SOURCE: Ixia

Ixia

July 21, 2011 16:05 ET

Ixia Announces 2011 Second Quarter Results

CALABASAS, CA--(Marketwire - Jul 21, 2011) - Ixia (NASDAQ: XXIA) today reported its financial results for the second quarter ended June 30, 2011.

Total revenue for the 2011 second quarter was $69.0 million, compared with $66.1 million reported for the 2010 second quarter and $78.5 million reported for the first quarter of 2011.

On a GAAP basis, the company recorded net income for the 2011 second quarter of $0.5 million, or $0.01 per diluted share, compared with a net loss of $0.4 million, or $0.01 per share, for the 2010 second quarter.

Non-GAAP net income for the 2011 second quarter was $5.8 million, or $0.08 per diluted share, compared with non-GAAP net income of $6.8 million, or $0.10 per diluted share, for the 2010 second quarter.

Additional non-GAAP information and a reconciliation of our non-GAAP measures to comparable GAAP measures for the second quarter and six months ended June 30, 2011 and 2010, respectively, may be found in the attached financial tables.

"Although we are disappointed with our results this quarter, the trends driving our markets and business, including the upgrade to next-generation networks and the convergence of wired and wireless networks, remain substantially intact," commented Atul Bhatnagar, Ixia's president and chief executive officer. "As we previously announced, the weakness we experienced in the second quarter related mainly to delays and reductions in spending by certain large network equipment makers, a large wireless order received too late in the quarter to ship and soft sales in the Asia Pacific region. While we are carefully monitoring market conditions and spending trends, we remain focused on continuing our efforts to develop innovative high performance testing solutions for emerging next generation media rich networks.

"The recent momentum in orders for our wireless test solutions is very encouraging," continued Mr. Bhatnagar. "In the second quarter we secured record bookings for our IxCatapult solutions, which consisted primarily of orders for our LTE products. Last Monday, we closed the acquisition of Wi-Fi test solution provider VeriWave, which complements our LTE strategy. Our product portfolio now provides an end-to-end test solution for the converged Wi-Fi, LTE, Ethernet and IP networks."

Ixia ended the second quarter with approximately $369 million in cash and investments, compared with $354 million at March 31, 2011.

