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Ixia Announces Record Results for the Second Quarter of 2005 Second Quarter Revenues Increase 54% and Net Income Increases 175% Year-over-YearCALABASAS, Calif. --(Business Wire)-- July 21, 2005 -- Ixia (Nasdaq:XXIA) today reported financial results for the second quarter ended June 30, 2005. Net revenues for the second quarter of 2005 were a record $41.3 million, which represents a year-over-year increase of 54% from the second quarter of last year and a sequential increase of 8% from the immediately preceding first quarter. Net income on a GAAP basis for the second quarter of 2005 was $9.8 million, or $0.14 per diluted share, a 175% increase when compared to net income of $3.5 million, or $0.06 per diluted share, for the second quarter of 2004. Ixia's second quarter of 2005 GAAP results included $1.2 million of non-cash charges related to the amortization of acquired intangible assets and income tax benefits of $1.2 million related to the tax effects of the amortization of the acquired intangible assets noted above and tax benefits related to previously recognized stock-based compensation. Excluding the effects of these items, non-GAAP net income for the second quarter of 2005 was $9.8 million, or $0.14 per diluted share, compared to $4.2 million, or $0.07 per diluted share, for the same period last year after excluding the effects of similar items. "The second quarter represented our 11th consecutive quarter of increasing sequential revenues and our 29th consecutive quarter of profitability," commented Errol Ginsberg, President and Chief Executive Officer of Ixia. "Demand for our testing solutions continues to grow, as revenues from our Ethernet TXS product lines set new records during the period. While sales to network equipment manufacturers and our largest customer, Cisco Systems, were especially strong, we had more than ten customers ordering over $500,000 in equipment, pointing to broader underlying demand for our products. This growth has been fueled by the adoption of new technologies, like 10 Gigabit Ethernet and IPv6, and the roll-out of new services, like Voice and Video over IP. All of these technologies and services require extensive testing with equipment that can generate wire speed traffic along with a sophisticated mix of real world traffic to adequately test these new complex advanced networks." "Most of our larger sales involve a combination of both hardware and software," added Mr. Ginsberg. "Encouragingly, our IxChariot and IxLoad software product offerings had record sales in the second quarter and continue to pull in additional hardware sales. Additionally, we continue to seek targeted acquisitions that enable us to extend the capabilities of our single platform solution and gain access to new customer segments. In mid-July we entered into the fast growing 802.11 Wi-Fi market with the introduction of our IxWLAN product and completed the acquisition of Wi-Fi testing innovator Communication Machinery Corporation for approximately $4 million. Complementing our top line growth, we are focused on improving our bottom line by maintaining strong gross margins and decreasing operating expenses as a percentage of revenues." During the second quarter ended June 30, 2005, Ixia increased cash, cash equivalents and investments by $23 million to approximately $186 million. This increase included nearly $12 million of proceeds from employee stock option exercises. Ixia will host a conference call today for analysts and investors to discuss its quarterly results at 5:00 p.m. Eastern Time. Open to the public, a live Web cast of the conference call will be accessible from the "Investors" section of Ixia's Web site (www.ixiacom.com). Following the live Web cast, an archived version will be available in the "Investors" section on the Ixia Web site for 90 days. Non-GAAP Information Certain non-GAAP financial measures are included in this press release. These non-GAAP financial measures are provided to enhance the user's overall understanding of our financial performance. By excluding certain non-cash charges, as well as the related tax effects, our non-GAAP results provide information to both management and investors that is useful in assessing Ixia's core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are also used by management to evaluate financial results and to plan and forecast future periods. The