Attached files
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| 8-K - FORM 8-K - IXIA | d245745d8k.htm |
Exhibit 99.1
Ixia Announces 2011 Third Quarter Results
CALABASAS, CA, October 20, 2011 — Ixia (Nasdaq:XXIA) today reported its financial results for the third quarter ended September 30, 2011.
Total revenue for the 2011 third quarter was $77.3 million, compared with $70.9 million reported for the 2010 third quarter and $69.0 million reported for the 2011 second quarter.
On a GAAP basis, the company recorded net income for the 2011 third quarter of $6.4 million, or $0.09 per diluted share, compared with net income of $4.9 million, or $0.07 per diluted share, for the 2010 third quarter.
Non-GAAP net income for the 2011 third quarter was $12.0 million, or $0.16 per diluted share, compared with non-GAAP net income of $9.8 million, or $0.14 per diluted share, for the 2010 third quarter.
Additional non-GAAP information and a reconciliation of our non-GAAP measures to comparable GAAP measures for the three and nine months ended September 30, 2011 and 2010 may be found in the attached financial tables.
“We are very pleased with our third quarter financial results as we performed well across several metrics,” commented Atul Bhatnagar, Ixia’s president and chief executive officer. “Revenue rebounded from the prior quarter driven by stronger carrier sales in both the US and Japan, as well as increased government business. With our broad and differentiated product portfolio, our high gross margins, and a keen focus on operating expenses, we significantly expanded our operating margin and generated $18.9 million in cash from operations.
“We believe key market indicators and customer spending trends are encouraging,” continued Mr. Bhatnagar. “While we are not immune to macroeconomic conditions, the trends driving our markets, such as mobility and next generation network upgrades, should continue to drive our business over the next several years.”
Ixia ended the third quarter with approximately $367 million in cash and investments, compared with $369 million at June 30, 2011. During the third quarter of 2011, we completed our acquisition of VeriWave, Inc. (“VeriWave”) for approximately $15.6 million in cash (net of the cash on VeriWave’s Balance Sheet).
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 third quarter results and its business outlook for the 2011 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 (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, 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 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 or other recent acquisitions 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.
Financial Contact:
The Blueshirt Group
Investor Relations
Maria Riley 415-217-7722
or
Tom Miller, Chief Financial Officer
Dir: 818-444-2325
tmiller@ixiacom.com
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
| September 30, 2011 |
December 31, 2010 |
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| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ | 48,416 | $ | 76,082 | ||||
| Short-term investments in marketable securities |
113,420 | 151,696 | ||||||
| Accounts receivable, net |
67,227 | 67,838 | ||||||
| Inventories |
30,400 | 28,965 | ||||||
| Prepaid expenses and other current assets |
15,119 | 12,647 | ||||||
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| Total current assets |
274,582 | 337,228 | ||||||
| Investments in marketable securities |
205,382 | 111,440 | ||||||
| Property and equipment, net |
24,172 | 22,745 | ||||||
| Intangible assets, net |
50,171 | 52,778 | ||||||
| Goodwill |
66,429 | 59,384 | ||||||
| Other assets |
6,455 | 6,308 | ||||||
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| Total assets |
$ | 627,191 | $ | 589,883 | ||||
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| Liabilities and Shareholders’ Equity |
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| Current liabilities: |
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| Accounts payable |
$ | 9,276 | $ | 9,924 | ||||
| Accrued expenses |
30,455 | 33,778 | ||||||
| Deferred revenues |
40,047 | 37,505 | ||||||
| Income taxes payable |
— | 1,648 | ||||||
