EXFO Reports Increases

QUEBEC -- EXFO Electro-Optical Engineering Inc. (NASDAQ: EXFO; TSX: EXF) reported today year-over-year increases in sales and net earnings for the second quarter ended February 28, 2007.

Sales increased 17.1% to US$35.2 million in the second quarter of fiscal 2007 from US$30.1 million in the second quarter of 2006 and decreased 1.0% from US$35.5 million in the first quarter of 2007. At the half-way mark of fiscal 2007, sales rose 23.9% year-over-year to US$70.8 million. Net bookings increased 28.8% to US$36.5 million for a book-to-bill ratio of 1.04 in the second quarter of fiscal 2007 from US$28.3 million in the same period last year and decreased 1.4% from US$37.0 million in the first quarter of 2007.

Gross margin improved to 57.5% of sales in the second quarter of fiscal 2007 from 55.3% in the second quarter of 2006 and 57.2% in the first quarter of 2007.

GAAP net earnings in the second quarter of fiscal 2007 increased 96.5% to US$2.7 million, or US$0.04 per diluted share, from US$1.4 million, or US$ 0.02 per diluted share, in the same period last year, but decreased 24.0% from US$3.5 million, or US$0.05 per diluted share, in the first quarter of 2007. GAAP net earnings in the second quarter of fiscal 2007 included US$0.6 million in amortization of intangible assets and US$0.2 million in stock-based compensation costs.

I am satisfied about our financial results with bookings improving almost 30% year-over-year and GAAP net earnings nearly doubling during the same period, despite a challenging second quarter due to seasonality,” said Germain Lamonde, EXFO’s Chairman, President and CEO. “While net earnings are improving much faster than sales and bookings, I am particularly pleased that we are building a strong presence in strategic market areas like next-generation networking, broadband deployments for triple-play offerings, convergence to IP including all-important IPTV services, as well as growing FTTx rollouts.”