Ixia Announces Third Quarter 2012 Results

Ixia Announces Third Quarter 2012 Results

Achieves Record Revenue of $109.6 Million; Announces Stock Repurchase Program

CALABASAS, Calif.--(BUSINESS WIRE)-- Ixia (Nasdaq: XXIA) today reported its financial results for the third quarter ended September 30, 2012.

Total revenue for the 2012 third quarter was $109.6 million, compared with $77.3 million reported for the 2011 third quarter and $92.3 million reported for the 2012 second quarter. The 2012 third quarter includes $17.3 million for a full quarter of revenue from the recent acquisition of Anue Systems, Inc. ("Anue"), which closed in June 2012, and approximately $3.5 million of revenue attributable to the recently acquired BreakingPoint Systems, Inc. ("BreakingPoint") for the period following the August 24, 2012 closing date.

On a GAAP basis, the company recorded net income for the 2012 third quarter of $11.4 million, or $0.15 per diluted share, compared with net income of $6.4 million, or $0.09 per diluted share, for the 2011 third quarter. GAAP results for the third quarter of 2012 include a tax benefit of approximately $12.7 million, or $0.15 per diluted share, for the reversal of valuation allowances related to deferred tax assets.

Non-GAAP net income for the 2012 third quarter was a record $15.8 million, or $0.20 per diluted share, compared with non-GAAP net income of $12.0 million, or $0.16 per diluted share, for the 2011 third quarter. Our non-GAAP results include the exclusion of the above mentioned valuation allowance reversal related to deferred tax assets.

Additional non-GAAP information and a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures for the three and nine months ended September 30, 2012 and 2011 may be found in the attached financial tables.

"We delivered another record quarter driven by high-speed Ethernet and our Network Visibility Solutions," commented Vic Alston, Ixia's president and chief executive officer. "Our geographic and customer mix in the third quarter reflected our two recent acquisitions that resulted in a higher percentage of domestic revenue as well as a stronger performance among service provider, enterprise and government accounts."

Alston continued, "Market trends are shifting to mobility, security, cloud and massive data centers, all areas where Ixia has invested heavily over the past several years. With the transformative acquisitions of Anue and BreakingPoint, we are building a broad service validation platform that enables customers to design, deploy and assess their networks. Going forward, we believe these investments will help Ixia address larger, higher growth markets, as well as diversify our customer base."

Ixia ended the third quarter with approximately $154 million in cash and investments, compared with $287 million at June 30, 2012. The cash and investments balance at the end of the third quarter 2012, reflects, among other items, the $164 million purchase price of BreakingPoint Systems, Inc. on August 24, 2012.

Ixia's board of directors has authorized the repurchase of up to $25 million of the company's common stock from time to time during the next twelve months on the open market or in privately negotiated transactions. The timing of repurchases and the actual number of shares repurchased will depend on a variety of factors, including Ixia's stock price, regulatory requirements, and market conditions. The company may terminate the repurchase program at any time.

Conference Call and Webcast Information

Ixia will host a conference call today, at 5:00 p.m., Eastern time, for analysts and investors to discuss its 2012 third quarter results and its business outlook for the 2012 fourth quarter. Open to the public, investors may access the call by dialing (678) 825-8347. A live webcast of the conference call, along with supplemental financial information, will be accessible from the "Investors" section of Ixia's web site (www.ixiacom.com). Following the live webcast, an archived version will be available in the "Investors" section on the Ixia web site for 90 days.

Non-GAAP Information

To supplement our consolidated financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), we have included certain non-GAAP financial measures in this press release and in the attachments hereto. Specifically, we have provided non-GAAP financial measures (i.e., non-GAAP income from operations, non-GAAP net income, and non-GAAP diluted earnings per share) that exclude certain non-cash and/or non-recurring income and expense items such as proceeds and expenses from certain legal and contractual settlements, stock-based compensation expenses, acquisition and other related costs, restructuring expenses, the amortization of acquisition-related intangible assets, and the related income tax effects of these items, as well as the income tax impacts of the valuation allowance recorded against certain deferred tax assets. The aforementioned items represent income and expense items that may be difficult to estimate from period to period and/or that we believe are not directly attributable to the underlying performance of our business operations. These non-GAAP financial measures are provided to enhance the user's overall understanding of our financial performance. We believe that by excluding these items, our non-GAAP measures provide supplemental information to both management and investors that is useful in assessing our core operating performance, in evaluating our ongoing business operations and in comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are also used by management to plan and forecast future periods and to assist in making operating and strategic decisions. The presentation of this additional information is not prepared in accordance with GAAP. The information therefore may not necessarily be comparable to that of other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. Investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures which are included below in the attached financial tables.

