Press Release

Ixia Announces Financial Results for 2016 First Quarter

Posted 05/03/2016

CALABASAS, Calif.--(BUSINESS WIRE)--May 3, 2016-- Ixia (Nasdaq: XXIA) today reported its financial results for the first quarter ended March 31, 2016.

Total revenue for the 2016 first quarter was $112.7 million, compared with $121.0 million reported for the 2015 first quarter and $138.5 million reported for the 2015 fourth quarter.

"While our results in the quarter were impacted by some near-term headwinds, we remain confident in our product portfolio and go-to-market strategy," said Bethany Mayer, Ixia’s president and chief executive officer. "We believe we are well positioned to capitalize on the growing technology trends across enterprise, service provider, and cloud networks by leveraging our security expertise and IP across our test and visibility products. We are continuing to focus on investing in leading edge technologies that address ongoing complex networking and security challenges and foster growth for our business over the long term.”

On a GAAP basis, the company recorded a net loss for the 2016 first quarter of $2.7 million, or $0.03 per diluted share, compared with a net loss of $9.6 million, or $0.12 per diluted share, for the 2015 first quarter, and net income of $5.8 million, or $0.07 per diluted share, for the 2015 fourth quarter.

Non-GAAP net income for the 2016 first quarter was $7.4 million, or $0.09 per diluted share, compared with non-GAAP net income of $9.7 million, or $0.12 per diluted share, for the 2015 first quarter, and non-GAAP net income of $18.7 million, or $0.22 per diluted share for the 2015 fourth quarter.

Additional non-GAAP information and GAAP to Non-GAAP reconciliation information may be found in the attached financial tables.

Ixia ended the 2016 first quarter with $80.9 million in cash, cash equivalents, and investments, compared with $67.0 million at December 31, 2015.

Conference Call and Webcast Information

Ixia will host a conference call today at 1:30 p.m. Pacific time (4:30 p.m. Eastern time) for analysts and investors to discuss the company’s 2016 first quarter and its business outlook and guidance for the 2016 second quarter. The call will be open to the public, and interested parties may listen to the call by dialing (844) 858-9864. A live audio webcast of the conference call will be accessible from the “Investors” section of the company’s website (www.ixiacom.com/investors). Following the live webcast, an archived version will be available in the “Investors” section of the Ixia website for at least 90 days. Certain supplemental financial information will be posted promptly to the website following the issuance of this press release, and additional supplemental financial information will be posted just prior to the start of the conference call.

Non-GAAP Financial Measures

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 net income and non-GAAP diluted earnings per share) that exclude certain non-cash and/or non-recurring income and expense items such as expenses relating to internal investigations and any related remediation efforts, the pending securities class action and shareholder derivative action against the company and certain of its current and former officers and directors as well as an ongoing SEC investigation, the amortization of acquisition-related intangible assets, stock-based compensation expenses, acquisition and other related costs, restructuring expenses, 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 and/or reflective of the underlying performance of our business operations. 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, evaluating our ongoing business operations, identifying and assessing financial and business trends, and comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are provided to enhance the user's overall understanding of our financial performance. These non-GAAP financial measures are also used by management to plan and forecast future periods and to assist management in making operating and strategic decisions. The presentation of this additional information is not prepared in accordance with GAAP. The information may not necessarily be comparable to that of other companies that may calculate their non-GAAP financial measures differently and should be considered as a supplement to, and 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 and also posted on our website.

