Ixia Announces Second Quarter Financial Results

Ixia Announces Second Quarter Financial Results

CALABASAS, Calif.--(BUSINESS WIRE)-- Ixia (Nasdaq: XXIA) today reported its financial results for the second quarter ended June 30, 2013.

Total revenue for the 2013 second quarter grew 28% to $115.9 million, compared with $90.7 million reported for the 2012 second quarter. The 2013 second quarter includes $33.2 million in revenue from the recent acquisitions of Anue Systems, Inc. ("Anue") and BreakingPoint Systems, Inc. ("BreakingPoint"), which closed in June and August 2012, respectively.


On a GAAP basis, the company recorded net income for the 2013 second quarter of $3.8 million, or $0.05 per diluted share, compared with net income of $25.7 million, or $0.32 per diluted share, for the 2012 second quarter. Non-GAAP net income for the 2013 second quarter was $14.5 million, or $0.18 per diluted share, compared with non-GAAP net income of $12.9 million, or $0.17 per diluted share, for the 2012 second quarter.

Additional non-GAAP information and a reconciliation of our non-GAAP measures to the most directly comparable GAAP measures for the 2013 and 2012 second quarters and year-to-date periods may be found in the attached financial tables.

"Although revenue for our core products was lower than anticipated due to order delays from our Service Provider and network equipment manufacturer customers, we made solid progress on our key growth initiatives," commented Vic Alston, Ixia's president and chief executive officer. "Anue and BreakingPoint revenue surpassed expectations and grew to $33.2 million, our revenue from enterprise customers increased by nearly 50 percent compared to last year and we added several new channel and technology partners."

Alston continued, "Our customers are rapidly moving to mobile networks, virtual data centers and hybrid cloud environments to deliver next generation applications and provide their customers with the always-on user experience. While we have seen recent softness in the market, our visibility, mobility, and security solutions uniquely position Ixia to benefit from some of today's strongest trends in networking and deliver long-term growth."

Ixia ended the 2013 second quarter with approximately $234 million in cash, cash equivalents and investments, compared with $208 million at March 31, 2013.

We are in the process of reviewing and finalizing our GAAP tax provision for the 2013 second quarter, and as a result, our GAAP net income is subject to change and may potentially be reduced by up to $3.3 million. We do not anticipate any changes in our non-GAAP results.

Conference Call and Webcast Information

Ixia will host a conference call today, at 2:00 p.m. Pacific time (5:00 p.m., Eastern time), for analysts and investors to discuss its 2013 second quarter results and its business outlook for the 2013 third quarter. Open to the public, interested parties 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 at least 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, realized gains for the sale of certain of our auction rate securities, expenses incurred in connection with our restatement of certain previously filed financial statements, 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 certain other non-cash income tax impacts such as changes in 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 develops amazing products so its customers can connect the world. Ixia helps its customers provide an always-on user experience through fast, secure delivery of dynamic, connected technologies and services. Through actionable insights that accelerate and secure application and service delivery, Ixia's customers benefit from faster time to market, optimized application performance and higher-quality deployments. Learn more at http://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 and BreakingPoint will not be realized, changes in the global economy, competition, consistency of orders from significant customers, the fact that our results reported in this press release are not yet final and are subject to change prior to the issuance of our Form 10-Q, our success in developing and producing new products, our success in developing new sales channels and customers, 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, 2012, 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)

June 30,

December 31,

2013

2012

Assets

Current assets:

Cash and cash equivalents

$

55,690

$

47,508

Short-term investments in marketable securities

178,042

126,851

Accounts receivable, net

91,378

103,523

Inventories

36,381

37,220

Prepaid expenses and other current assets

46,657

42,942

Total current assets

408,148

358,044

Investments in marketable securities

370

3,119

Property and equipment, net

32,741

28,763

Intangible assets, net

137,263

157,003

Goodwill

260,032

260,457

Other assets

10,221

11,863

Total assets

$

848,775

$

819,249

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

15,452

$

12,114

Accrued expenses and other

39,373

52,525

Deferred revenues

67,195

66,096

Total current liabilities

122,020

130,735

Deferred revenues

10,295

8,695

Other liabilities

32,353

32,321

Convertible senior notes

200,000

200,000

Total liabilities

364,668

371,751

Shareholders' equity:

Common stock, without par value; 200,000 shares authorized at June 30, 2013 and December 31, 2012; 75,922 and 74,126 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively

172,293

158,933

Additional paid-in capital

182,434

168,980

Retained earnings

129,164

117,296

Accumulated other comprehensive income

216

2,289

Total shareholders' equity

484,107

447,498

Total liabilities and shareholders' equity

$

848,775

$

819,249

IXIA

Condensed Consolidated Statements of Operations

(in thousands, except per share data)


(unaudited)

Three months ended

Six months ended

June 30,

June 30,

2013

2012

2013

2012

Revenues:

Products

$

87,818

$

73,288

$

184,454

$

142,895

Services

28,077

17,414

54,224

34,465

Total revenues

115,895

90,702

238,678

177,360

Costs and operating expenses:(1)

Cost of revenues - products

21,088

14,220

42,475

29,002

Cost of revenues - services

3,311

2,730

6,336

4,860

Research and development

29,539

22,546

59,251

43,397

Sales and marketing

33,191

24,556

68,232

49,163

General and administrative

12,027

11,090

24,085

22,606

Amortization of intangible assets

10,055

5,358

20,193

9,403

Acquisition and other related

1,093

3,739

2,365

4,164

Restructuring

58

Total costs and operating expenses

110,304

84,239

222,995

162,595

Income from operations

5,591

6,463

15,683

14,765

Interest income and other, net

3,431

602

3,638

712

Interest expense

(1,943

)

(1,800

)

(3,886

)

(3,600

)

Income before income taxes

7,079

5,265

15,435

11,877

Income tax (benefit) expense(2)

3,316

(20,431

)

3,567

(18,986

)

Net income

$

3,763

$

25,696

$

11,868

$

30,863

Earnings per share:

Basic

$

0.05

$

0.36

$

0.16

$

0.43

Diluted

$

0.05

$

0.32

$

0.15

$

0.40

Weighted average number of common and common equivalent shares outstanding:

Basic

75,667

71,579

75,194

71,079

Diluted

77,245

83,803

77,046

83,508

(1) Stock-based compensation included in:

Cost of revenues - products

$

128

$

75

$

281

$

171

Cost of revenues - services

49

29

107

66

Research and development

2,049

945

4,497

2,224

Sales and marketing

1,836

911

3,851

1,934

General and administrative

1,679

1,809

3,884

3,475