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Ixia Announces Third Quarter Results
CALABASAS, Calif. --(Business Wire)-- Ixia (Nasdaq: XXIA) today announced financial results for the third quarter of 2008.
Total revenues for the third quarter of 2008 were $47.3 million, which compares to $45.9 million in the immediately preceding second quarter of 2008 and $44.0 million in the third quarter of 2007. For the third quarter of 2008, Ixia reported net income on a GAAP basis of $483,000, or $0.01 per diluted share, compared to net income of $1.9 million, or $0.03 per diluted share, for the third quarter of 2007. Net income for the third quarter of 2008 reflects an impairment charge of approximately $4.3 million related to bonds ($5.0 million face value) issued by Lehman Brothers Holdings, Inc.
Ixia's 2008 third quarter GAAP results include non-cash charges of $2.4 million related to stock-based compensation, $1.4 million for the amortization of acquired intangible assets, $4.3 million for the bond impairment mentioned above, and a net tax benefit of approximately $2.2 million related to these items. Excluding the effects of these items, non-GAAP net income for the third quarter of 2008 was $6.3 million, or $0.10 per diluted share, compared to $5.8 million, or $0.08 per diluted share, for the third quarter of 2007. Third quarter 2007 non-GAAP results exclude non-cash charges of $3.8 million related to stock-based compensation, $1.7 million related to the amortization of acquired intangible assets, and a net tax benefit of $1.6 million related to these items.
"Despite a challenging economic environment, we displayed positive momentum on several fronts and delivered good operating results during the quarter," said Atul Bhatnagar, Ixia's president and chief executive officer. "Our service provider and government businesses helped propel revenue growth, while strong software sales and expense control drove our non-GAAP operating margins for the quarter to just over 15%. We also announced several important product developments during the quarter, including the unveiling of our working 40 gigabit Ethernet test solution at the Broadband World Forum in September, and the fourth quarter availability of the industry's first 100 gigabit Ethernet test device. Building on our leadership in gigabit and 10 gigabit Ethernet testing, Ixia is now the first company to demonstrate working 40 and 100 gigabit Ethernet test solutions. We believe that by continuing to be first to market with new Ethernet solutions that our customers need and demand, we will position Ixia for continued growth over the next several years."
As of September 30, 2008, Ixia had cash, cash equivalents and investments of $217 million and no debt.
Ixia will host a conference call today for analysts and investors to discuss its 2008 third quarter results and business outlook for the 2008 fourth quarter at 5:00 p.m. Eastern Time. Open to the public, a live webcast of the conference call 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 income, non-GAAP income tax expense, non-GAAP net income, and non-GAAP diluted earnings per share) that exclude certain non-cash expenses such as the amortization or impairment of acquisition-related intangible assets, the impairment charges related to certain investments and stock-based compensation, as well as the related income tax effects of such items. The amortization or impairment of acquisition-related intangible assets, the impairment charges related to certain investments and stock-based compensation represent non-cash charges that may be difficult to estimate from period to period and that 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 certain non-cash charges, as well as the related income tax effects, 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 this press release.
About Ixia
Ixia is a leading provider of IP performance test systems and service verification platforms for IP-based infrastructure and services. Ixia's test systems are used by network and telephony equipment manufacturers, semiconductor manufacturers, service providers, governments and enterprises to validate the performance and reliability of complex IP networks, devices, and applications. Ixia's multiplay test systems address the growing need to test voice, video, and data services and network capability under real-world conditions.
For more information, contact Ixia at 26601 W. Agoura Road, Calabasas, CA 91302; (818) 871-1800, Fax: (818) 871-1805; Email: info@ixiacom.com or visit our Web Site at http://www.ixiacom.com.
Ixia and the Ixia four petal logo are trademarks and/or registered trademarks of Ixia. Other trademarks are the property of their respective owners.
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 possible future revenues, growth and profitability and future business and market share. 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 those identified in our Annual Report on Form 10-K for the year ended December 31, 2007 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.
