict accurately especially now that in the last couple of years where the market is a little bit more challenging sometime, it takes a longer to get like the larger deals to get booked, but we believe this is a fair number for us in terms of mitigating the risk basically property but the ratio in the last quarter was at 1.07 I think that we stand with also I think recognizing revenues from some of these $7.4 million that we booked in the last quarter will be recognized [relatively] at basically 25% [indiscernible] over the next quarters to come and we already had a number of service renewals or agreements on at hand. So overall without giving a specific guidance or numbers, but we sit in the prior quarter we're at about 15% of recurring revenues these numbers stand about stable more or less. So I think we've done a fairly good level of confidence without banking too much on some of the large deals that might come this quarter or might come to the next quarter.

[Robert Young:]

Okay, and given this transition that you have towards a solution-centric sale and these longer duration projects that you're involved in with service assurance and some of the analytics, is there a backlog that's building up that buffers that bookings number? Is that something that we should be thinking about as well, or do you still -- maybe the question I'm asking is how long is that backlog and is there any backlog that you can share with us?

[Germain Lamonde:]

Yes, we don’t share about the backlog number. But we stated in back in fiscal year '14 that we build a fair amount of backlog with a booked to bill ratio for the whole fiscal year at 1.04. So we have a bit of a better situation in fact than normal. When looking at Q3 also one of the additional elements of keeping at the back of your mind is that Q3 is typically from the [seasonality] point of view a fairly good quarter. While this is a time where many of the operators get a new budget that’s when you start to want to spend towards key initiatives that we would be working towards sometime for three, six or nine months. So this is typically not a bad time at all basically for us.

[Robert Young:]

Okay, and I think you'd said there's was a ForEx impact on the gross margin. So I was wondering maybe Pierre, if you could give a sense of how much of an impact is on gross margin. I was wondering about hitting that range of 63% to 65% for the full year. I know you expect things to be a bit stronger but would still require higher margins to get there I think. So is there a way to normalize that gross margin for the quarter?

[Pierre Plamondon:]

We're [still need to get] 63 to 65 probably lot of more than 63 range for the year. [Indiscernible] makes our product to help us to deliver better margin and increased volume will at the last also to improve the margins. The currency in Q2 for example the [pointers] contract has reduce our sale based 600K so that has a negative impact of the gross margin in Q2 for sure. And we're expecting probably next quarter of sales within again as what we have forecast the ageing contract will probably will cut us about $1 million of reducing our sale as well. So that should give you some information to make your model.

[Robert Young:]

Okay, and then I guess two other modeling questions. Just the ranges you'd expect for SG&A and R&D, is that still same as last quarter and how should we be modeling that tax? That seems to be a hard one to forecast right now.

[Pierre Plamondon:]

For SG&A net earnings were still delivering the range that we have given. We mainly at the high side of those range however. On the tax rate it's always a good question I would say that I'm expecting the tax expenses to be between let`s say 0.5 million to 1.5 million for the quarter between the low end and the high end of the guidance. And we have [nearly about in the air] depending how it will end but that should give you an idea of how to figure out the tax rate.

[Robert Young:]

Okay, okay that's great. Thanks a lot guys. Have a good evening.

[Operator:]

And our next question comes from the line of Anthony Jin with RBC Capital Markets. Your line is open. Please proceed.

[Anthony Jin:]

Hi, thank you for taking my questions. Germain, I'm not sure if I caught it properly. Were you talking about in the end of your prepared remarks that even though you are not growing revenues significantly that EBITDA should grow significantly on additional cost cuts?

[Germain Lamonde:]

What is said is that due to cost controls and due as well to impact of currencies, while currencies are impacting our top line as we discussed earlier it's also however having a very positive impact on our profitability. So basically it's making our expenses as reported in U.S dollars all of the expenses that we are incurring in Canadian dollars, they are basically to a lower level when converted back. So basically the higher U.S dollar helps us from profitability plus internal cost controls are allowing us to remain very comfortable with be able to deliver better EBITDA for the same level of revenue. My additional comment was that while we've been basically keeping very tight controls we intend to continue to do so and continue to accelerate basically finding ways where we can deliver basically on our revenues and on market with basically the recent [month and ton of] expenses. So we're always looking for ways to keep reducing our expenses, in the last few fiscal year we've have been able to reduce OpEx internally by significant amount. And our intention is to go into that direction.

[Anthony Jin:]

Yes, I believe it was what $50 million the last couple years. Is there anything like -- can we think maybe in the low single millions additional cost cuts, not ForEx related that could come in the next year or so? Is that not unreasonable?

[Germain Lamonde:]

I'm not going to [signal into] to put a number there. But clearly this is part of our core focus is to always keep looking for ways to do more with less basically. So we are consciousness of the need for us as we are very committed to deliver EBITDA improvements not only in 2015 but also in 2016 and beyond we just don’t want to account strictly on currencies we’re happy with the fact that currencies is helping, but we’re also taking measures to keep improving our capacity to deliver better earnings and better EBITDA in the years to come.