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| Total current liabilities |
79,778 | 82,855 | ||||||
| Deferred revenues |
9,163 | 9,170 | ||||||
| Other liabilities |
5,960 | 6,378 | ||||||
| Convertible senior notes |
200,000 | 200,000 | ||||||
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| Total liabilities |
294,901 | 298,403 | ||||||
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| Shareholders’ equity: |
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| Common stock, without par value; 200,000 shares authorized at September 30, 2011 and December 31, 2010; 69,703 and 67,613 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively |
129,294 | 115,590 | ||||||
| Additional paid-in capital |
146,719 | 133,249 | ||||||
| Retained earnings |
54,198 | 40,187 | ||||||
| Accumulated other comprehensive income |
2,079 | 2,454 | ||||||
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| Total shareholders’ equity |
332,290 | 291,480 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 627,191 | $ | 589,883 | ||||
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IXIA
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
| Three months ended September 30, |
Nine months ended September 30, |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Revenues: |
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| Products |
$ | 62,062 | $ | 58,540 | $ | 181,981 | $ | 164,134 | ||||||||
| Services |
15,209 | 12,350 | 42,724 | 34,901 | ||||||||||||
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| Total revenues |
77,271 | 70,890 | 224,705 | 199,035 | ||||||||||||
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| Costs and operating expenses:(1) |
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| Cost of revenues – products |
14,164 | 14,231 | 41,199 | 39,449 | ||||||||||||
| Cost of revenues – services |
1,573 | 1,535 | 4,682 | 4,561 | ||||||||||||
| Research and development |
18,932 | 17,802 | 55,996 | 54,323 | ||||||||||||
| Sales and marketing |
20,397 | 19,665 | 64,525 | 57,986 | ||||||||||||
| General and administrative |
9,420 | 8,443 | 25,892 | 25,667 | ||||||||||||
| Amortization of intangible assets(2) |
4,239 | 3,532 | 11,718 | 13,676 | ||||||||||||
| Acquisition and other related |
377 | 312 | 851 | 2,991 | ||||||||||||
| Restructuring |
— | 30 | — | 3,587 | ||||||||||||
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| Total costs and operating expenses |
69,102 | 65,550 | 204,863 | 202,240 | ||||||||||||
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| Income (loss) from operations |
8,169 | 5,340 | 19,842 | (3,205 | ) | |||||||||||
| Interest income and other, net(2) |
1,022 | 578 | 1,813 | 9,674 | ||||||||||||
| Interest expense |
(1,800 | ) | — | (5,400 | ) | — | ||||||||||
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| Income before income taxes |
7,391 | 5,918 | 16,255 | 6,469 | ||||||||||||
| Income tax expense |
943 | 1,044 | 2,244 | 1,087 | ||||||||||||
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| Net income |
$ | 6,448 | $ | 4,874 | $ | 14,011 | $ | 5,382 | ||||||||
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| Earnings per share: |
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| Basic |
$ | 0.09 | $ | 0.07 | $ | 0.20 | $ | 0.08 | ||||||||
| Diluted |
$ | 0.09 | $ | 0.07 | $ | 0.20 | $ | 0.08 | ||||||||
| Weighted average number of common and common equivalent shares outstanding: |
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| Basic |
69,613 | 65,513 | 68,968 | 64,388 | ||||||||||||
| Diluted |
70,892 | 68,018 | 71,595 | 66,341 | ||||||||||||
|
(1) Stock-basedcompensation included in: |
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| Cost of revenues - products |
$ | 81 | $ | 115 | $ | 329 | $ | 371 | ||||||||
| Cost of revenues - services |
31 | 44 | 125 | 140 | ||||||||||||
| Research and development |
918 | 1,191 | 3,374 | 3,748 | ||||||||||||
| Sales and marketing |
679 | 772 | 2,546 | 2,503 | ||||||||||||
| General and administrative |
1,172 | 916 | 3,614 | 2,468 | ||||||||||||
| (2) The three months ended September 30, 2010 included out-of-period adjustments attributable to the three months ended June 30, 2010, which decreased non-cash amortization of intangible assets by $333,000 and increased interest income and other, net by $267,000. |
