Ixia Announces Second Quarter Financial Results

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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 securities178,042126,851
Accounts receivable, net91,378103,523
Inventories36,38137,220
Prepaid expenses and other current assets 46,657 42,942
Total current assets408,148358,044
 
Investments in marketable securities3703,119
Property and equipment, net32,74128,763
Intangible assets, net137,263157,003
Goodwill260,032260,457
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 other39,37352,525
Deferred revenues 67,195 66,096
Total current liabilities122,020130,735
 
Deferred revenues10,2958,695
Other liabilities32,35332,321
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, respectively172,293158,933
Additional paid-in capital182,434168,980
Retained earnings129,164117,296
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 endedSix 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 - products21,08814,22042,47529,002
Cost of revenues - services3,3112,7306,3364,860
Research and development29,53922,54659,25143,397
Sales and marketing33,19124,55668,23249,163
General and administrative12,02711,09024,08522,606
Amortization of intangible assets10,0555,35820,1939,403
Acquisition and other related1,0933,7392,3654,164
Restructuring     58   
Total costs and operating expenses 110,304  84,239  222,995  162,595 
 
Income from operations5,5916,46315,68314,765
Interest income and other, net3,4316023,638712
Interest expense (1,943) (1,800) (3,886) (3,600)
Income before income taxes7,0795,26515,43511,877
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:
Basic75,66771,57975,19471,079
Diluted77,24583,80377,04683,508
 
 
 
(1) Stock-based compensation included in:
Cost of revenues - products$128$75$281$171
Cost of revenues - services492910766
Research and development2,0499454,4972,224
Sales and marketing1,8369113,8511,934
General and administrative1,6791,8093,8843,475
 
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