Ixia 8K Announces Second Quarter Financial Results | XXIA 30 Jul 13

Exhibit 99.1

LOGO

Ixia Announces Second Quarter Financial Results

CALABASAS, CA, July 30, 2013 —Ixia (Nasdaq: XXIA) today reported its financial results for the second quarter ended June 30, 2013.

Total revenue for the 2013 second quarter grew 28% to $115.9 million, compared with $90.7 million reported for the 2012 second quarter. The 2013 second quarter includes $33.2 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.

On a GAAP basis, the company recorded net income for the 2013 second quarter of $3.8 million, or $0.05 per diluted share, compared with net income of $25.7 million, or $0.32 per diluted share, for the 2012 second quarter. Non-GAAP net income for the 2013 second quarter was $14.5 million, or $0.18 per diluted share, compared with non-GAAP net income of $12.9 million, or $0.17 per diluted share, for the 2012 second quarter.

Additional non-GAAP information and a reconciliation of our non-GAAP measures to the most directly comparable GAAP measures for the 2013 and 2012 second quarters and year-to-date periods may be found in the attached financial tables.

“Although revenue for our core products was lower than anticipated due to order delays from our Service Provider and network equipment manufacturer customers, we made solid progress on our key growth initiatives,” commented Vic Alston, Ixia’s president and chief executive officer. “Anue and BreakingPoint revenue surpassed expectations and grew to $33.2 million, our revenue from enterprise customers increased by nearly 50 percent compared to last year and we added several new channel and technology partners.”

Alston continued, “Our customers are rapidly moving to mobile networks, virtual data centers and hybrid cloud environments to deliver next generation applications and provide their customers with the always-on user experience. While we have seen recent softness in the market, our visibility, mobility, and security solutions uniquely position Ixia to benefit from some of today’s strongest trends in networking and deliver long-term growth.”

Ixia ended the 2013 second quarter with approximately $234 million in cash, cash equivalents and investments, compared with $208 million at March 31, 2013.

We are in the process of reviewing and finalizing our GAAP tax provision for the 2013 second quarter, and as a result, our GAAP net income is subject to change and may potentially be reduced by up to $3.3 million. We do not anticipate any changes in our non-GAAP results.

Conference Call and Webcast Information

Ixia will host a conference call today, at 2:00 p.m. Pacific time (5:00 p.m., Eastern time), for analysts and investors to discuss its 2013 second quarter results and its business outlook for the 2013 third quarter. Open to the public, interested parties 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 at least 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, realized gains for the sale of certain of our auction rate securities, expenses incurred in connection with our restatement of certain previously filed financial statements, 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 develops amazing products so its customers can connect the world. Ixia helps its customers provide an always-on user experience through fast, secure delivery of dynamic, connected technologies and services. Through actionable insights that accelerate and secure application and service delivery, Ixia’s customers benefit from faster time to market, optimized application performance and higher-quality deployments. Learn more at http://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, the fact that our results reported in this press release are not yet final and are subject to change prior to the issuance of our Form 10-Q, our success in developing and producing new products, our success in developing new sales channels and customers, 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, 2012, 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

Maria Riley, Investor Relations

Tel: 415-217-7722

Ixia

Tom Miller, Chief Financial Officer

Tel: 818-444-2325

tmiller@ixiacom.com

IXIA

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)


	June 30, 2013		December 31, 2012
Assets
Current assets:
Cash and cash equivalents	$	55,690	$	47,508
Short-term investments in marketable securities		178,042		126,851
Accounts receivable, net		91,378		103,523
Inventories		36,381		37,220
Prepaid expenses and other current assets		46,657		42,942

Total current assets		408,148		358,044

Investments in marketable securities		370		3,119
Property and equipment, net		32,741		28,763
Intangible assets, net		137,263		157,003
Goodwill		260,032		260,457
Other assets		10,221		11,863

