Ixia Announces Record Revenues for the Year and the Quarter; Fourth Qu

    Business Editors

    CALABASAS, Calif.--(BUSINESS WIRE)--Feb. 3, 2005--Ixia (Nasdaq:XXIA) today reported financial results for the fourth quarter and year ended December 31, 2004.
    Net revenues for the fourth quarter of 2004 were a record $35.2 million, which represents a year-over-year increase of 53% from the fourth quarter of last year and a sequential increase of 17% from the immediately preceding third quarter. Net income on a GAAP basis for the fourth quarter of 2004 was $7.6 million, or $0.11 per diluted share, a 227% increase when compared to net income of $2.3 million, or $0.04 per diluted share, for the fourth quarter of 2003.
    Ixia's fourth quarter of 2004 GAAP results included $1.2 million of non-cash charges related to the amortization of acquired intangible assets and income tax benefits of $1.4 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 fourth quarter of 2004 was $7.4 million, or $0.11 per diluted share, compared to $3.8 million, or $0.06 per diluted share, for the same period last year after excluding the effects of similar items.
    "Our record fourth quarter results reflect a strong performance across the full breadth of our product line," commented Errol Ginsberg, President and Chief Executive Officer of Ixia. "Sales of our 10 Gig and 1 Gig TXS cards both set records for the quarter. Software sales were also the highest in company history, due to record sales of IxVoice, IxANVL, IxChariot and protocol test software. Moving forward, we are continuing to expand our product offering in a number of fast growing areas including Security, Voice over IP and converged voice, video and data services to the home."
    "Our strong results in the fourth quarter also reflect robust demand from a wide range of customers," Mr. Ginsberg added. "We continue to generate increasing revenues from our core network equipment manufacturer customer base, by expanding the value proposition and flexibility of our open, multi-purpose testing platform. At the same time, we are making progress in penetrating key enterprise and government accounts and are expanding our product offering for the carrier market, which accounted for 13% of revenue in the fourth quarter."
    For the year ended December 31, 2004, revenues increased 40% to a record $117.0 million from $83.5 million in 2003. GAAP net income in 2004 increased to $18.9 million, or $0.29 per diluted share, which represents a 117% increase over net income of $8.7 million, or $0.14 per diluted share, in 2003.
    During the fourth quarter ended December 31, 2004, Ixia increased cash, cash equivalents and investments by $19.1 million to approximately $147.2 million.
    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 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 equipment manufacturers, semiconductor manufacturers, service providers, and large enterprises to validate the functionality and reliability of complex IP networks, devices, and applications. Ixia's IxVoice products address the growing need for IP telephony test solutions for developing VoIP networks. Ixia's Real World Traffic 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, including Ethernet, SONET, and ATM, and are distinguished by their performance, accuracy, reliability, and adaptability to the industry's constant evolution.
    For more information, contact Ixia at 26601 West 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 logo are registered trademarks of Ixia. IxVoice, IxANVL, IxChariot and Real World Traffic are trademarks of Ixia. 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 ability to effectively integrate our acquisitions, including G3 Nova, and market, develop and sell the acquired technology, 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, 2003. Ixia undertakes 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)

December 31, December 31, 2004 2003 ------------- ------------- (unaudited) Assets Current assets: Cash and cash equivalents $ 71,759 $ 41,708 Short-term investments in marketable securities 26,381 22,143 Accounts receivable, net 22,069 17,121 Inventories 6,669 5,585 Income taxes receivable 1,696 2,011 Prepaid expenses and other current assets 6,634 6,927 ------------- -------------

Total current assets 135,208 95,495

Investments in marketable securities 49,015 58,072 Property and equipment, net 12,268 6,907 Goodwill 11,377 1,592 Other intangible assets, net 23,031 19,960 Other assets 5,410 2,992 ------------- -------------

Total assets $236,309 $185,018 ============= =============

Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 1,556 $ 806 Accrued expenses 13,181 8,825 Deferred revenues 7,032 5,436 Income taxes payable 4,203 2,897 ------------- -------------

Total current liabilities 25,972 17,964

Deferred income taxes 3,411 -- ------------- -------------

Total liabilities 29,383 17,964 ------------- -------------

Shareholders' equity: Common stock, without par value; 200,000 shares authorized, 62,461 and 59,642 shares issued and outstanding as of December 31, 2004 and December 31, 2003, respectively 100,144 84,048 Additional paid-in capital 53,247 48,769 Deferred stock-based compensation -- (419) Retained earnings 53,535 34,656 ------------- -------------

Total shareholders' equity 206,926 167,054 ------------- -------------

Total liabilities and shareholders' equity $236,309 $185,018 ============= =============

IXIA Condensed Consolidated Statements of Income (in thousands, except per share data)

Three months ended Twelve months ended December 31, December 31, ------------------- -------------------- 2004 2003 2004 2003 --------- -------- --------- --------- (unaudited) (unaudited)

