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.
IXIA Condensed Consolidated Balance Sheets (in thousands) (unaudited) | ||||||
September 30, | December 31, | |||||
2012 | 2011 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 51,188 | $ | 42,729 | ||
Short-term investments in marketable securities | 20,161 | 156,684 | ||||
Accounts receivable, net | 102,776 | 65,357 | ||||
Inventories | 36,209 | 27,239 | ||||
Prepaid expenses and other current assets | 23,699 | 12,700 | ||||
Total current assets | 234,033 | 304,709 | ||||
Investments in marketable securities | 82,928 | 185,608 | ||||
Property and equipment, net | 28,793 | 25,060 | ||||
Intangible assets, net | 167,126 | 46,028 | ||||
Goodwill | 259,236 | 66,429 | ||||
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 expenses | 48,568 | 27,301 | ||||
Deferred revenues | 63,153 | 40,963 | ||||
Income taxes payable | 2,648 | 895 | ||||
Total current liabilities | 128,959 | 74,164 | ||||
Deferred revenues | 13,635 | 10,092 | ||||
Other liabilities | 12,425 | 5,849 | ||||
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, respectively | 153,018 | 132,330 | ||||
Additional paid-in capital | 160,062 | 145,840 | ||||
Retained earnings | 106,595 | 63,962 | ||||
Accumulated other comprehensive income | 3,027 | 2,230 | ||||
Total shareholders' equity | 422,702 | 344,362 | ||||
Total liabilities and shareholders' equity | $ | 777,721 | $ | 634,467 | ||
IXIA Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenues: | ||||||||||||||||
Products | $ | 88,656 | $ | 62,062 | $ | 233,637 | $ | 181,981 | ||||||||
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 - products | 20,509 | 14,164 | 49,511 | 41,199 | ||||||||||||
Cost of revenues - services | 2,735 | 1,573 | 7,595 | 4,682 | ||||||||||||
Research and development | 25,763 | 18,932 | 69,160 | 55,996 | ||||||||||||
Sales and marketing | 30,633 | 20,397 | 79,796 | 64,525 | ||||||||||||
General and administrative | 11,058 | 9,420 | 33,664 | 25,892 | ||||||||||||
Amortization of intangible assets | 9,960 | 4,239 | 19,363 | 11,718 | ||||||||||||
Acquisition and other related | 4,308 | 377 | 8,472 | 851 | ||||||||||||
Restructuring | 2,098 | — | 2,098 | — | ||||||||||||
Total costs and operating expenses | 107,064 | 69,102 | 269,659 | 204,863 | ||||||||||||
Income from operations | 2,488 | 8,169 | 17,879 | 19,842 | ||||||||||||
Interest income and other, net | 928 | 1,022 | 1,640 | 1,813 | ||||||||||||
Interest expense | (1,800 | ) | (1,800 | ) | (5,400 | ) | (5,400 | ) | ||||||||
Income before income taxes | 1,616 | 7,391 | 14,119 | 16,255 | ||||||||||||
Income tax (benefit) expense | (9,785 | ) | 943 | (28,514 | ) | 2,244 | ||||||||||
Net income | $ | 11,401 | $ | 6,448 | $ | 42,633 | $ | 14,011 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.16 | $ | 0.09 | $ | 0.59 | $ | 0.20 | ||||||||
Diluted | $ | 0.15 | $ | 0.09 | $ | 0.55 | $ | 0.20 | ||||||||
Weighted average number of common and common equivalent shares outstanding: | ||||||||||||||||
Basic | 72,805 | 69,613 | 71,659 | 68,968 | ||||||||||||
Diluted | 85,070 | 70,892 | 84,061 | 71,595 | ||||||||||||
(1) Stock-based compensation included in: | ||||||||||||||||
Cost of revenues - products | $ | 85 | $ | 81 | $ | 256 | $ | 329 | ||||||||
Cost of revenues - services | 33 | 31 | 99 | 125 | ||||||||||||
Research and development | 1,332 | 918 | 3,556 | 3,374 | ||||||||||||
Sales and marketing | 1,043 | 679 | 2,977 | 2,546 | ||||||||||||
General and administrative | 1,671 | 1,172 | 5,146 | 3,614 | ||||||||||||
IXIA Non-GAAP Information and Reconciliation to Most Directly Comparable GAAP Financial Measures (in thousands, except per share data) (unaudited) | ||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
GAAP income from operations | $ | 2,488 | $ | 8,169 | $ | 17,879 | $ | 19,842 | ||||||||
Adjustments: | ||||||||||||||||
Stock-based compensation(a) | 4,164 | 2,881 | 12,034 | 9,988 | ||||||||||||
Amortization of intangible assets(b) | 9,960 | 4,239 | 19,363 | 11,718 | ||||||||||||
Acquisition and other related(c) | 4,308 | 377 | 8,472 | 851 | ||||||||||||
Restructuring (d) | 2,098 | — | 2,098 | — | ||||||||||||
Legal, contract settlements and other(e) | — | — | 2,083 | 900 | ||||||||||||
Inventory adjustments(f) | 332 | — | 332 | — | ||||||||||||
Non-GAAP income from operations | $ | 23,350 | $ | 15,666 | ||||||||||||