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 2011 second quarter results and its business outlook for the 2011 third 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 (e.g., non-GAAP cost of revenues, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP interest income and other, net, non-GAAP income tax expense, 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, the amortization of acquisition-related intangible assets, restructuring expenses, certain inventory adjustments, 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 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 services testing solution -- from the wireless edge to the Internet core. Network equipment manufacturers, service providers, enterprises, and government agencies use Ixia's industry-leading test and simulation platforms to design and validate a broad range of wired, Wi-Fi, and 3G/4G networking equipment and networks. Ixia's solutions create real-world conditions by emulating a full range of high-scaling networking protocols and generating media-rich application traffic to validate performance, conformance and security of cloud, core, data center, wireless and multiplay 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, 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 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 and war, terrorism, political unrest, natural disasters and other circumstances that could, among other consequences, reduce the demand for our products, disrupt our supply chain or impact the delivery of our products. Such factors also include the risk that the anticipated benefits of our acquisition of VeriWave will not be realized, as well as the factors identified in our Annual Report on Form 10-K for the year ended December 31, 2010, 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)
(unaudited)
June 30, December 31,
2011 2010
Assets
Current assets:
Cash and cash equivalents $ 52,582 $ 76,082
Short-term investments in marketable securities 179,047 151,696
Accounts receivable, net 65,271 67,838
Inventories 29,332 28,965
Prepaid expenses and other current assets 13,789 12,647
Total current assets 340,021 337,228
Investments in marketable securities 136,956 111,440
Property and equipment, net 23,751 22,745
Intangible assets, net 45,461 52,778
Goodwill 59,384 59,384
Other assets 6,579 6,308
Total assets $ 612,152 $ 589,883
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 6,900 $ 9,924
Accrued expenses 25,345 33,778
Deferred revenues 40,859 37,505
Income taxes payable -- 1,648
Total current liabilities 73,104 82,855
Deferred revenues 9,048 9,170
Other liabilities 6,574 6,378
Convertible senior notes 200,000 200,000
Total liabilities 288,726 298,403
Shareholders' equity:
Common stock, without par value; 200,000 shares authorized at June 30, 2011 and December 31, 2010; 69,496 and 67,613 shares issued and outstanding as of June 30, 2011 and December 31, 2010, respectively 128,904 115,590
Additional paid-in capital 144,038 133,249
Retained earnings 47,750 40,187
Accumulated other comprehensive income 2,734 2,454
Total shareholders' equity 323,426 291,480
Total liabilities and shareholders' equity $ 612,152 $ 589,883
IXIA
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Revenues:
Products $ 54,992 $ 54,925 $ 119,919 $ 105,594
Services 13,981 11,179 27,515 22,551
Total revenues 68,973 66,104 147,434 128,145
Costs and operating expenses:(1)
Cost of revenues - products 13,014 13,773 27,035 25,218
Cost of revenues - services 1,631 1,518 3,109 3,026
Research and development 18,545 17,882 37,064 36,521
Sales and marketing 21,210 19,160 44,128 38,321
General and administrative 8,074 8,357 16,472 17,224
Amortization of intangible assets 3,789 5,086 7,479 10,144
Acquisition and other related 474 1,556 474 2,679
Restructuring -- 67 -- 3,557
Total costs and operating expenses 66,737 67,399 135,761 136,690
Income (loss) from operations 2,236 (1,295 ) 11,673 (8,545 )
Interest income and other, net 253 309 791 9,096
Interest expense (1,800 ) -- (3,600 ) --
Income (loss) before income taxes 689 (986 ) 8,864 551
Income tax expense (benefit) 235 (625 ) 1,301 43
Net income (loss) $ 454 $ (361 ) $ 7,563 $ 508
Earnings (loss) per share:
Basic $ 0.01 $ (0.01 ) $ 0.11 $ 0.01
Diluted $ 0.01 $ (0.01 ) $ 0.11 $ 0.01
Weighted average number of common and common equivalent shares outstanding:
Basic 69,156 64,603 68,643 64,052
Diluted 71,885 64,603 71,628 65,628
(1) Stock-based compensation included in:
Cost of revenues - products $ 112 $ 133 $ 248 $ 256
Cost of revenues - services 43 50 94 96
Research and development 1,082 1,356 2,456 2,557
Sales and marketing 826 896 1,867 1,731
General and administrative 1,183 961 2,442 1,552
IXIA
Non-GAAP Information and Reconciliation to Comparable GAAP Financial Measures
(in thousands, except percentages and per share data)
(unaudited)
Three months ended June 30,
2011 2010
Amount ($) % Total
Revenues
Amount ($) % Total
Revenues
Total revenues $ 68,973 100 % $ 66,104 100 %
Total cost of revenues – GAAP $ 14,645 21.2 % $ 15,291 23.1 %
Inventory adjustment(a) % (306 ) -0.5 %
Stock-based compensation(b) (155 ) -0.2 % (183 ) -0.2 %
Total cost of revenues – Non-GAAP $ 14,490 21.0 % $ 14,802 22.4 %
Operating expenses – GAAP $ 52,092 75.5 % $ 52,108 78.8 %
Amortization of intangible assets(c) (3,789 ) -5.5 % (5,086 ) -7.7 %
Acquisition and other related(d) (474 ) -0.7 % (1,556 ) -2.4 %
Restructuring(e) % (67 ) -0.1 %
Stock-based compensation(b) (3,091 ) -4.4 % (3,213 ) -4.8 %
Operating expenses – Non-GAAP $ 44,738 64.9 % $ 42,186 63.8 %
Operating margin – GAAP $ 2,236 3.2 % $ (1,295 ) -2.0 %
Inventory adjustment(a) % 306 0.5 %