Total assets	$	848,775	$	819,249


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	15,452	$	12,114
Accrued expenses and other		39,373		52,525
Deferred revenues		67,195		66,096

Total current liabilities		122,020		130,735

Deferred revenues		10,295		8,695
Other liabilities		32,353		32,321
Convertible senior notes		200,000		200,000

Total liabilities		364,668		371,751


Shareholders’ equity:
Common stock, without par value; 200,000 shares authorized at June 30, 2013 and December 31, 2012; 75,922 and 74,126 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively		172,293		158,933
Additional paid-in capital		182,434		168,980
Retained earnings		129,164		117,296
Accumulated other comprehensive income		216		2,289

Total shareholders’ equity		484,107		447,498


Total liabilities and shareholders’ equity	$	848,775	$	819,249

IXIA

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Revenues:
Products	$	87,818		$	73,288		$	184,454		$	142,895
Services		28,077			17,414			54,224			34,465

Total revenues		115,895			90,702			238,678			177,360


Costs and operating expenses:⁽¹⁾
Cost of revenues – products		21,088			14,220			42,475			29,002
Cost of revenues – services		3,311			2,730			6,336			4,860
Research and development		29,539			22,546			59,251			43,397
Sales and marketing		33,191			24,556			68,232			49,163
General and administrative		12,027			11,090			24,085			22,606
Amortization of intangible assets		10,055			5,358			20,193			9,403
Acquisition and other related		1,093			3,739			2,365			4,164
Restructuring		—			—			58			—

Total costs and operating expenses		110,304			84,239			222,995			162,595


Income from operations		5,591			6,463			15,683			14,765
Interest income and other, net		3,431			602			3,638			712
Interest expense		(1,943	)		(1,800	)		(3,886	)		(3,600	)

Income before income taxes		7,079			5,265			15,435			11,877
Income tax (benefit) expense⁽²⁾		3,316			(20,431	)		3,567			(18,986	)

Net income	$	3,763		$	25,696		$	11,868		$	30,863


Earnings per share:
Basic	$	0.05		$	0.36		$	0.16		$	0.43
Diluted	$	0.05		$	0.32		$	0.15		$	0.40

Weighted average number of common and common equivalent shares outstanding:
Basic		75,667			71,579			75,194			71,079
Diluted		77,245			83,803			77,046			83,508

⁽¹⁾ Stock-based compensation included in:
Cost of revenues – products	$	128		$	75		$	281		$	171
Cost of revenues – services		49			29			107			66
Research and development		2,049			945			4,497			2,224
Sales and marketing		1,836			911			3,851			1,934
General and administrative		1,679			1,809			3,884			3,475

⁽²⁾The Company is in the process of finalizing its GAAP tax provision for the three and six months ended June 30, 2013.

IXIA

Non-GAAP Information and Reconciliation to Most Directly Comparable GAAP Financial Measures

(in thousands, except per share data)

(unaudited)


	Three months ended June 30,
	2013			2012
GAAP income from operations	$	5,591		$	6,463
Adjustments:
Stock-based compensation^(a)		5,741			3,769
Amortization of intangible assets^(b)		10,055			5,358
Acquisition and other related^(c)		1,093			3,739
Legal and contract settlements, and other^(d)		156			401

Non-GAAP income from operations	$	22,636		$	19,730


GAAP net income	$	3,763		$	25,696
Adjustments:
Stock-based compensation^(a)		5,741			3,769
Amortization of intangible assets^(b)		10,055			5,358
Acquisition and other related^(c)		1,093			3,739
Legal and contract settlements, and other^(d)		(2,713	)		401
Income tax effect related to non-GAAP adjustments^(e)		(3,467	)		(26,071	)