Safe Harbor under the Private Securities Litigation Reform Act of 1995

Certain statements made in this press release may be deemed to be forward-looking statements including, without limitation, statements regarding the company’s go-to-market strategy, positioning to capitalize on growing technology trends, and focus on investing in leading edge technologies. In some cases, such forward-looking statements can be identified by words such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "project," "predict," "potential," or the like. These statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. These risks and uncertainties, as well as other factors, may cause our future results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors that could cause the actual results to differ materially from those expressed or implied in such forward-looking statements include, among others: our success in developing, producing, and introducing new products and in keeping pace with the rapid technological changes that characterize our market; our success in developing new sales channels and customers; market acceptance of our products; competition; changes in the global economy and in market conditions; consistency of orders from significant customers; our success in leveraging our intellectual property portfolio, expertise and market opportunities; our expectations regarding the transition into Software Defined Networks (SDN) and Network Functions Virtualization (NFV); material weaknesses in our internal controls; and war, terrorism, political unrest, natural disasters, cybersecurity attacks, and other circumstances that could, among other consequences, reduce the demand for our products, disrupt our supply chain, impact the delivery of our products, and/or change our business strategy, market positioning, and business plans and focus and/or affect our ability to execute on such strategy and plans. The factors that may cause future results to differ materially from our current expectations also include, without limitation, the risks identified in our Annual Report on Form 10-K for the year ended December 31, 2015 and in our other filings with the 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.

About Ixia

Ixia (Nasdaq: XXIA) provides testing, visibility, and security solutions, strengthening applications across physical and virtual networks for enterprises, service providers, and network equipment manufacturers. Ixia offers companies trusted environments in which to develop, deploy, and operate. Customers worldwide rely on Ixia to verify their designs, optimize their performance, and ensure protection of their networks to make their applications stronger.

Learn more at www.ixiacom.com.

Ixia and the Ixia logo are trademarks or registered trademarks of Ixia in the United States and other jurisdictions.

 
IXIA
Consolidated Balance Sheets
(in thousands)

(unaudited)

 
    March 31,   December 31,
    2016   2015
Assets        
Current assets:        
Cash and cash equivalents   $ 61,378     $ 52,472  
Marketable securities   19,521     14,504  
Accounts receivable, net of allowances of $1,131 and $1,107, as of March 31, 2016 and December 31, 2015, respectively   95,727     121,932  
Inventories   31,164     33,289  
Prepaid expenses and other current assets   41,911     44,384  
Total current assets   249,701     266,581  
Property and equipment, net   37,706     36,536  
Intangible assets, net   93,976     103,660  
Goodwill   338,873     338,873  
Other assets   35,883     34,227  
Total assets   $ 756,139     $ 779,877  
         
Liabilities and Shareholders’ Equity        
Current liabilities:        
Accounts payable   $ 9,711     $ 15,346  
Accrued expenses and other   45,698     70,029  
Deferred revenues   112,283     108,436  
Term loan, net   3,548     3,045  
Total current liabilities   171,240     196,856  
Deferred revenues   22,592     22,117  
Other liabilities   6,814     7,406  
Term loan, net   32,697     34,487  
Total liabilities   233,343     260,866  
         
Shareholders’ equity:        
Common stock, without par value; 200,000 shares authorized at March 31, 2016 and December 31, 2015; 81,233 and 80,805 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively   202,681     201,087  
Additional paid-in capital   230,073     225,432  
Retained earnings   90,838     93,525  
Accumulated other comprehensive loss   (796 )   (1,033 )
Total shareholders’ equity   522,796     519,011  
Total liabilities and shareholders’ equity   $ 756,139     $ 779,877  
 
IXIA
Condensed Consolidated Statements of Operations
(in thousands, except per share data)

(unaudited)

 
    Three Months Ended
    March 31,
    2016   2015
Revenues:        
Products   $ 71,973     $ 85,904  
Services   40,700     35,058  
Total revenues   112,673     120,962  
Costs and operating expenses: (1)        
Cost of revenues – products (2)   21,041     24,051  
Cost of revenues – services   4,185     4,516  
Research and development   27,462     27,626  
Sales and marketing   39,031     37,521  
General and administrative   15,888     18,371  
Amortization of intangible assets   9,979     10,923  
Acquisition and other related costs   26     582  
Restructuring   (184 )   (210 )
Total costs and operating expenses   117,428     123,380  
Loss from operations   (4,755 )   (2,418 )
Interest income and other, net   300     (481 )
Interest expense   (514 )   (2,147 )
Loss before income taxes   (4,969 )   (5,046 )
Income tax (benefit) expense   (2,282 )   4,565  
Net loss   $ (2,687 )   $ (9,611 )
Loss per share:        
Basic   $ (0.03 )   $ (0.12 )
Diluted   $ (0.03 )   $ (0.12 )
Weighted average number of common and common equivalent shares outstanding:        
Basic   81,015     78,706  
Diluted   81,015     78,706  
         