[Unidentified Analyst:]

Okay, I'll just elaborate I guess on the revenue side of things. Can you talk about your growth strategy? I know in the past you're not expecting the markets to improve significantly, and your growth is going to come from call it the market share gains. Now to the degree that you can, can you just elaborate in terms of your actual growth strategy and comment on your progression to date and what is it that actual has in terms of strengths, specific strengths that can see EXFO winning over the competition, whether it be large or small?

[Germain Lamonde:]

Absolutely so clearly we are focused on growing the business the market conditions have been adverse in the last too long now right with there seems to have been pretty much a three year cycle going to four years that has been a very challenging cycle within our own industry right now, and it’s not just impacting EXFO this is impacting every one of our peers and frankly I think within the peers group I’m quite pleased with the performance we’re delivering despite the fact that I still don’t believe this is good enough. So we are focusing on driving the business up from the revenue standpoint, we’ve made some significant inroads in the last fiscal year, growing our business in the wireless segment, at the midpoint in this fiscal year although I’m not going to give you numbers but I remain very confident that our business this year, bookings we’ll make this year in the wireless segment will keep going up. Last year we delivered, we estimated 18% of bookings growth in the mobile environment or mobile world or wireless world which basically was quite significant that did in the same vein offset some of the decline in bookings that we experienced in the fixed industry or the non-mobile industry. I expect mobile to remain strong we have a lot of key play around basically helping operators to become more productive, we’ve got a lot of solutions in that direction and that includes our assurance, that includes our analytics, that includes our EXFO connect that are allowing to do more what we call in the industry more like inside out rather than outside in, meaning like going from central to go and deploy tests you know operate the networks with more visibility to make the best decisions faster, so that’s the sort of area in which we’re more and more being involved into. We're basically building this business to be more and more solution centric for the last several years and I can say now that I’m happy with that segment of our business doing very well, I reported earlier that bookings in our solutions environment which is like systems, service assurance you name it, is actually being growing from a bookings reported to more than 20% so far in this fiscal year. I expect the business to continue to remain strong and we have series of initiatives as well around all aspects of what we call the wireless front or the wireless deployment which is something we believe has got a lot of acceleration and requirements in the marketplace for ways we can help operators to do their job better and faster right the first time.

[Unidentified Analyst:]

Would you say that your product set is -- you're pretty happy with your product set, or do you need, do you see areas where you can build upon it or possibly engage in is some tuck-in acquisitions?

[Germain Lamonde:]

We’re always looking for tuck in acquisitions, organically right now there was a few things that we wanted to get done. I think there’s a lot of things we’ve done as of late, we’ve done two small acquisitions last year, two small tuck in acquisitions that we’re now starting to bring to the market under the proper integration that has been done now, excited about the results that this is going to generate but I’m trying to be avoiding people to believe that these new solutions will necessarily generate big revenues day one, but clearly the impact is that we’re engaging at a senior level with solutions that do not exist anywhere else in the industry so I’m quite pleased with the differentiation and the value and the benefits we bring to the party. So internally from an organics point of view we’ve launched a series of new products there’s more that are just about to be launched in the weeks to come, I feel quite strong that our organic engine is really working very nicely. We’ve had a few hiccups in 2013 that impacted 2014 results and some of our 2015 but this is all like something that’s behind us now and I’m quite pleased with the innovation engine that we’ve got going. R&D’s very productive, we’re delivering some great new results and I’m quite happy about that.

[Unidentified Analyst:]

Okay, so I want to follow-up on that. It seems like you are running up the product portfolio becoming more of a solutions player, but how much further do you have to go to really have that end-to-end solution set if you will, that really captivates the top 15 operators or even smaller operators to really call it bolster sales or give you that competitive edge over the competition?

[Germain Lamonde:]

Well I’d say that maybe, that’s a good question, I’ll consider this is not just to make sure we have few more questions asked by other [analysts], I would say that when you launch a very limited solution and you take it out of the market place like we’ve been talking about World Mobile Congress or analytics in our end to end view solution we bring to the table, we think that they’re differentiated to get very deep end to end view going from handset to hand devices or consumers to consumer if you will subscriber to subscriber but everything in between where we can actually provide very deep down segmentation, analytics analysis and troubleshooting and being able to help operators to prioritize areas of action that we need to get involve to fix the most I would say important elements from the dollars point, meaning you can fix a number of problems which ones are impacting your revenues as an operator, we're giving in that level of detail that's amazing that yes it is actually more taking operators to plan the performance of solutions like ours. Now, these solutions take time but the good news is that the level of engagements we've got now with whether this is EVP, network planning, network operation, or Chief Technology Officers and the engagement towards these solutions being deployed essentially moving a lot higher and faster I think we've got more commitment than ever. So I am optimistic, things take time but I'm quite optimistic as we’re making the right moves and getting the right audience and talking to the right people to get things moving. So thank you very much Anthony -- any additional question.

[Operator:]

Okay. And our next question comes from the line of Robin Manson-Hing with CIBC. Your line is open. Please, proceed.

[Robin Manson-Hing:]

Good evening. Germain, you talked about fiscal Q3 being a key quarter for network operators to deploy their annual budgets, and I understand you have a game plan longer term to benefit from NAV, but in the short-term, do you see an impact with carriers still trying to figure out how to increasingly virtualize certain functions within their network architecture? How are you seeing this playing out in the short-term?