IXIA
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2008 2007
------------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 170,139 $ 188,892
Short-term investments in marketable
securities 4,998 4,999
Accounts receivable, net 37,234 32,405
Inventories 11,477 12,731
Deferred income taxes 5,707 5,613
Prepaid expenses and other current assets 3,785 3,385
------------- ------------
Total current assets 233,340 248,025
Investments in marketable securities 41,960 54,609
Property and equipment, net 19,816 21,433
Deferred income taxes 15,093 13,543
Intangible assets, net 11,863 14,147
Goodwill 16,728 16,728
Other assets 2,453 955
------------- ------------
Total assets $ 341,253 $ 369,440
============= ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,490 $ 2,474
Accrued expenses 19,957 19,440
Deferred revenues 18,950 18,748
Income taxes payable 586 1,304
------------- ------------
Total current liabilities 42,983 41,966
Deferred revenues 6,608 7,167
Other liabilities 5,248 3,807
------------- ------------
Total liabilities 54,839 52,940
------------- ------------
Shareholders' equity:
Common stock, without par value; 200,000
shares authorized at September 30, 2008
and December 31, 2007; 63,563 and 68,171
shares issued and outstanding as of
September 30, 2008 and December 31, 2007,
respectively 93,864 132,092
Additional paid-in capital 105,294 98,157
Retained earnings 91,447 89,077
Accumulated other comprehensive loss (4,191) (2,826)
------------- ------------
Total shareholders' equity 286,414 316,500
------------- ------------
Total liabilities and shareholders'
equity $ 341,253 $ 369,440
============= ============
IXIA
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ -------------------
2008 2007 2008 2007
---------- ------- --------- ---------
Revenues:
Products $ 39,888 $37,247 $113,605 $108,826
Services 7,436 6,787 21,290 18,910
---------- ------- --------- ---------
Total revenues 47,324 44,034 134,895 127,736
---------- ------- --------- ---------
Costs and operating
expenses:(1)
Cost of revenues - products 8,100 8,523 24,940 24,757
Cost of revenues -
amortization of purchased
technology 1,173 1,220 3,613 3,976
Cost of revenues - services 965 865 3,153 2,925
Research and development 12,483 12,767 36,999 35,377
Sales and marketing 14,474 13,944 44,203 42,253
General and administrative 6,526 6,109 19,668 18,440
Amortization of intangible
assets 201 430 669 1,575
Impairment of purchased
technology and intangible
assets -- -- -- 3,263
---------- ------- --------- ---------
Total costs and operating
expenses 43,922 43,858 133,245 132,566
---------- ------- --------- ---------
Income (loss) from
operations 3,402 176 1,650 (4,830)
Interest and other income, net 1,405 2,818 5,938 8,429
Other-than-temporary impairment
on investments (4,298) -- (4,298) --
---------- ------- --------- ---------
Income before income taxes 509 2,994 3,290 3,599
Income tax expense 26 1,068 920 1,032
---------- ------- --------- ---------
Net income $ 483 $ 1,926 $ 2,370 $ 2,567
========== ======= ========= =========
Earnings per share:
Basic $ 0.01 $ 0.03 $ 0.04 $ 0.04
Diluted $ 0.01 $ 0.03 $ 0.04 $ 0.04
Weighted average number of
common and common equivalent
shares outstanding:
Basic 63,473 68,192 65,580 67,805
Diluted 64,416 69,572 66,539 69,298
-------------------------------
(1) Stock-based compensation
included in:
Cost of revenues - products $ 120 $ 157 $ 368 $ 383
Cost of revenues - services 45 60 140 146
Research and development 866 1,590 2,749 3,850
Sales and marketing 781 1,130 2,555 3,496
General and administrative 552 861 1,920 1,821