About Ixia

Ixia provides the industry's most comprehensive converged IP network validation and network visibility solutions. Equipment manufacturers, service providers, enterprises, and government agencies use Ixia's solutions to design, verify, and monitor a broad range of wired, Wi-Fi, and 3G/LTE equipment and networks. Ixia's test solutions emulate realistic media-rich traffic and network conditions so that customers can optimize and validate the design, performance, and security of their pre-deployment networks. Ixia's intelligent network visibility platforms provide clarity into physical and virtual production networks for improved performance, security, resiliency, and application delivery of cloud, data center, and service provider networks. For more information, visit www.ixiacom.com.

Safe Harbor Under the Private Securities Litigation Reform Act of 1995:

Certain statements made in this press release are forward-looking statements, including, without limitation, statements regarding growth, profitability, financial performance and future business. In some cases, such forward-looking statements can be identified by terms such as may, will, should, expect, plan, believe, estimate, predict or the like. Such statements reflect our current intent, belief and expectations and are subject to risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that may cause future results to differ materially from our current expectations include the risk that the anticipated benefits and synergies of our recent acquisitions of Anue Systems, Inc. and BreakingPoint Systems, Inc. will not be realized, changes in the global economy, competition, consistency of orders from significant customers, our success in developing and producing new products, market acceptance of our products, war, terrorism, political unrest, natural disasters and other circumstances that could, among other consequences, reduce the demand for our products, disrupt our supply chain and/or impact the delivery of our products. Such factors also include those identified in our Annual Report on Form 10-K for the year ended December 31, 2011, and in our other filings with the U.S. Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.


Condensed Consolidated Balance Sheets

(in thousands)


 September 30, December 31,
Current assets:
Cash and cash equivalents$51,188$42,729
Short-term investments in marketable securities20,161156,684
Accounts receivable, net102,77665,357
Prepaid expenses and other current assets 23,699 12,700
Total current assets234,033304,709
Investments in marketable securities82,928185,608
Property and equipment, net28,79325,060
Intangible assets, net167,12646,028
Other assets 5,605 6,633
Total assets$777,721$634,467
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable$14,590$5,005
Accrued expenses48,56827,301
Deferred revenues63,15340,963
Income taxes payable 2,648 895
Total current liabilities128,95974,164
Deferred revenues13,63510,092
Other liabilities12,4255,849
Convertible senior notes 200,000 200,000
Total liabilities 355,019 290,105
Shareholders' equity:
Common stock, without par value; 200,000 shares authorized at September 30, 2012 and December 31, 2011; 73,313 and 70,240 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively153,018132,330
Additional paid-in capital160,062145,840
Retained earnings106,59563,962
Accumulated other comprehensive income 3,027 2,230
Total shareholders' equity 422,702 344,362
Total liabilities and shareholders' equity$777,721$634,467


Condensed Consolidated Statements of Operations

(in thousands, except per share data)


 Three months ended Nine months ended
September 30,September 30,
2012 20112012 2011
Services 20,896  15,209  53,901  42,724 
Total revenues 109,552  77,271  287,538  224,705 
Costs and operating expenses:(1)
Cost of revenues - products20,50914,16449,51141,199
Cost of revenues - services2,7351,5737,5954,682
Research and development25,76318,93269,16055,996
Sales and marketing30,63320,39779,79664,525
General and administrative11,0589,42033,66425,892
Amortization of intangible assets9,9604,23919,36311,718
Acquisition and other related4,3083778,472851
Restructuring 2,098    2,098   
Total costs and operating expenses 107,064  69,102  269,659  204,863 
Income from operations2,4888,16917,87919,842
Interest income and other, net9281,0221,6401,813
Interest expense (1,800) (1,800) (5,400) (5,400)
Income before income taxes1,6167,39114,11916,255
Income tax (benefit) expense (9,785) 943  (28,514) 2,244 
Net income$11,401 $6,448 $42,633 $14,011 
Earnings per share:
Weighted average number of common and common equivalent shares outstanding:
(1) Stock-based compensation included in:
Cost of revenues - products$85$81$256$329
Cost of revenues - services333199125
Research and development1,3329183,5563,374
Sales and marketing1,0436792,9772,546
General and administrative1,6711,1725,1463,614


Non-GAAP Information and Reconciliation to Most Directly Comparable GAAP Financial Measures

(in thousands, except per share data)


 Three months ended

September 30,

 Nine months ended

September 30,

2012 20112012 2011
GAAP income from operations$2,488$8,169$17,879$19,842
Stock-based compensation(a)4,1642,88112,0349,988
Amortization of intangible assets(b)9,9604,23919,36311,718
Acquisition and other related(c)4,3083778,472851
Restructuring (d)2,0982,098
Legal, contract settlements and other(e)2,083900
Inventory adjustments(f) 332    332   
Non-GAAP income from operations$23,350 $15,666 Read Full Story


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