Net revenues $35,162 $23,049 $116,978 $83,533 Cost of revenues(1) 6,072 4,526 20,716 15,761 Amortization of purchased technology 837 595 3,044 1,183 --------- -------- --------- --------- Gross profit 28,253 17,928 93,218 66,589 --------- -------- --------- ---------

Operating expenses: Research and development 6,963 5,373 24,689 20,664 Sales and marketing 8,538 6,596 31,785 24,884 General and administrative 4,081 2,316 12,441 8,899 Amortization of intangible assets 371 300 1,532 1,070 Stock-based compensation(2) -- 342 389 1,762 Impairment of goodwill and other intangible assets -- 410 -- 410 --------- -------- --------- --------- Total operating expenses 19,953 15,337 70,836 57,689 --------- -------- --------- ---------

Income from operations 8,300 2,591 22,382 8,900 Interest and other, net 1,030 733 2,960 3,062 --------- -------- --------- --------- Income before income taxes 9,330 3,324 25,342 11,962 Income tax expense 1,758 1,011 6,463 3,258 --------- -------- --------- --------- Net income $ 7,572 $2,313 $ 18,879 $ 8,704 ========= ======== ========= =========

Earnings per share: Basic $ 0.12 $ 0.04 $ 0.31 $ 0.15 Diluted $ 0.11 $ 0.04 $ 0.29 $ 0.14

Weighted average number of common and common equivalent shares outstanding: Basic 61,692 59,472 60,687 58,344 Diluted 66,288 64,343 64,745 62,227

-------------------------

(1)Stock-based compensation included in: Cost of revenues $ -- $ 32 $ 30 $ 157 ========= ======== ========= =========

(2)Stock-based compensation related to: Research and development $ -- $ 222 $ 271 $ 1,316 Sales and marketing -- 70 80 166 General and administrative -- 50 38 280 --------- -------- --------- --------- $ -- $ 342 $ 389 $ 1,762 ========= ======== ========= =========

IXIA Impact of Non-GAAP Adjustments on Net Income (in thousands, except percentages and per share data) (unaudited)

Three months ended December 31, 2004 ------------------------------------- GAAP Adjustments Non-GAAP --------- ------------- ------------

Net revenues $ 35,162 $ -- $ 35,162 Cost of revenues 6,072 -- 6,072 Amortization of purchased technology 837 (837)(1) -- --------- ------------- ------------ Gross profit 28,253 837 29,090 --------- ------------- ------------ 80.4% 82.7% Operating expenses: Research and development 6,963 -- 6,963 Sales and marketing 8,538 -- 8,538 General and administrative 4,081 -- 4,081 Amortization of intangible assets 371 (371)(1) -- --------- ------------- ------------ Total operating expenses 19,953 (371) 19,582 --------- ------------- ------------ 56.7% 55.7% Income from operations 8,300 1,208 9,508 Interest and other, net 1,030 -- 1,030 --------- ------------- ------------ Income before income taxes 9,330 1,208 10,538 Income tax expense 1,758 1,409(2) 3,167 --------- ------------- ------------ Net income $ 7,572 $(201) $ 7,371 ========= ============= ============

Earnings per share: Basic $ 0.12 $0.00 $ 0.12 Diluted $ 0.11 $0.00 $ 0.11

Weighted average number of common and common equivalent shares outstanding: Basic 61,692 -- 61,692 Diluted 66,288 -- 66,288

(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 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 December 31, 2003 ------------------------------------- GAAP Adjustments Non-GAAP --------- ------------- -----------

Net revenues $23,049 $ -- $23,049 Cost of revenues 4,526 (32)(1) 4,494 Amortization of purchased technology 595 (595)(2) -- --------- ------------- ----------- Gross profit 17,928 627 18,555 --------- ------------- ----------- 77.8% 80.5% Operating expenses: Research and development 5,373 -- 5,373 Sales and marketing 6,596 -- 6,596 General and administrative 2,316 -- 2,316 Amortization of intangible assets 300 (300)(2) -- Stock-based compensation 342 (342)(1) -- Impairment of goodwill and other intangible assets 410 (410)(3) -- --------- ------------- ----------- Total operating expenses 15,337 (1,052) 14,285 --------- ------------- ----------- 66.5% 62.0% Income from operations 2,591 1,679 4,270 Interest and other, net 733 -- 733 --------- ------------- ----------- Income before income taxes 3,324 1,679 5,003 Income tax expense 1,011 150(4) 1,161 --------- ------------- ----------- Net income $ 2,313 $1,529 $ 3,842 ========= ============= ===========

Earnings per share: Basic $ 0.04 $ 0.02(5) $ 0.06 Diluted $ 0.04 $ 0.02(5) $ 0.06

Weighted average number of common and common equivalent shares outstanding: Basic 59,472 -- 59,472 Diluted 64,343 -- 64,343

(1) The adjustment represents the amortization of certain 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 Caimis, Inc., the acquisition of the ANVL product line from Empirix, Inc. and the acquisition of certain rights associated with the Chariot product line from NetIQ Corporation.

