Marketing with Stifel Nicolaus, April 2013, Germain Lamonde

1. Marketing with Stifel Nicolaus
Germain Lamonde
Chairman, President & CEO
April 4, 2013

2. Forward-Looking 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 1934. The Private
Securities Litigation Reform Act of 1995 provides “safe-harbors” for such forward-looking
statements and we intend that any forward-looking 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.
Annual financial data in this presentation is prepared in accordance with international financial
reporting standards (IFRS) and Canadian generally accepted accounting principles (GAAP).
Quarterly financial data is prepared in accordance with IFRS. For a reconciliation of adjusted
EBITDA to net earnings (loss), refer to the Q2 2013 press release or the “Non-IFRS Measures”
section on EXFO’s website.
© 2013 EXFO Inc. All rights reserved.. 2

3. EXFO at a Glance
Who We Are What We’ve Done Where We’re Going
› No.2 supplier in portable › Gained market share year-in › Increase wireless presence
telecom testing and innovation and year-out for past 27 years
› Enable network operators to
leader in IP service assurance › Ten-year sales CAGR of 20% reduce operating expenses
› Helping network operators and › Difficult market in FY 2012
› Expand share of wallet with
equipment manufacturers › EXFO sales: -7% YoY while Tier-1 operators
design, deploy and monitor IP double-digit market decrease
fixed and mobile networks › Restructuring: Annual savings › Accelerate profitability through
of $8.0 M and restructuring execution
costs of $2.4 M
© 2013 EXFO Inc. All rights reserved. 3

4. Global Organization
Americas
› FY 2012 Sales: $130.6 M
› Growth YoY: -4.6%
› Sales Split: 52%
EMEA
› FY 2012 Sales: $71.0 M
› Growth YoY: -16.4%
› Sales Split: 29%
Asia-Pacific
› No.1 in portable optical testing
› No.2 in portable telecom testing › FY 2012 Sales: $47.3 M
› Growth YoY: +1.2%
› Sales Split: 19%
2000 CUSTOMERS IN >100 COUNTRIES
1700 EMPLOYEES IN >25 COUNTRIES
© 2013 EXFO Inc. All rights reserved.. 4

5. Bandwidth Demand
Global IP traffic
Up 4X from 2011-2016
Mobile IP traffic
Up 13X from 2012-2017
(Cisco)
STRONG FUNDAMENTAL DRIVERS,
MARKED BY INCREASED MOBILE TRAFFIC AND VIDEO
© 2013 EXFO Inc. All rights reserved.
© 2013 EXFO Inc. All rights reserved. 5
5

6. Dynamic Carrier Market
AT&T Invests Extra $14B to Boost Broadband
China Mobile Increases CAPEX Almost 50% to $30B
DT Spends 30B Euros Over Three Years
SoftBank to Pay $20B for 70% Stake in Sprint
Sprint to Buy Rest of Clearwire for $2.2B
© 2013 EXFO Inc. All rights reserved.. 6

7. Growth Strategy
Increase Wireless Enable Operators Expand Share of Accelerate
Presence to Reduce OPEX Wallet with Tier-1 Profitability via
Operators Execution
Wireless sales to Key productivity Doing business Combining revenue
continue growing differentiators, with ~80% of top-100 growth with a tight
(~24% of sales FTB Ecosystem and operators worldwide control on expenses
in FY 2012) EXFO Connect
EXPANDING MARKET SHARE FOR 27 CONSECUTIVE YEARS
© 2013 EXFO Inc. All rights reserved.. 7

8. Riding the Right Waves
Market-Driven Innovation
› Wireless backhaul
› 4G/LTE, 3G
› DAS, RRH
› 100G upgrades
› FTTH, VDSL2
Focus on Execution
› Unmatched customer
experience
INNOVATION AND EXECUTION ENABLE MARKET-SHARE GAINS
© 2013 EXFO Inc. All rights reserved.. 8

9. Revenue Mix/Gross Margin Evolution
FY 2006 | FY 2012 Gross Margin
70%
65%
11%
60%
In % of sales
45%
55% 55%
50%
89%
45%
Sales: $107.4 M Sales: $250.0 M 40%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Protocol Other
MOVING TOWARD HIGHER-MARGIN, PROTOCOL-LAYER SALES
© 2013 EXFO Inc. All rights reserved.. 9

10. Telecom Market
PROTOCOL
(Wireless, Serv. Assurance,
PHYSICAL
Transport & Datacom)
(Optical & Access)
TAM $700 M $3.2 B
SAM $550 M $1.8 B
Annual growth rate ~5% ~15%
Sales ― FY 2012 $135.1 M $113.7 M
Sales growth ― FY ’12/’11 -14.5% 4.4%
Five-year sales CAGR 3.9% 46.1%
Gross margin profile Low-60s (%) Mid-70s (%)
Major competitors JDSU, Anritsu, Sunrise JDSU, IXIA, Tektronix
PROTOCOL TO DRIVE REVENUE & EARNINGS GROWTH
© 2013 EXFO Inc. All rights reserved. 10

11. Physical-Layer Business
PORTABLE OPTICAL COPPER ACCESS
› No. 1 player with >35% market share › Product portfolio optimized for high-
› Market dominance in OTDR testing speed copper links
› New MaxTester series secured
› Key differentiator: iOLM software contract wins with three tier-1
› Market leader in dispersion testing North American operators
› Unmatched product breadth & depth › Supports pair bonding & vectoring
(100 Mb/s)
© 2013 EXFO Inc. All rights reserved. 11