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IXIA
Non-GAAP Information and Reconciliation to Comparable GAAP Financial Measures
(in thousands, except percentages and per share data)
(unaudited)
| Three months ended September 30, | ||||||||||||||
| 2011 | 2010 | |||||||||||||
| Amount ($) | % Total Revenues |
Amount ($) | % Total Revenues | |||||||||||
| Total revenues |
$ | 77,271 | 100% | $ | 70,890 | 100% | ||||||||
| Total cost of revenues – GAAP |
$ | 15,737 | 20.4% | $ | 15,766 | 22.2% | ||||||||
| Stock-based compensation(a) |
(112 | ) | -0.2% | (159 | ) | -0.2% | ||||||||
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| Total cost of revenues – Non-GAAP |
$ | 15,625 | 20.2% | $ | 15,607 | 22.0% | ||||||||
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| Operating expenses – GAAP |
$ | 53,365 | 69.1% | $ | 49,784 | 70.2% | ||||||||
| Amortization of intangible assets(b) |
(4,239 | ) | -5.5% | (3,532 | ) | -5.0% | ||||||||
| Acquisition and other related(c) |
(377 | ) | -0.5% | (312 | ) | -0.4% | ||||||||
| Restructuring(d) |
— | —% | (30 | ) | -0.0% | |||||||||
| Stock-based compensation(a) |
(2,769 | ) | -3.6% | (2,879 | ) | -4.1% | ||||||||
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| Operating expenses – Non-GAAP |
$ | 45,980 | 59.5% | $ | 43,031 | 60.7% | ||||||||
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| Operating margin – GAAP |
$ | 8,169 | 10.6% | $ | 5,340 | 7.5% | ||||||||
| Amortization of intangible assets(b) |
4,239 | 5.5% | 3,532 | 5.0% | ||||||||||
| Acquisition and other related(c) |
377 | 0.5% | 312 | 0.4% | ||||||||||
| Restructuring(d) |
— | —% | 30 | 0.0% | ||||||||||
| Stock-based compensation(a) |
2,881 | 3.7% | 3,038 | 4.4% | ||||||||||
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| Operating margin – Non-GAAP |
$ | 15,666 | 20.3% | $ | 12,252 | 17.3% | ||||||||
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| Income tax expense – GAAP |
$ | 943 | 1.2% | $ | 1,044 | 1.5% | ||||||||
| Effect of reconciling items(e) |
1,906 | 2.5% | 1,998 | 2.8% | ||||||||||
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| Income tax expense – Non-GAAP |
$ | 2,849 | 3.7% | $ | 3,042 | 4.3% | ||||||||
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| Net income – GAAP |
$ | 6,448 | 8.3% | $ | 4,874 | 6.9% | ||||||||
| Effect of reconciling items(f) |
5,591 | 7.3% | 4,914 | 6.9% | ||||||||||
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| Net income – Non-GAAP |
$ | 12,039 | 15.6% | $ | 9,788 | 13.8% | ||||||||
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| Diluted earnings per share – GAAP |
$ | 0.09 | $ | 0.07 | ||||||||||
| Effect of reconciling items(g)(h) |
0.07 | 0.07 | ||||||||||||
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| Diluted earnings per share – Non-GAAP |
$ | 0.16 | $ | 0.14 | ||||||||||
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| (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, Agilent Technologies’ N2X Data Network Testing Product line and our recent acquisition of VeriWave, Inc. 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, we provide investors with supplemental information that is useful in evaluating our ongoing operations and performance. While the amortization of acquisition-related 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 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 costs, 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 represents the income tax effects of the reconciling items noted in footnotes (a), (b), (c) and (d) as well as changes in the valuation allowance relating to the company’s deferred tax assets. |
| (f) | This adjustment represents the effects of the reconciling items noted in footnotes (a), (b), (c), (d) and (e). |
| (g) | This adjustment represents the effects of the reconciling items noted in footnotes (a), (b), (c), (d) and (e), on a diluted per share basis. |
| (h) | This reconciling item for the three months ended September 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. |
IXIA
Non-GAAP Information and Reconciliation to Comparable GAAP Financial Measures
(in thousands, except percentages and per share data)