Non-GAAP net income	$	14,472		$	12,892


GAAP diluted earnings per share	$	0.05		$	0.32
Adjustments:
Stock-based compensation^(a)		0.07			0.05
Amortization of intangible assets^(b)		0.13			0.06
Acquisition and other related^(c)		0.01			0.05
Legal and contract settlements, and other^(d)		(0.03	)		—
Income tax effect related to non-GAAP adjustments^(e)		(0.04	)		(0.31	)
Convertible senior notes^(f)		(0.01	)		—

Non-GAAP diluted earnings per share	$	0.18		$	0.17


Shares used in computing GAAP diluted earnings per common share		77,245			83,803
Effect of reconciling item^(f)(g)		10,233			(267	)

Shares used in computing non-GAAP diluted earnings per common share		87,478			83,536

(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 a $2.9 million realized gain recorded during the second quarter of 2013 for the sale of certain of our auction rate securities that were previously written-down, partially offset by $156,000 of costs incurred in the second quarter of 2013 related to the restatement of certain of our previously filed financial statements. The second quarter of 2012 included a one-time charge of $401,000 to settle a legal matter. We believe that by excluding these non-recurring items, 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.

(e)	This adjustment represents the income tax effects of the reconciling items noted in footnotes (a), (b), (c), and (d), as well as certain other non-cash income tax impacts such as changes in the valuation allowance relating to certain deferred tax assets.

(f)	This reconciling item for the non-GAAP diluted earnings per share calculation for the three months ended June 30, 2013 includes the impact of the convertible senior notes as these were anti-dilutive for the equivalent GAAP earnings per share calculations.

(g)	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.

IXIA

Non-GAAP Information and Reconciliation to Most Directly Comparable GAAP Financial Measures

(in thousands, except per share data)

(unaudited)


	Six months ended June 30,
	2013			2012
GAAP income from operations	$	15,683		$	14,765
Adjustments:
Stock-based compensation^(a)		12,620			7,870
Amortization of intangible assets^(b)		20,193			9,403
Acquisition and other related^(c)		2,365			4,164
Restructuring^(d)		58			—
Legal and contract settlements, and other^(e)		(153	)		2,083

Non-GAAP income from operations	$	50,766		$	38,285


GAAP net income	$	11,868		$	30,863
Adjustments:
Stock-based compensation^(a)		12,620			7,870
Amortization of intangible assets^(b)		20,193			9,403
Acquisition and other related^(c)		2,365			4,164
Restructuring^(d)		58			—
Legal and contract settlements, and other^(e)		(3,022	)		2,083
Income tax effect related to non-GAAP adjustments^(f)		(9,275	)		(29,334	)

Non-GAAP net income	$	34,807		$	25,049


GAAP diluted earnings per share	$	0.15		$	0.40
Adjustments:
Stock-based compensation^(a)		0.17			0.09
Amortization of intangible assets^(b)		0.26			0.11
Acquisition and other related^(c)		0.03			0.05
Restructuring^(d)		—			—
Legal and contract settlements, and other^(e)		(0.04	)		0.03
Income tax effect related to non-GAAP adjustments^(f)		(0.12	)		(0.35	)
Convertible senior notes^(g)		(0.03	)		—

Non-GAAP diluted earnings per share	$	0.42		$	0.33


Shares used in computing GAAP diluted earnings per common share		77,046			83,508
Effect of reconciling item^(g)(h)		10,246			(259	)

Shares used in computing non-GAAP diluted earnings per common share		87,292			83,249

(a)

(b)

(c)

(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 includes a $2.9 million realized gain recorded during the second quarter of 2013 for the sale of certain of our auction rate securities that were previously written-down and $1.2 million of proceeds from the settlement of a previous legal matter in the first quarter of 2013, partially offset by $1.0 million of costs incurred in the first six months of 2013 related to the restatement of certain of our previously filed financial statements. The first six months of 2012 included 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 non-recurring items, 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 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 six months ended June 30, 2013 includes the impact of the 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.

Ixia (XXIA) Inactive 8-KIxia Announces Second Quarter Financial Results