presentation of this additional information is not meant to be considered a substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles. Investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures which are included below. About Ixia Ixia is a leading, global provider of high performance IP network testing solutions. Its highly scalable solutions generate, capture, characterize, and emulate network and application traffic, establishing definitive performance and conformance metrics of network devices or systems under test. Ixia's testing solutions are used by network and telephony equipment manufacturers, semiconductor manufacturers, service providers, governments, and large enterprises to validate the functionality, and reliability of complex IP networks, devices, and applications. Ixia's Real World Traffic(TM) Suite addresses the growing need to test applications and networks prior to deployment under realistic load conditions. Ixia's analysis solutions utilize a wide range of industry-standard interfaces and are distinguished by their performance, accuracy, reliability, and adaptability to the industry's constant evolution. For more information, contact Ixia at 26601 W. Agoura Road, Calabasas, CA 91302; (818) 871-1800, Fax: (818) 871-1805; Email: [email protected] or visit our Web Site at http://www.ixiacom.com. Ixia, the Ixia four petal logo, IxLoad, IxChariot, IxWLAN, TXS, and Real World Traffic are either registered trademarks or trademarks of Ixia in the United States and/or other countries. Other trademarks used in this release are the trademarks or registered trademarks 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 the Company's current intent, belief and expectations and are subject to risks and uncertainties that could cause the Company's 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 the Company's current expectations include, among other things: consistency of orders from significant customers, our success in developing and producing new products, and market acceptance of our products. These and other risk factors that may affect Ixia's financial results in the future are discussed in Ixia's periodic SEC filings, including its Annual Report on Form 10-K for the year ended December 31, 2004. Ixia undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. -0- *T IXIA Condensed Consolidated Balance Sheets (in thousands) June 30, December 31, 2005 2004 ------------ ------------ (unaudited) Assets Current assets: Cash and cash equivalents $ 10,821 $ 16,383 Short-term investments in marketable securities 135,224 81,757 Accounts receivable, net 27,325 22,069 Inventories 7,264 6,669 Deferred income taxes 3,672 3,756 Income taxes receivable 560 1,696 Prepaid expenses and other current assets 3,342 2,878 ---------- ---------- Total current assets 188,208 135,208 Investments in marketable securities 39,885 49,015 Property and equipment, net 15,385 12,268 Deferred income taxes 14,172 4,798 Goodwill 11,377 11,377 Other intangible assets, net 20,580 23,031 Other assets 307 612 ---------- ---------- Total assets $ 289,914 $ 236,309 ========== ========== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 1,770 $ 1,556 Accrued expenses 9,827 13,181 Deferred revenues 8,943 7,032 Income taxes payable 5,244 4,203 ---------- ---------- Total current liabilities 25,784 25,972 Deferred income taxes 3,801 3,411 ---------- ---------- Total liabilities 29,585 29,383 ---------- ---------- Shareholders' equity: Common stock, without par value; 200,000 shares authorized, 65,795 and 62,459 shares issued and outstanding as of June 30, 2005 and December 31, 2004, respectively 120,931 100,144 Additional paid-in capital 66,768 53,247 Retained earnings 72,630 53,535 ---------- ---------- Total shareholders' equity 260,329 206,926 ---------- ---------- Total liabilities and shareholders' equity $ 289,914 $ 236,309 ========== ========== IXIA Condensed Consolidated Statements of Income (in thousands, except per share data) (unaudited) Three months ended Six months ended June 30, June 30, ------------------ ----------------- 2005 2004 2005 2004 --------- -------- -------- -------- Net revenues $41,326 $26,811 $79,740 $51,724 Cost of revenues(1) 6,349 4,851 12,194 9,262 Amortization of purchased technology 943 732 1,885 1,371 -------- -------- -------- -------- Gross profit 34,034 21,228 65,661 41,091 -------- -------- -------- -------- Operating expenses: Research