[Germain Lamonde:]

Thanks Robin. This is a very good question. Of course NAV is very important part of our game plan and we've got a lot engagement with customers. We're part of the cost systems. We've been involved with the field trials with the number of operators, -- while this is important for us to drive that agenda and we're doing aggressively. We also think that this is not material impact and our revenues in our fiscal 2015. So for operators right now there is still a lot of work being done into understanding the impact and planning the deployments of NAV as technologies become more mature and more solid, today this is still like early stages into this stage. Now with that trend towards virtualization we believe we have the lot of ways in which we can be a very strong [strategic] partner for key wireless operators, and especially wireless operators. It's an area where the type of sales assurance system we provided actually extremely important and especially so in an area of NAV. Many of our technologies whether this is probes from the sale assurance active or passive probes can be virtualized, many of our tools and [abilities] can be virtualized and we've done that and proven that to a number of operators right now, we've got series of engagements with both operators and system vendors to ensure we will be benefiting from the transition, gradual transition towards NAV. Now, what's going to make us probably a bit more sticky and differentiated is our ability to mix and match in the same sort of system that the future environmental the co-existing both call that a traditional world or the virtualized world will be in co-existence and that's very critical for operators to get the kind of tools and solutions and systems to help them manage these two worlds that will be co-existing. So I think we're making a lot of good moves. It's basically keeping the right balance between how much we want to jump to NAV and do the right work for NAV was the same thing assuring we can deliver on our numbers. So I think that’s a balance always.

[Robin Manson-Hing:]

You aren't seeing any short-term impact in terms of carriers kind of delaying, because what it seems like maybe some guys are probably first innovators in terms of carrier innovation but trying to figure out what they're doing in terms of their network architecture. They are delaying it, it seems like a little bit of some spending, but you are not seeing any of that in the short-term?

[Germain Lamonde:]

I would say this is occurring, now the question, is this getting worse than it was but it's clear that NAV has been basically sort of -- many approach have taken a bit of wait stance or attitude if you will and it hasn’t entirely gone. And I'm not trying to say that everyone [now has gone and hold] and deploying either in the traditional type of the deployments or [gong ho] in deploying on NAV. NAV is in the [redundancy] stage, there are fair trials, we’re involved in some of them but it's not yet a mass deployment but network operators still have to get the networks up and running. Networks have been run increasingly hot and there is basically capacity demand. We've seen the impact with this. There is of course a question has been raised in the past and we've discussed together, the impact of spectrum acquisition which has also being having some CapEx or some investment money for some of the operators, this is true and this is being planned and many of the large operators it's being widely reported. I do not believe that the overall market for us in the Americas is becoming worse not that it's becoming also that much easier. But I'm happy to report that we are seeing some traction and I expect our fiscal year here to be [not to be balance].

[Robin Manson-Hing:]

Okay, last question I guess. Obviously a lot's going on with your primary competitor. Just that do you have any comments along in terms of competition, what you see there?

[Germain Lamonde:]

No first of all I don’t think anyone can either have fun talking about competition. I think this has been a tough market for everyone. I think this is been tough for all of our competitors. The one competitor you're referring to is going through an important transformation and that’s probably a good thing overall for the industry for the organization as well. We've learn to report that none of us are reporting very, very strong numbers. But what I'm very glad to do is that I think our organic numbers are showing pretty well in comparison and I believe that we have spent basically large amount of money towards acquisitions, but the acquisitions we've done I'm very, very pleased with them and again no offense but I just feel like we are we're going to get the return for the value of our shareholders on the investment that we’ve done like the last acquisitions we've done last fiscal year where that hasn’t happen less than $5 million for the two of them combined. We have generated the cash back into the balance sheet since we view some of that towards reprocessing shares. So we're working hard to create value for shareholders and nonetheless we've generated in fact $5.7 million of cash from operations in the last quarter alone. So still having a very strong balance sheet and I think this is hard work but this is the work to generate value for shareholders we are very committed to do that.

[Operator:]

And I'm showing no further questions at this time. Mr. Lamonde I'll turn it back to you for your closing remarks.

[Germain Lamonde:]

Okay well then since there is no additional questions I'd like to suggest a few key takeaways before we conclude this conference call today. So first of all our sales were impacted by U.S currency headwind and we witnesses in the EMEA regions in the second quarter and first half of 2015. Second number and quality meetings that we held at World Mobile Congress in Barcelona earlier this month confirm that we are really on the right track as we are involving as the process end to end solution provider, certainly our SIB offering was a good use of cash for the company while putting value for shareholders. And while we're expecting this fiscal year to remain probably about flattish from the sales point of view, we're expecting sales in the second half to be stronger and with relatively flat year on year revenues we're expecting to deliver a substantial increase to our EBITDA. So at this point that concludes our second quarter 2015 conference call and on behalf of the entire EXFO team thank you very much for joining us today.

[Operator:]

Ladies and gentlemen that does conclude the conference for today. We thank you for your participation and ask that you please disconnect your lines.