Marketing with Northland Capital Markets

Marketing with Northland Capital Markets At EXFO, we make networks smarter Philippe Morin Chief Executive Officer October 19-20, 2017

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 1934. 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 net earnings, refer to the Q4 2017 press release or the Non-IFRS Measures section on EXFO s website. All amounts in millions of US dollars, except otherwise noted. 2017 EXFO Inc. All rights reserved. 2

The network test, monitoring and analytics experts. No.1 in portable optical test equipment market Largest active service assurance deployment worldwide 1600+ employees in 25 countries 2017 EXFO Inc. All rights reserved. 3

EXFO by numbers $243.3M Revenue increase of 4.6% $22.0M Adjusted EBITDA* margin of 9.1% $12.9M Cash flows from operations in FY 2017 * Adjusted EBITDA represents net earnings before interest, income taxes, depreciation and amortization, stock-based compensation costs, restructuring charges, change in fair value of cash contingent consideration and foreign exchange loss. 2017 EXFO Inc. All rights reserved. 4

Fiber Customer investments Communications service providers (CSPs) deploying fiber everywhere and upgrading transmission rates to 100G to handle ongoing bandwidth explosion EXFO positioning Market leadership in optical testing and shared lead in high-speed Ethernet testing 2017 EXFO Inc. All rights reserved. 8

Cloud Customer investments Web-scale operators building data centers in large cities and interconnecting them with fiber to improve service quality Web-scale operators also deploying fiber inside data centers to add capacity and reliability EXFO positioning Market leadership in optical testing and shared lead in high-speed Ethernet testing Real-time performance assurance of Ethernet services 2017 EXFO Inc. All rights reserved. 9

Network virtualization Customer investments CSPs virtualizing network functions to accelerate introduction of new services and reduce operating costs EXFO positioning Technology leadership in active monitoring and real-time analytics, combined with automated network topology discovery, for virtual and hybrid networks 2017 EXFO Inc. All rights reserved. 10

5G Customer investments CSPs rolling out fiber and small cells to prepare for stringent capacity, latency and reliability requirements of next-generation mobility networks EXFO positioning Lab-to-field testing and real-time monitoring/analytics supported by 30+ years of telecom expertise 2017 EXFO Inc. All rights reserved. 11

Game-changers Subscriber Network Service Test automation Automated test routines to improve network reliability and efficiency. Data mined in the cloud. Real-time 3D analytics Real-time visibility of all three dimensions: network, service and subscriber. 2017 EXFO Inc. All rights reserved. 13

EXFO markets PHYSICAL (Optical and copper) PROTOCOL (T&D, SA, analytics, wireless) TOTAL Market size $600M $2.0B $2.6B EXFO sales FY 2017 $161.9M $81.9M $243.8M* Growth rate FY 2017 6.6% -1.7% 4.6% Gross margin profile 55-60% 70-75% 60-65% Major competitors Viavi, Anritsu Viavi, NetScout * Excludes losses on FX contracts 2017 EXFO Inc. All rights reserved. 14

Q4 2017 financial results Revenue Bookings IFRS net earnings Adjusted EBITDA* $63.0M $66.3M $0.8M $8.5M Adjusted EBITDA margin of 13.6% * Adjusted EBITDA represents net earnings before interest, income taxes, depreciation and amortization, stockbased compensation costs, restructuring charges, change in fair value of cash contingent consideration and foreign exchange loss. 2017 EXFO Inc. All rights reserved. 15

Astellia transaction Global leader in performance analysis of mobile networks and subscriber experience EXFO acquired 33.1% stake in Astellia and intends to purchase remaining equity via public tender offer If transaction is successful, it would provide EXFO with scale and differentiation in SA and analytics market Astellia reported sales of 48.9 M euros and net loss of 0.7 M euros in 2016 2017 EXFO Inc. All rights reserved. 16

Yenista Optics acquisition Supplier of high-end optical test equipment for the lab and manufacturing markets Optical spectrum analyzers, tunable lasers and filters, passive optical component test system Revenue of US$5.8 M in 2016 and profitable All-cash deal for US$9.7 M, net of cash acquired, closed in early October 2017 EXFO Inc. All rights reserved. 17

Why invest? 1.Well positioned for growth drivers Fiber Cloud Network virtualization 5G 2.Generating healthy profitability Reported adjusted EBITDA * of $22.0 M in FY 2017 Targeting adjusted EBITDA of $26 M in FY 2018 3.Solid balance sheet Cash position of $39.2 M No debt 4.Strong leadership team One-two tandem of Executive Chairman Germain Lamonde and CEO Philippe Morin Stable and experienced Deep telecom knowledge * Adjusted EBITDA represents net earnings before interest, income taxes, depreciation and amortization, stock-based compensation costs, restructuring charges, change in cash contingent consideration and foreign exchange loss. 2017 EXFO Inc. All rights reserved. 18