12. Protocol-Layer Business
TRANSPORT AND DATACOM WIRELESS SERVICE ASSURANCE
› Multi-service analyzers for • Protocol analyzers: 4G/LTE and 3G › Probe-based systems targeted at
SONET/SDH, OTN and Ethernet test solutions for deployment and medium to large network operators
troubleshooting applications
rates from 10M to 100G › Primary focus on active testing to
• Network simulators: Large-scale
› Comprehensive portfolio for wireless emulation of subscriber sessions to validate service-level agreements
backhaul test routers, gateways and session › Monitoring multi-play services with
› Pioneered new standard for Ethernet border controllers a single platform is key differentiator
testing (EtherSam) • Stratgic partnership with Artiza
Networks to offer highest-capacity,
end-to-end simulation solution
© 2013 EXFO Inc. All rights reserved. 12

13. Key Differentiator
PUTTING INTELLIGENCE INTO OUR PLATFORMS!
© 2013 EXFO Inc. All rights reserved. 13

14. FTB Ecosystem + EXFO Connect + EXFO Apps Store
EXFO Apps Store ›
›
Test Equipment Manager
Test Data Manager
Contains: S/W releases & updates, › GPS/Route Optimization
new applications, training material,
› Work Ticket Management
productivity tools, etc
› License sharing or rental
› Training Management
› Etc. (from EXFO or 3rd parties)
FTB Ecosystem Download applications and
(20+ optical, transport, datacom configurations onto platform Automatically
and copper acces test modules)
close job ticket › Notification
Corporate › Billing
OSS › Signature
Search and
Pass › Next work
request custom
results order
configuration
› Etc.
Automatically upload
test results REDUCES OPEX for
Load configuration and
immediately start testing Operators & NEMs
› Established base of ~40,000 compliant platforms
© 2013 EXFO Inc. All rights reserved.. 14

15. Financial Snapshot
$300 Revenue
70.0%
› $250 M (-7% YoY)
$250 60.0% › Gained market share
› FY’13: 6-10% growth
(estimate)
Sales CAGR of 20%
50.0%
$200
over last 10 Years 40.0%
Gross Margin
› Improved to 63.3%
$150 30.0%
› Up 9X out of 10 years
› FY’13-15: Trending up
20.0%
$100
10.0%
Adjusted EBITDA Margin
$50
0.0% › 7.3% in FY’12 from
In US$ Millions
13.5% in FY’11 due to
36% 34% 21% 24% -5% 32% 33% -7% lower revenue level
-10.0%
› Mid-term goal: 15%
2004 2005 2006 2007 2008 2009 2010 2011 2012
Revenue Gross Margin Adjusted EBITDA Margin
© 2013 EXFO Inc. All rights reserved.. 15

16. We plan on increasing our sales volume
to better absorb the cost of being a
global player. By leveraging economies
of scale, we’re targeting a mid-term
1
adjusted EBITDA margin of 15%.
CEO Germain Lamonde
Letter to Shareholders
1Adjusted
EBITDA represents net earnings before interest, income taxes, depreciation of property plant and equipment, amortization of intangible assets, stock-based
compensation costs and foreign exchange gain or loss.
© 2013 EXFO Inc. All rights reserved. 16

17. 1
Annual Financial Results
(in US$ millions, except gross margin)
Sales Net R&D Expenses Net Earnings/Loss2
Gross Margin SG&A Expenses Adjusted EBITDA3
1 All financial results from continuing operations, except net earnings/loss and adjusted EBITDA.
2 Fiscal 2011 and 2012 financial results according to IFRS; prior years according to Canadian GAAP.
3 Adjusted EBITDA represents net earnings (loss) before interest, income taxes, depreciation of property, plant and equipment, amortization of intangible assets, restructuring charges, stock-based
compensation costs, R&D tax credits recovery, changes in the fair value of the cash contingent consideration, impairment of goodwill, foreign exchange gain or loss and extraordinary gain.
© 2013 EXFO Inc. All rights reserved.. 17

18. Q2 2013 Highlights
› Sales reached $62.6 M
› Gross margin1 amounted to 62.2% of sales
› Adjusted EBITDA2 totaled $4.4 M
› Cash flows from operations totaled $2.1 M
› TravelHawk Pro, a troubleshooting tool for 4G/LTE networks,
selected by three of top-five LTE operators
› Launched FTB-88100NGE Power Blazer, first portable, multi-
service test solution supporting rates from 10M to 100G
1Gross margin is a non-IFRS financial measure and represents sales less cost of sales, excluding depreciation and amortization.
2Adjusted EBITDA represents net earnings before interest, income taxes, depreciation of property, plant and equipment, amortization
of intangible assets, restructuring charges, stock-based compensation costs and foreign exchange gain.
© 2013 EXFO Inc. All rights reserved.. 18

19. Strong Value Proposition
5 Good Reasons to Invest in EXFO
1. Excellent track record of sales growth
Sales CAGR of 20% in last 10 years
2. Well-positioned for key growth drivers
Bandwidth expansion and IP network convergence
3. Balancing sales growth and profitability 1
Targeting adjusted EBITDA margin of 15% on revenue of $350 to $400 M
4. Solid balance sheet
Cash position of $56.4 M and negligible debt ― as at February 28, 2013
5. Experienced and disciplined management team
Deep knowledge of managing business in growth and downward markets
1AdjustedEBITDA represents net earnings before interest, income taxes, depreciation of property plant and equipment, amortization of intangible assets, stock-based compensation
costs and foreign exchange gain or loss.
© 2013 EXFO Inc. All rights reserved. 19