and development 7,974 5,519 15,520 11,182 Sales and marketing 9,950 7,695 19,425 15,352 General and administrative 3,914 2,962 7,519 5,325 Amortization of intangible assets 286 379 628 788 Stock-based compensation(2) -- 126 -- 375 -------- -------- -------- -------- Total operating expenses 22,124 16,681 43,092 33,022 -------- -------- -------- -------- Income from operations 11,910 4,547 22,569 8,069 Interest and other, net 1,229 595 2,125 1,333 -------- -------- -------- -------- Income before income taxes 13,139 5,142 24,694 9,402 Income tax expense 3,373 1,596 5,599 2,834 -------- -------- -------- -------- Net income $ 9,766 $ 3,546 $19,095 $ 6,568 ======== ======== ======== ======== Earnings per share: Basic $ 0.15 $ 0.06 $ 0.30 $ 0.11 Diluted $ 0.14 $ 0.06 $ 0.28 $ 0.10 Weighted average number of common and common equivalent shares outstanding: Basic 64,862 60,447 64,112 60,170 Diluted 69,391 64,308 68,944 64,528 ---------------------------------- (1)Stock-based compensation included in: Cost of revenues $ -- $ 6 $ -- $ 29 ======== ======== ======== ======== (2)Stock-based compensation related to: Research and development $ -- $ 102 $ -- $ 263 Sales and marketing -- 22 -- 75 General and administrative -- 2 -- 37 -------- -------- -------- -------- $ -- $ 126 $ -- $ 375 ======== ======== ======== ======== IXIA Impact of Non-GAAP Adjustments on Net Income (in thousands, except percentages and per share data) (unaudited) Three months ended June 30, 2005 -------------------------------- GAAP Adjustments Non-GAAP --------- ----------- --------- Net revenues $ 41,326 $ -- $41,326 Cost of revenues 6,349 -- 6,349 Amortization of purchased technology 943 (943)(1) -- --------- --------- -------- Gross profit 34,034 943 34,977 --------- --------- -------- 82.4% 84.6% Operating expenses: Research and development 7,974 -- 7,974 Sales and marketing 9,950 -- 9,950 General and administrative 3,914 -- 3,914 Amortization of intangible assets 286 (286)(1) -- --------- --------- -------- Total operating expenses 22,124 (286) 21,838 --------- --------- -------- 53.5% 52.8% Income from operations 11,910 1,229 13,139 Interest and other, net 1,229 -- 1,229 --------- --------- -------- Income before income taxes 13,139 1,229 14,368 Income tax expense 3,373 1,244(2) 4,617 --------- --------- -------- Net income $ 9,766 $ (15) $ 9,751 ========= ========= ======== Earnings per share: Basic $ 0.15 $ -- $ 0.15 Diluted $ 0.14 $ -- $ 0.14 Weighted average number of common and common equivalent shares outstanding: Basic 64,862 -- 64,862 Diluted 69,391 -- 69,391 (1)The adjustment represents the amortization of intangible assets related to the acquisition of the ANVL product line from Empirix, Inc., the acquisition of certain rights associated with the Chariot product line from NetIQ Corporation, and the acquisition of G3 Nova Technologies, Inc. (2)The adjustment represents the income tax effects of footnote (1) and the elimination of tax benefits related to previously recognized stock-based compensation. IXIA Impact of Non-GAAP Adjustments on Net Income (in thousands, except percentages and per share data) (unaudited) Three months ended June 30, 2004 --------------------------------- GAAP Adjustments Non-GAAP --------- ----------- --------- Net revenues $ 26,811 $ -- $ 26,811 Cost of revenues 4,851 (6)(1) 4,845 Amortization of purchased technology 732 (732)(2) -- --------- --------- --------- Gross profit 21,228 738 21,966 --------- --------- --------- 79.2% 81.9% Operating expenses: Research and development 5,519 -- 5,519 Sales and marketing 7,695 -- 7,695 General and administrative 2,962 -- 2,962 Amortization of intangible assets 379 (379)(2) -- Stock-based compensation 126 (126)(1) -- --------- --------- --------- Total operating expenses 16,681 (505) 16,176 --------- --------- --------- 62.2% 60.3% Income from operations 4,547 1,243 5,790 Interest and other, net 595 -- 595 --------- --------- --------- Income before income taxes 5,142 1,243 6,385 Income tax expense 1,596 545(3) 2,141 --------- --------- --------- Net income $ 3,546 $ 698 $ 4,244 ========= ========= ========= Earnings per share: Basic $ 0.06 $ 0.01(4) $ 0.07 Diluted $ 0.06 $ 0.01(4) $ 0.07 Weighted average number of common and common equivalent shares outstanding: Basic 60,447 -- 60,447 Diluted 64,308 -- 64,308 (1)The adjustment represents stock-based compensation related to stock options granted prior to our IPO in October 