Amortization of intangible assets(c) 3,789 5.5 % 5,086 7.7 %
Acquisition and other related(d) 474 0.7 % 1,556 2.4 %
Restructuring(e) % 67 0.1 %
Stock-based compensation(b) 3,246 4.7 % 3,396 5.1 %
Operating margin – Non-GAAP $ 9,745 14.1 % $ 9,116 13.8 %
Income tax expense (benefit) – GAAP $ 235 0.3 % $ (625 ) -0.9 %
Effect of reconciling items(f) 2,133 3.1 % 3,222 4.8 %
Income tax expense – Non-GAAP $ 2,368 3.4 % $ 2,597 3.9 %
Net income (loss) – GAAP $ 454 0.7 % $ (361 ) -0.5 %
Effect of reconciling items(g) 5,376 7.8 % 7,189 10.8 %
Net income – Non-GAAP $ 5,830 8.5 % $ 6,828 10.3 %
Diluted earnings (loss) per share – GAAP $ 0.01 $ (0.01 )
Effect of reconciling items(h) 0.07 0.11
Diluted earnings per share – Non-GAAP $ 0.08 $ 0.10
(a) This reconciling item represents a cost of sales timing adjustment between the first quarter and second quarter of 2010 due to the deferral of certain inventory costs.
(b) This reconciling item represents stock-based compensation expenses. As stock-based compensation represents a non-cash charge that is not directly attributable to the underlying performance of our business operations, we believe that by excluding stock-based compensation, investors are provided with supplemental information that is useful in comparing our operating results from period to period and in evaluating our core operations and performance. While we expect to continue to recognize stock-based compensation expense in the future, management also excludes this expense when evaluating current performance, forecasting future results, measuring core operating results, and making operating and strategic decisions.
(c) This reconciling item represents the amortization of intangible assets related to the acquisitions of various businesses and technologies such as the acquisitions of Catapult Communications Corporation and Agilent Technologies' N2X Data Network Testing Product Line. As the amortization expense represents a non-cash charge that is not directly attributable to the underlying performance of our business operations, we believe that by excluding the amortization of acquisition-related intangible assets, investors are provided with supplemental information that is useful in evaluating our ongoing operations and performance. While the amortization of intangible assets is expected to continue in the future, management also excludes this expense when evaluating current performance, forecasting future results, measuring core operating results, and making operating and strategic decisions.
(d) This reconciling item represents costs associated with our acquisitions of Catapult Communications Corporation in June 2009, Agilent Technologies' N2X Data Network Testing Product Line in October 2009 and our recently announced acquisition of VeriWave, Inc. Acquisition and other related costs consist primarily of transaction and integration related costs such as professional fees for legal, accounting and tax services, integration related consulting fees, certain employee, facility and infrastructure transition costs, and other related expenses. We believe that by excluding acquisition and other related costs, we provide investors with supplemental information that is useful in comparing our ongoing operating results from period to period and in evaluating our core operations and performance.
(e) This reconciling item represents costs primarily associated with our restructuring plan announced during the first quarter of 2010 related to our acquisition of the N2X Data Network Testing Product Line. These costs primarily relate to one-time employee termination benefits consisting of severance and other related costs, as well as some facility-related costs. We believe that by excluding restructuring costs, we provide investors with supplemental information that is useful in comparing our operating results from period to period and in evaluating our core operations and performance.
(f) This adjustment represents the income tax effects of the reconciling items noted in footnotes (a), (b), (c), (d) and (e) as well as changes in the valuation allowance relating to the company's deferred tax assets.
(g) This adjustment represents the effects of the reconciling items noted in footnotes (a), (b), (c), (d) and (e), net of tax.
(h) This adjustment represents the effects of the reconciling items noted in footnotes (a), (b), (c), (d) and (e), net of tax, on a diluted per share basis.
IXIA
Non-GAAP Information and Reconciliation to Comparable GAAP Financial Measures
(in thousands, except percentages and per share data)
(unaudited)
Six months ended June 30,
2011 2010
Amount ($) % Total
Revenues
Amount ($) % Total
Revenues
Total revenues $ 147,434 100 % $ 128,145 100 %
Total cost of revenues – GAAP $ 30,144 20.4 % $ 28,244 22.0 %
Stock-based compensation(a) (342 ) -0.2 % (352 ) -0.2 %
Total cost of revenues – Non-GAAP $ 29,802 20.2 % $ 27,892 21.8 %
Operating expenses – GAAP $ 105,617 71.6 % $ 108,446 84.6 %
Amortization of intangible assets(b) (7,479 ) -5.1 % (10,144 ) -7.9 %
Acquisition and other related(c) (474 ) -0.3 % (2,679 ) -2.1 %
Restructuring(d) % (3,557 ) -2.8 %
Stock-based compensation(a) (6,765 ) -4.6 % (5,840 ) -4.5 %
Legal and contract settlements(e) (900 ) -0.6 % %
Operating expenses – Non-GAAP $ 89,999 61.0 % $ 86,226 67.3 %
Operating margin – GAAP $ 11,673 7.9 % $ (8,545 ) -6.7 %
Amortization of intangible assets(b) 7,479 5.1 % 10,144 7.9 %
Acquisition and other related(c) 474 0.3 % 2,679 2.1 %
Restructuring(d) % 3,557 2.8 %
Stock-based compensation(a) 7,107 4.8 % 6,192 4.8 %
Legal and contract settlements(e) 900 0.6 % %
Operating margin – Non-GAAP $ 27,633 18.7 % $ 14,027 10.9 %