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,
-----------------------------------
2008 2007
----------------- -----------------
Amount % Total Amount % Total
($) Revenues ($) Revenues
-------- -------- -------- --------
Total cost of revenues - GAAP $10,238 21.6% $10,608 24.1%
Amortization of purchased
technology(a) (1,173) -2.5% (1,220) -2.8%
Stock-based compensation(b) (165) -0.3% (217) -0.5%
-------- -------- -------- --------
Total cost of revenues - Non-GAAP $ 8,900 18.8% $ 9,171 20.8%
======== ======== ======== ========
Operating expenses - GAAP $33,684 71.2% $33,250 75.5%
Amortization of intangible
assets(a) (201) -0.4% (430) -1.0%
Stock-based compensation(b) (2,199) -4.7% (3,581) -8.1%
-------- -------- -------- --------
Operating expenses - Non-GAAP $31,284 66.1% $29,239 66.4%
======== ======== ======== ========
Income from operations - GAAP $ 3,402 7.2% $ 176 0.4%
Effect of reconciling items(c) 3,738 7.9% 5,448 12.4%
-------- -------- -------- --------
Income from operations - Non-GAAP $ 7,140 15.1% $ 5,624 12.8%
======== ======== ======== ========
Other-than-temporary impairment on
investments - GAAP $(4,298) -9.1% $ -- --%
Effect of reconciling items(d) 4,298 9.1% -- --%
-------- -------- -------- --------
Other-than-temporary impairment on
investments - Non-GAAP $ -- --% $ -- --%
======== ======== ======== ========
Income tax expense - GAAP $ 26 0.1% $ 1,068 2.4%
Effect of reconciling items(e) 2,188 4.6% 1,588 3.6%
-------- -------- -------- --------
Income tax expense - Non-GAAP $ 2,214 4.7% $ 2,656 6.0%
======== ======== ======== ========
Net income - GAAP $ 483 1.0% $ 1,926 4.4%
Effect of reconciling items(f) 5,848 12.4% 3,860 8.7%
-------- -------- -------- --------
Net income - Non-GAAP $ 6,331 13.4% $ 5,786 13.1%
======== ======== ======== ========
Diluted earnings per share - GAAP $ 0.01 $ 0.03
Effect of reconciling items(g) 0.09 0.05
-------- --------
Diluted earnings per share - Non-
GAAP $ 0.10 $ 0.08
======== ========
(a) This reconciling item represents the amortization of intangible
assets related to the acquisitions of various businesses and
technologies such as the acquisition of the ANVL(TM) product line
from Empirix, Inc., the acquisition of certain rights associated
with the Chariot(R) product line from NetIQ Corporation and the
acquisition of G3 Nova Technologies, 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, investors are provided
with supplemental information that is useful in evaluating our
ongoing operations and performance. While the amortization of
acquired 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.
(b) This reconciling item represents stock-based compensation expense
recognized under Statement of Financial Accounting Standards No.
123 (revised 2004), "Share-Based Payment" ("FAS 123R"). 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 adjustment represents the effects of the reconciling items
noted in footnotes (a) and (b).
(d) This reconciling item represents an other-than-temporary
impairment on long term bonds issued by Lehman Brothers Holdings,
Inc. As this other-than-temporary impairment represents a non-
cash charge that is not directly attributable to the underlying
performance of our business operations, we believe that by
excluding this other-than-temporary impairment, 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.
(e) This adjustment represents the income tax effects of the
reconciling items noted in footnotes (a), (b) and (d).
(f) This adjustment represents the effects of the reconciling items
noted in footnotes (a), (b) and (d), net of tax.