2000. (2)The adjustment represents the amortization of intangible assets related to the acquisition of the ANVL product line from Empirix, Inc., the acquisition of certain rights associated with the Chariot product line from NetIQ Corporation, and the acquisition of G3 Nova Technologies, Inc. (3)The adjustment represents the income tax effects of footnotes (1) and (2), and the elimination of tax benefits related to previously recognized stock-based compensation. (4)The adjustment represents the earnings per share effect of the adjustments noted in footnotes (1), (2) and (3). IXIA Impact of Non-GAAP Adjustments on Net Income (in thousands, except percentages and per share data) (unaudited) Six months ended June 30, 2005 ------------------------------- GAAP Adjustments Non-GAAP -------- ------------ --------- Net revenues $79,740 $ -- $79,740 Cost of revenues 12,194 -- 12,194 Amortization of purchased technology 1,885 (1,885)(1) -- -------- ----------- -------- Gross profit 65,661 1,885 67,546 -------- ----------- -------- 82.3% 84.7% Operating expenses: Research and development 15,520 -- 15,520 Sales and marketing 19,425 -- 19,425 General and administrative 7,519 -- 7,519 Amortization of intangible assets 628 (628)(1) -- -------- ----------- -------- Total operating expenses 43,092 (628) 42,464 -------- ----------- -------- 54.0% 53.3% Income from operations 22,569 2,513 25,082 Interest and other, net 2,125 -- 2,125 -------- ----------- -------- Income before income taxes 24,694 2,513 27,207 Income tax expense 5,599 3,009(2) 8,608 -------- ----------- -------- Net income $19,095 $ (496) $18,599 ======== =========== ======== Earnings per share: Basic $ 0.30 $ (0.01)(3) $ 0.29 Diluted $ 0.28 $ (0.01)(3) $ 0.27 Weighted average number of common and common equivalent shares outstanding: Basic 64,112 -- 64,112 Diluted 68,944 -- 68,944 (1)The adjustment represents the amortization of intangible assets related to the acquisition of the ANVL product line from Empirix, Inc., the acquisition of certain rights associated with the Chariot product line from NetIQ Corporation, and the acquisition of G3 Nova Technologies, Inc. (2)The adjustment represents the income tax effects of footnote (1) and the elimination of tax benefits related to previously recognized stock-based compensation. (3)The adjustment represents the earnings per share effect of the adjustments noted in footnotes (1) and (2). IXIA Impact of Non-GAAP Adjustments on Net Income (in thousands, except percentages and per share data) (unaudited) Six months ended June 30, 2004 ------------------------------- GAAP Adjustments Non-GAAP --------- ----------- -------- Net revenues $51,724 $ -- $51,724 Cost of revenues 9,262 (29)(1) 9,233 Amortization of purchased technology 1,371 (1,371)(2) -- -------- ----------- -------- Gross profit 41,091 1,400 42,491 -------- ----------- -------- 79.4% 82.1% Operating expenses: Research and development 11,182 -- 11,182 Sales and marketing 15,352 -- 15,352 General and administrative 5,325 -- 5,325 Amortization of intangible assets 788 (788)(2) -- Stock-based compensation 375 (375)(1) -- -------- ----------- -------- Total operating expenses 33,022 (1,163) 31,859 -------- ----------- -------- 63.8% 61.6% Income from operations 8,069 2,563 10,632 Interest and other, net 1,333 -- 1,333 -------- ----------- -------- Income before income taxes 9,402 2,563 11,965 Income tax expense 2,834 1,154(3) 3,988 -------- ----------- -------- Net income $ 6,568 $ 1,409 $ 7,977 ======== =========== ======== Earnings per share: Basic $ 0.11 $ 0.02(4) $ 0.13 Diluted $ 0.10 $ 0.02(4) $ 0.12 Weighted average number of common and common equivalent shares outstanding: Basic 60,170 -- 60,170 Diluted 64,528 -- 64,528 (1)The adjustment represents stock-based compensation related to stock options granted prior to our IPO in October 2000. (2)The adjustment represents the amortization of intangible assets related to the acquisition of the ANVL product line from Empirix, Inc., the acquisition of certain rights associated with the Chariot product line from NetIQ Corporation, and the acquisition of G3 Nova Technologies, Inc. (3)The adjustment represents the income tax effects of footnotes (1) and (2), and the elimination of tax benefits related to previously recognized stock-based compensation. (4)The adjustment represents the earnings per share effect of the adjustments noted in footnotes (1), (2) and (3). *T |