(1) Stock-based compensation included in:        
Cost of revenues – products   $ 87     $ 95  
Cost of revenues – services   33     36  
Research and development   1,693     2,093  
Sales and marketing   1,648     1,049  
General and administrative   1,480     1,874  
     
(2)  

Cost of revenues – products excludes amortization of intangible assets related to purchased technologies of $6.4 million for each of the three months ended March 31, 2016 and 2015, which are included in Amortization of intangible assets.

 
IXIA
Non-GAAP Information and Reconciliation to Most Directly Comparable GAAP Financial Measures
(in thousands, except per share data)

(unaudited)

 
    Three Months Ended
    March 31,
    2016   2015
GAAP net loss   $ (2,687 )   $ (9,611 )
Adjustments:        
Stock-based compensation (a)   4,941     5,147  
Amortization of intangible assets (b)   9,979     10,923  
Acquisition and other related costs (c)   26     582  
Restructuring (d)   (184 )   (210 )
Investigations, shareholder litigation and related matters (e)   991     2,688  
Income tax effect (f)   (5,673 )   191  
Non-GAAP net income   $ 7,393     $ 9,710  
         
GAAP diluted loss per share   $ (0.03 )   $ (0.12 )
Adjustments:        
Stock-based compensation (a)   0.06     0.06  
Amortization of intangible assets (b)   0.12     0.14  
Acquisition and other related costs (c)   0.00     0.01  
Restructuring (d)   0.00     0.00  
Investigations, shareholder litigation and related matters (e)   0.01     0.03  
Income tax effect (f)   (0.07 )   0.00  
Convertible senior notes (g)       0.00  
Non-GAAP diluted earnings per share   $ 0.09     $ 0.12  
         
Shares used in computing GAAP diluted earnings per common share   81,015     78,706  
Effect of reconciling item (g)(h)   1,112     11,568  
Shares used in computing non-GAAP diluted earnings per common share   82,127     90,274  
     
(a)   This reconciling item represents stock-based compensation. 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, we provide investors 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 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. As 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: professional fees for legal, accounting, tax, due diligence, valuation, and other related services; amortization of deferred compensation; consulting fees; required regulatory costs; 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 plans. During the first quarter of 2014, we initiated a plan to restructure certain of our operations following our December 5, 2013 acquisition of Net Optics, Inc. During the third quarter of 2014, we implemented a company-wide restructuring initiative to restructure our operations to better align our operating costs with our business opportunities. The restructuring costs associated with our restructuring plans primarily relate to employee termination benefits, lease exit costs and other 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 reconciling item represents costs incurred related to (i) internal investigations and any related remediation efforts, (ii) the securities class action against the company and certain of its current and former officers and directors as well as a shareholder derivative action, and (iii) an SEC investigation. These costs consist primarily of legal and accounting fees, recruiting and consulting expenses, severance and retention costs, and other related expenses. We believe that by excluding these non-recurring costs, we are providing 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 adjustment represents the income tax effects of the reconciling items noted in footnotes (a), (b), (c), (d), and (e), as well as certain other non-cash income tax impacts such as changes in the valuation allowance relating to certain deferred tax assets.
(g)   This reconciling item for the non-GAAP diluted earnings per share calculation for the three months ended March 31, 2015 includes the impact of our convertible senior notes as these were anti-dilutive for the equivalent GAAP earnings per share calculations.
(h)   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.

 

Source: Ixia

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