(g) This adjustment represents the effects of the reconciling items
noted in footnotes (a), (b) and (d), 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)
Nine months ended September 30,
------------------------------------
2008 2007
------------------ -----------------
Amount % Total Amount % Total
($) Revenues ($) Revenues
--------- -------- -------- --------
Total cost of revenues - GAAP $ 31,706 23.5% $33,161 26.0%
Amortization of purchased
technology(a) (3,613) -2.7% (3,976) -3.1%
Impairment of purchased
technology(b) -- 0.0% (1,503) -1.2%
Stock-based compensation(c) (508) -0.4% (529) -0.4%
--------- -------- -------- --------
Total cost of revenues - Non-GAAP $ 27,585 20.4% $27,153 21.3%
========= ======== ======== ========
Operating expenses - GAAP $101,539 75.3% $99,405 77.8%
Amortization of intangible
assets(a) (669) -0.5% (1,575) -1.2%
Impairment of intangible
assets(b) -- 0.0% (1,760) -1.4%
Stock-based compensation(c) (7,224) -5.4% (9,167) -7.2%
--------- -------- -------- --------
Operating expenses - Non-GAAP $ 93,646 69.4% $86,903 68.0%
========= ======== ======== ========
Income (loss) from operations -
GAAP $ 1,650 1.2% $(4,830) -3.8%
Effect of reconciling items(d) 12,014 9.0% 18,510 14.5%
--------- -------- -------- --------
Income from operations - Non-GAAP $ 13,664 10.2% $13,680 10.7%
========= ======== ======== ========
Other-than-temporary impairment
on investments - GAAP $ (4,298) -3.2% $ -- --%
Effect of reconciling items(e) 4,298 3.2% -- --%
--------- -------- -------- --------
Other-than-temporary impairment
on investments - Non-GAAP $ -- --% $ -- --%
========= ======== ======== ========
Income tax expense - GAAP $ 920 0.7% $ 1,032 0.8%
Effect of reconciling items(f) 5,175 3.8% 6,563 5.1%
--------- -------- -------- --------
Income tax expense - Non-GAAP $ 6,095 4.5% $ 7,595 5.9%
========= ======== ======== ========
Net income - GAAP $ 2,370 1.8% $ 2,567 2.0%
Effect of reconciling items(g) 11,137 8.2% 11,947 9.4%
--------- -------- -------- --------
Net income - Non-GAAP $ 13,507 10.0% $14,514 11.4%
========= ======== ======== ========
Diluted earnings per share - GAAP $ 0.04 $ 0.04
Effect of reconciling items(h) 0.16 0.17
--------- --------
Diluted earnings per share - Non-
GAAP $ 0.20 $ 0.21
========= ========
(a) This reconciling item represents the amortization of intangible
assets related to the acquisitions of various businesses and
technologies such as the acquisition of the ANVL(TM) product line
from Empirix, Inc., the acquisition of certain rights associated
with the Chariot(R) product line from NetIQ Corporation and the
acquisition of G3 Nova Technologies, 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, investors are provided
with supplemental information that is useful in evaluating our
ongoing operations and performance. While the amortization of
acquired 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.
(b) This reconciling item represents the impairment of purchased
technology of $1.5 million and the impairment of certain
intangible assets of $1.8 million related to the acquisition of
Communication Machinery Corporation in July 2005 and to the
acquisition of the mobile video test product line from Dilithium
Networks in January 2006.
(c) This reconciling item represents stock-based compensation expense
recognized under Statement of Financial Accounting Standards No.
123 (revised 2004), "Share-Based Payment" ("FAS 123R"). 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.
(d) This adjustment represents the effects of the reconciling items
noted in footnotes (a), (b) and (c).
(e) This reconciling item represents an other-than-temporary
impairment on long term bonds issued by Lehman Brothers Holdings,
Inc. As this other-than-temporary impairment represents a non-
cash charge that is not directly attributable to the underlying
performance of our business operations, we believe that by
excluding this other-than-temporary impairment, 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.
(f) This adjustment represents the income tax effects of the
reconciling items noted in footnotes (a), (b), (c) and (e).
(g) This adjustment represents the effects of the reconciling items
noted in footnotes (a), (b), (c) and (e), net of tax.
(h) This adjustment represents the effects of the reconciling items
noted in footnotes (a), (b), (c) and (e), net of tax, on a
diluted per share basis.
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