(unaudited)
| Nine months ended September 30, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
| Amount ($) | % Total Revenues |
Amount ($) | % Total Revenues |
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| Total revenues |
$ | 224,705 | 100% | $ | 199,035 | 100% | ||||||||||
| Total cost of revenues – GAAP |
$ | 45,881 | 20.4% | $ | 44,010 | 22.1% | ||||||||||
| Stock-based compensation(a) |
(454 | ) | -0.2% | (511 | ) | -0.2% | ||||||||||
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| Total cost of revenues – Non-GAAP |
$ | 45,427 | 20.2% | $ | 43,499 | 21.9% | ||||||||||
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| Operating expenses – GAAP |
$ | 158,982 | 70.8% | $ | 158,230 | 79.5% | ||||||||||
| Amortization of intangible assets(b) |
(11,718 | ) | -5.2% | (13,676 | ) | -6.9% | ||||||||||
| Acquisition and other related(c) |
(851 | ) | -0.4% | (2,991 | ) | -1.5% | ||||||||||
| Restructuring(d) |
— | —% | (3,587 | ) | -1.8% | |||||||||||
| Stock-based compensation(a) |
(9,534 | ) | -4.2% | (8,719 | ) | -4.4% | ||||||||||
| Legal and contract settlements(e) |
(900 | ) | -0.5% | — | —% | |||||||||||
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| Operating expenses – Non-GAAP |
$ | 135,979 | 60.5% | $ | 129,257 | 64.9% | ||||||||||
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| Operating margin – GAAP |
$ | 19,842 | 8.8% | $ | (3,205 | ) | -1.6% | |||||||||
| Amortization of intangible assets(b) |
11,718 | 5.2% | 13,676 | 6.9% | ||||||||||||
| Acquisition and other related(c) |
851 | 0.4% | 2,991 | 1.5% | ||||||||||||
| Restructuring(d) |
— | —% | 3,587 | 1.8% | ||||||||||||
| Stock-based compensation(a) |
9,988 | 4.4% | 9,230 | 4.6% | ||||||||||||
| Legal and contract settlements(e) |
900 | 0.5% | — | —% | ||||||||||||
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| Operating margin – Non-GAAP |
$ | 43,299 | 19.3% | $ | 26,279 | 13.2% | ||||||||||
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| Interest income and other, net – GAAP |
$ | 1,813 | 0.8% | $ | 9,674 | 4.9% | ||||||||||
| Auction rate securities settlements(f) |
— | —% | (8,925 | ) | -4.5% | |||||||||||
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| Interest income and other, net – Non-GAAP |
$ | 1,813 | 0.8% | $ | 749 | 0.4% | ||||||||||
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| Income tax expense – GAAP |
$ | 2,244 | 1.0% | $ | 1,087 | 0.5% | ||||||||||
| Effect of reconciling items(g) |
7,430 | 3.3% | 6,016 | 3.1% | ||||||||||||
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| Income tax expense – Non-GAAP |
$ | 9,674 | 4.3% | $ | 7,103 | 3.6% | ||||||||||
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| Net income – GAAP |
$ | 14,011 | 6.2% | $ | 5,382 | 2.7% | ||||||||||
| Effect of reconciling items(h) |
16,027 | 7.2% | 14,543 | 7.3% | ||||||||||||
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| Net income – Non-GAAP |
$ | 30,038 | 13.4% | $ | 19,925 | 10.0% | ||||||||||
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| Diluted earnings per share – GAAP |
$ | 0.20 | $ | 0.08 | ||||||||||||
| Effect of reconciling items(i)(j) |
0.21 | 0.22 | ||||||||||||||
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| Diluted earnings per share – Non-GAAP |
$ | 0.41 | $ | 0.30 | ||||||||||||
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| (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, Agilent Technologies’ N2X Data Network Testing Product line and our recent acquisition of VeriWave, Inc. 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, we provide investors with supplemental information that is useful in evaluating our ongoing operations and performance. While the amortization of acquisition-related 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 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 costs, 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), (f) and (g). |
| (i) | This adjustment represents the effects of the reconciling items noted in footnotes (a), (b), (c), (d), (e), (f) and (g), on a diluted per share basis. |
| (j) | This reconciling item for the nine months ended September 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. |