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Ixia (Nasdaq: XXIA) today reported its financial results for the
fourth quarter and year ended December 31, 2012.
Total revenue for the 2012 fourth quarter was a record $124.1 million,
compared with $83.7 million reported for the 2011 fourth quarter and
$109.6 million reported for the 2012 third quarter. The 2012 fourth
quarter includes $30.3 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.
Excluding Anue and BreakingPoint, fourth quarter revenue grew 12 percent
to $93.8 million in 2012 from $83.7 million a year ago.
Total revenue for the fiscal year 2012 was a record $411.7 million, an
increase of 34 percent compared with $308.4 million reported for fiscal
year 2011. Fiscal year 2012 includes $54.9 million in revenue
attributable to Anue and BreakingPoint. For the full year, excluding
Anue and BreakingPoint revenue in calendar 2012, revenue grew 16 percent
to $356.8 million.
“Our strong fourth quarter capped off a transformational year that
included completing two significant acquisitions and achieving record
revenue and profit,” commented Vic Alston, Ixia's president and chief
executive officer. “In the quarter, demand was strong across our entire
solution offering with revenue from our Anue and BreakingPoint solutions
exceeding our expectations. We made solid progress expanding our
customer base with service provider and enterprise accounts hitting 50
percent of revenue in the quarter.”
Alston continued, “Looking forward into 2013, we intend to continue
building on our momentum and growing our presence among service
providers and enterprises as we help them optimize their networks and
datacenters worldwide to accelerate, secure and scale application
delivery.”
On a GAAP basis, the company recorded net income for the 2012 fourth
quarter of $4.6 million, or $0.06 per diluted share, compared with net
income of $9.8 million, or $0.14 per diluted share, for the 2011 fourth
quarter. The company recorded GAAP net income for fiscal year 2012 of
$47.2 million, or $0.61 per diluted share, compared with $23.8 million
or $0.33 per diluted share, for fiscal year 2011. GAAP results for the
fiscal year 2012 include a tax benefit of approximately $37.4 million,
or $0.44 per diluted share, for the reversal of valuation allowances
related to deferred tax assets.
Non-GAAP net income for the 2012 fourth quarter was a record $19.5
million, or $0.24 per diluted share, compared with non-GAAP net income
of $13.7 million, or $0.18 per diluted share, for the 2011 fourth
quarter. The company recorded non-GAAP net income for fiscal year 2012
of $60.7 million, or $0.77 per diluted share, compared with $43.8
million, or $0.59 per diluted share, for fiscal year 2011.
Additional non-GAAP information and a reconciliation of our non-GAAP
measures to the most directly comparable GAAP financial measures for the
2012 and 2011 fourth quarters and fiscal years may be found in the
attached financial tables.
Ixia ended the fourth quarter with approximately $177 million in cash,
cash equivalents and investments, compared with $154 million at
September 30, 2012.
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 fourth quarter results and
its business outlook for the 2013 first 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 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 solutions deliver actionable insight through real-time monitoring,
real-world testing, and rapid assessment. This end-to-end visibility
provides organizations with a complete understanding into user behavior,
security vulnerabilities, network capacity, application performance, and
IT resiliency. From the lab to the network to the cloud, Ixia solutions
enable its customers to optimize networks and data centers to
accelerate, secure, and scale application delivery. 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 and BreakingPoint 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.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31,
December 31,
2012
2011
Assets
Current assets:
Cash and cash equivalents
$
47,508
$
42,729
Short-term investments in marketable securities
126,851
156,684
Accounts receivable, net
103,587
65,357
Inventories
37,612
27,239
Prepaid expenses and other current assets
40,278
12,700
Total current assets
355,836
304,709
Investments in marketable securities
3,119
185,608
Property and equipment, net
28,763
25,060
Intangible assets, net
157,050
46,028
Goodwill
260,457
66,429
Other assets
9,723
6,633
Total assets
$
814,948
$
634,467
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
$
12,264
$
5,005
Accrued expenses and other
51,524
28,196
Deferred revenues
70,628
40,963
Total current liabilities
134,416
74,164
Deferred revenues
14,091
10,092
Other liabilities
25,049
5,849
Convertible senior notes
200,000
200,000
Total liabilities
373,556
290,105
Shareholders’ equity:
Common stock, without par value; 200,000 shares authorized at
December 31, 2012 and 2011; 74,126 and 70,240 shares issued and
outstanding as of December 31, 2012 and 2011, respectively
158,933
132,330
Additional paid-in capital
168,980
145,840
Retained earnings
111,190
63,962
Accumulated other comprehensive income
2,289
2,230
Total shareholders’ equity
441,392
344,362
Total liabilities and shareholders’ equity
$
814,948
$
634,467
IXIA
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three months ended
Year ended
December 31,
December 31,
2012
2011
2012
2011
Revenues:
Products
$
97,481
$
67,689
$
331,118
$
249,670
Services
26,638
15,962
80,539
58,686
Total revenues
124,119
83,651
411,657
308,356
Costs and operating expenses:(1)
Cost of revenues – products
21,765
15,602
71,276
56,801
Cost of revenues – services
2,898
1,838
10,493
6,520
Research and development
29,220
19,105
98,380
75,101
Sales and marketing
37,506
22,486
117,302
87,011
General and administrative
11,779
7,756
45,443
33,648
Amortization of intangible assets
10,758
4,262
30,121
15,980
Acquisition and other related
3,389
249
11,861
1,100