Interest income and other, net – GAAP $ 791 0.5 % $ 9,096 7.1 %
Auction rate securities settlements(f) % (8,925 ) -7.0 %
Interest income and other, net – Non-GAAP $ 791 0.5 % $ 171 0.1 %
Income tax expense – GAAP $ 1,301 0.9 % $ 43 0.0 %
Effect of reconciling items(g) 5,524 3.7 % 4,018 3.2 %
Income tax expense – Non-GAAP $ 6,825 4.6 % $ 4,061 3.2 %
Net income – GAAP $ 7,563 5.1 % $ 508 0.4 %
Effect of reconciling items(h) 10,436 7.1 % 9,629 7.5 %
Net income – Non-GAAP $ 17,999 12.2 % $ 10,137 7.9 %
Diluted earnings per share – GAAP $ 0.11 $ 0.01
Effect of reconciling items(i)(j) 0.14 0.14
Diluted earnings per share – Non-GAAP $ 0.25 $ 0.15
(a) This reconciling item represents stock-based compensation expenses. As stock-based compensation represents a non-cash charge that is not directly attributable to the underlying performance of our business operations, we believe that by excluding stock-based compensation, investors are provided with supplemental information that is useful in comparing our operating results from period to period and in evaluating our core operations and performance. While we expect to continue to recognize stock-based compensation expense in the future, management also excludes this expense when evaluating current performance, forecasting future results, measuring core operating results, and making operating and strategic decisions.
(b) This reconciling item represents the amortization of intangible assets related to the acquisitions of various businesses and technologies such as the acquisitions of Catapult Communications Corporation and Agilent Technologies' N2X Data Network Testing Product Line. As the amortization expense represents a non-cash charge that is not directly attributable to the underlying performance of our business operations, we believe that by excluding the amortization of acquisition-related intangible assets, investors are provided with supplemental information that is useful in evaluating our ongoing operations and performance. While the amortization of intangible assets is expected to continue in the future, management also excludes this expense when evaluating current performance, forecasting future results, measuring core operating results, and making operating and strategic decisions.
(c) This reconciling item represents costs associated with our acquisitions of Catapult Communications Corporation in June 2009, Agilent Technologies' N2X Data Network Testing Product Line in October 2009 and our recently announced acquisition of VeriWave, Inc. Acquisition and other related costs consist primarily of transaction and integration related costs such as professional fees for legal, accounting and tax services, integration related consulting fees, certain employee, facility and infrastructure transition costs, and other related expenses. We believe that by excluding acquisition and other related costs, we provide investors with supplemental information that is useful in comparing our ongoing operating results from period to period and in evaluating our core operations and performance.
(d) This reconciling item represents costs primarily associated with our restructuring plan announced during the first quarter of 2010 related to our acquisition of the N2X Data Network Testing Product Line. These costs primarily relate to one-time employee termination benefits consisting of severance and other related costs, as well as some facility-related costs. We believe that by excluding restructuring costs, we provide investors with supplemental information that is useful in comparing our operating results from period to period and in evaluating our core operations and performance.
(e) This adjustment includes a one-time charge of $900,000 incurred in the first quarter of 2011 to terminate and settle a development contract. We believe that by excluding this one-time charge, we provide investors with supplemental information that is useful in comparing our operating results from period to period and in evaluating our core operations and performance.
(f) This reconciling item represents settlement proceeds received during the first quarter of 2010 relating to claims asserted by us against our former investment manager for damages and losses relating to our previous investments in auction rate securities with an aggregate par value of $19.0 million. As these proceeds are not directly attributable to the underlying performance of our business operations, we believe that by excluding these proceeds, we provide investors with supplemental information that is useful in comparing our operating results from period to period and in evaluating our core operations and performance.
(g) This adjustment represents the income tax effects of the reconciling items noted in footnotes (a), (b), (c), (d), (e) and (f) as well as changes in the valuation allowance relating to the company's deferred tax assets.
(h) This adjustment represents the effects of the reconciling items noted in footnotes (a), (b), (c), (d), (e) and (f), net of tax.
(i) This adjustment represents the effects of the reconciling items noted in footnotes (a), (b), (c), (d), (e) and (f), net of tax, on a diluted per share basis.
(j) This reconciling item for the six months ended June 30, 2011 non-GAAP diluted earnings per share calculation includes the impact of the convertible senior notes as these were anti-dilutive for the equivalent GAAP earnings per share calculations.

Contact Information

  • Financial Contact:
    The Blueshirt Group
    Investor Relations
    Maria Riley
    415-217-7722
    or
    Tom Miller
    Chief Financial Officer
    Dir: 818-444-2325
    Email Contact