(3) The adjustment represents an impairment charge against intangible assets associated with the October 2001 acquisition of Caimis, Inc.

(4) The adjustment represents the income tax effects of footnotes (1), (2) and (3).

(5) The adjustment represents the earnings per share effect of the adjustments noted in footnotes (1), (2), (3) and (4).

IXIA Impact of Non-GAAP Adjustments on Net Income (in thousands, except percentages and per share data) (unaudited)

Twelve months ended December 31, 2004 ------------------------------------- GAAP Adjustments Non-GAAP --------- ------------- -----------

Net revenues $116,978 $ -- $116,978 Cost of revenues 20,716 (30)(1) 20,686 Amortization of purchased technology 3,044 (3,044)(2) -- --------- ------------- ----------- Gross profit 93,218 3,074 96,292 --------- ------------- ----------- 79.7% 82.3% Operating expenses: Research and development 24,689 -- 24,689 Sales and marketing 31,785 -- 31,785 General and administrative 12,441 -- 12,441 Amortization of intangible assets 1,532 (1,532)(2) -- Stock-based compensation 389 (389)(1) -- --------- ------------- ----------- Total operating expenses 70,836 (1,921) 68,915 --------- ------------- ----------- 60.6% 58.9% Income from operations 22,382 4,995 27,377 Interest and other, net 2,960 -- 2,960 --------- ------------- ----------- Income before income taxes 25,342 4,995 30,337 Income tax expense 6,463 3,066(3) 9,529 --------- ------------- ----------- Net income $ 18,879 $1,929 $ 20,808 ========= ============= ===========

Earnings per share: Basic $ 0.31 $ 0.03(4) $ 0.34 Diluted $ 0.29 $ 0.03(4) $ 0.32

Weighted average number of common and common equivalent shares outstanding: Basic 60,687 -- 60,687 Diluted 64,745 -- 64,745

(1) The adjustment represents the amortization of certain 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 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)

Twelve months ended December 31, 2003 ------------------------------------- GAAP Adjustments Non-GAAP --------- ------------- -----------

Net revenues $83,533 $ -- $83,533 Cost of revenues 15,761 (157)(1) 15,604 Amortization of purchased technology 1,183 (1,183)(2) -- --------- ------------- ----------- Gross profit 66,589 1,340 67,929 --------- ------------- ----------- 79.7% 81.3% Operating expenses: Research and development 20,664 -- 20,664 Sales and marketing 24,884 -- 24,884 General and administrative 8,899 -- 8,899 Amortization of intangible assets 1,070 (1,070)(2) -- Stock-based compensation 1,762 (1,762)(1) -- Impairment of goodwill and other intangible assets 410 (410)(3) -- --------- ------------- ----------- Total operating expenses 57,689 (3,242) 54,447 --------- ------------- ----------- 69.1% 65.2% Income from operations 8,900 4,582 13,482 Interest and other, net 3,062 -- 3,062 --------- ------------- ----------- Income before income taxes 11,962 4,582 16,544 Income tax expense 3,258 1,190(4) 4,448 --------- ------------- ----------- Net income $ 8,704 $3,392 $12,096 ========= ============= ===========

Earnings per share: Basic $ 0.15 $ 0.06(5) $ 0.21 Diluted $ 0.14 $ 0.06(5) $ 0.19

Weighted average number of common and common equivalent shares outstanding: Basic 58,344 -- 58,344 Diluted 62,227 -- 62,227

(1) The adjustment represents the amortization of certain stock-based compensation related to stock options, warrants and restricted stock granted prior to our IPO in October 2000.

(2) The adjustment represents the amortization of intangible assets related to the acquisition of Caimis, Inc., the acquisition of the ANVL product line from Empirix, Inc. and the acquisition of certain rights associated with the Chariot product line from NetIQ Corporation.

(3) The adjustment represents an impairment charge against intangible assets associated with the October 2001 acquisition of Caimis, Inc.

(4) The adjustment represents the income tax effect of footnotes (1), (2) and (3).

(5) The adjustment represents the earnings per share effect of the adjustments noted in footnotes (1), (2), (3) and (4).

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CONTACT: Ixia Tom Miller, 818-444-2325 (Chief Financial Officer) tmiller@ixiacom.com or The Blueshirt Group Chris Danne, 415-217-7722 chris@blueshirtgroup.com Rakesh Mehta, 415-217-7722 rakesh@blueshirtgroup.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE SOFTWARE NETWORKING EARNINGS CONFERENCE CALLS SOURCE: Ixia

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