Restructuring
1,979
—
4,077
—
Total costs and operating expenses
119,294
71,298
388,953
276,161
Income from operations
4,825
12,353
22,704
32,195
Interest income and other, net
615
246
2,255
2,059
Interest expense
(1,815
)
(1,800
)
(7,215
)
(7,200
)
Income before income taxes
3,625
10,799
17,744
27,054
Income tax (benefit) expense
(970
)
1,035
(29,484
)
3,279
Net income
$
4,595
$
9,764
$
47,228
$
23,775
Earnings per share:
Basic
$
0.06
$
0.14
$
0.65
$
0.34
Diluted
$
0.06
$
0.14
$
0.61
$
0.33
Weighted average number of common and common equivalent shares
outstanding:
Basic
73,746
70,012
72,183
69,231
Diluted
75,521
71,821
84,505
71,664
(1) Stock-based compensation included in:
Cost of revenues - products
$
167
$
73
$
423
$
402
Cost of revenues - services
63
28
162
153
Research and development
2,686
912
6,242
4,286
Sales and marketing
2,375
750
5,352
3,296
General and administrative
2,316
840
7,462
4,454
IXIA
Non-GAAP Information and Reconciliation to Most Directly
Comparable GAAP Financial Measures
(in thousands, except per share data)
(unaudited)
Three months ended
December 31,
Year ended
December 31,
2012
2011
2012
2011
GAAP income from operations
$
4,825
$
12,353
$
22,704
$
32,195
Adjustments:
Stock-based compensation(a)
7,607
2,603
19,641
12,591
Amortization of intangible assets(b)
10,758
4,262
30,121
15,980
Acquisition and other related(c)
3,389
249
11,861
1,100
Restructuring(d)
1,979
—
4,077
—
Legal, contract settlements and other(e)
—
(900
)
2,083
—
Inventory adjustments(f)
664
—
996
—
Non-GAAP income from operations
$
29,222
$
18,567
$
91,483
$
61,866
GAAP net income
$
4,595
$
9,764
$
47,228
$
23,775
Adjustments:
Stock-based compensation(a)
7,607
2,603
19,641
12,591
Amortization of intangible assets(b)
10,758
4,262
30,121
15,980
Acquisition and other related(c)
3,389
249
11,861
1,100
Restructuring(d)
1,979
—
4,077
—
Legal, contract settlements and other(e)
—
(900
)
2,083
—
Inventory adjustments(f)
664
—
996
—
Income tax effect related to non-GAAP adjustments(g)
(9,529
)
(2,237
)
(55,324
)
(9,667
)
Non-GAAP net income
$
19,463
$
13,741
$
60,683
$
43,779
GAAP diluted earnings per share
$
0.06
$
0.14
$
0.61
$
0.33
Adjustments:
Stock-based compensation(a)
0.10
0.04
0.23
0.18
Amortization of intangible assets(b)
0.14
0.06
0.36
0.22
Acquisition and other related(c)
0.04
—
0.14
0.02
Restructuring(d)
0.03
—
0.05
—
Legal, contract settlements and other(e)
—
(0.02
)
0.02
—
Inventory adjustments(f)
0.01
—
0.01
—
Income tax effect related to non-GAAP adjustments(g)
(0.13
)
(0.03
)
(0.65
)
(0.14
)
Convertible senior notes(h)
(0.01
)
(0.01
)
—
(0.02
)
Non-GAAP diluted earnings per share
$
0.24
$
0.18
$
0.77
$
0.59
Shares used in computing GAAP diluted earnings per common share
75,521
71,821
84,505
71,664
Effect of reconciling item(h)(i)
10,224
10,059
(223
)
10,052
Shares used in computing non-GAAP diluted earnings per common
share
85,745
81,880
84,282
81,716
(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, VeriWave, Inc., Anue Systems, Inc. and BreakingPoint Systems,
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
acquisition-related activities. Acquisition and other related costs
consist primarily of transaction and integration related costs such
as success-based banking fees, professional fees for legal,
accounting and tax services, integration related consulting fees,
amortization of deferred consideration payable to certain
pre-acquisition employees of BreakingPoint Systems, Inc., certain
employee, facility and infrastructure 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 associated with our
restructuring/reorganization plans in light of our acquisition of
BreakingPoint Systems, Inc. These costs primarily relate to one-time
employee termination benefits consisting of severance and other
related costs, and costs related to the closure of our office in
Melbourne, Australia. 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 reconciling item represents a one-time charge of $900,000
incurred in the first quarter of 2011 to terminate and settle a
development contract, a one-time reversal of $900,000 incurred in
the fourth quarter of 2011 related to certain legal and contractual
matters, a one-time transition charge of $1.7 million incurred in
the first quarter of 2012 in connection with the departure of our
former CEO and a one-time charge of $401,000 incurred in the second
quarter of 2012 to settle a legal matter. We believe that by
excluding these charges, we provide our 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 relates to the purchase price accounting
adjustment associated with the fair value of inventory as a result
of the acquisition of BreakingPoint Systems, Inc. recorded in the
third and fourth quarters of 2012. While we may have similar charges
in the future resulting from purchase price accounting adjustments,
management excludes these expenses when evaluating current
performance, forecasting future results, measuring core operating
results, and making operating and strategic decisions. We believe
that by excluding these charges, 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
certain other non-cash income tax impacts such as changes in the
valuation allowance relating to the company’s deferred tax assets.
We recorded partial release of our valuation allowance of $22.6
million, $12.7 million and $2.1 million, in the second, third and
fourth quarters of 2012, respectively.
(h)
This reconciling item for the non-GAAP diluted earnings per share
calculation for the three and twelve months ended December 31, 2011
and for the three months ended December 31, 2012 includes the impact
of the convertible senior notes as these were anti-dilutive for the
equivalent GAAP earnings per share calculations.
(i)
This adjustment represents the effects of stock-based compensation
on diluted common equivalent shares outstanding as well as any
adjustments required due to a change from a net loss to a net income
position.
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