WE MAKE APPLICATIONS STRONGER

Transcription

1 WE MAKE APPLICATIONS STRONGER Investor Presentation Q IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

2 SAFE HARBOR STATEMENT Certain statements made in this presentation may be deemed to be forward-looking statements, including, without limitation, statements regarding the growth in cloud outsourcing, data usage, and the number of connected devices, customer base growth and diversification, the company s target model for the relative sizes of its customer market segments, growth drivers, and the company s financial target model. In some cases, such forward looking statements can be identified by terms such as may, will, should, could, would, expect, plan, anticipate, believe, estimate, project, predict, potential, and variations of these words and similar expressions. Such forward-looking 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 such forward-looking statements. Factors that could cause our actual results to differ materially from the results predicted include, among others: the risk that cloud outsourcing, data usage, and the number of connected devices will not grow as contemplated by the company and/or third parties; the risk that the company will not be successful in diversifying and growing its business while focusing on operational fundamentals and driving financial discipline; the risk that the company will not realize all of the expected benefits of our previously announced restructuring and cost reduction programs; changes in the global economy; competition; consistency of orders from significant customers; our success in leveraging our IP portfolio, expertise, and market opportunities; our expectations regarding the transition into Software Defined Networks (SDN), Network Functions Virtualization (NFV), and virtualized networks; our success in developing and producing new products; our success in developing new sales channels and customers; market acceptance of our products; 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, and/or impact the delivery of our products. 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 U.S. Securities and Exchange Commission. Many of these risks and uncertainties are outside of our control and are difficult for us to forecast or mitigate. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

3 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 presentation. Specifically, we have provided non-gaap financial measures (e.g., non-gaap operating income, non-gaap operating expenses, non-gaap operating margin, and non-gaap diluted earnings per share) that exclude certain non-cash and/or nonrecurring income and expense items such as expenses relating to internal investigations and any related remediation efforts, the securities class action and shareholder derivative action against the company and certain of its current and former officers and directors, as well as a 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 company also uses these measures in connection with determinations regarding executive compensation. 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. A reconciliation of GAAP to non-gaap results is provided at the end of this investor presentation. Note that unless specifically noted otherwise, all numbers in this presentation are on a non-gaap basis IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

4 COMPANY OVERVIEW Bethany Mayer, President and CEO IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

5 IXIA HAS A STRONG HISTORY OF PERFORMANCE FOUNDED 1997 HEADQUARTERS EMPLOYEES ~1826 CALABASAS, CA ($MM) REVENUE MARKET CAP* ~$935 MILLION ENTERPRISE VALUE* ~$870 MILLION *As of ~30% 1 st BUSINESS NOW RELATES TO SECURITY TO MARKET WITH 10G, 40G, 100G, 400G, 25G, 50G ~45% ~400 OF EMPLOYEES IN R&D U.S. AND FOREIGN PATENTS PENDING OR ISSUED IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

6 WE ARE PROUD TO SERVE NEMs SERVICE PROVIDERS ENTERPRISE 15 OF THE TOP 15 NEMS 47 OF THE TOP 50 CARRIERS 77 OF THE FORTUNE IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

7 MARKET DYNAMICS DRIVING More Data, More Complexity, More to Secure CLOUD NETWORK SECURITY BIG DATA INTERNET OF THINGS MOBILE DATA TRAFFIC MOVES TO CLOUD APPS BY % BILLION CONNECTED 38 % GROWTH IN GLOBAL SECURITY INCIDENTS 2014 to 2015 GIGABYTES OF NEW DATA PER PERSON / DAY BY 2020 THINGS REQUESTING SUPPORT BY IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

8 CUSTOMER PAIN POINTS The Cost of Inadequate Network Design, Monitoring and Security: Jeep Hack Forces 1.4M Recalls; Drives Congress to Action OPM Hack: 4 Million Government Workers Completely Exposed One out of three Americans health records were breached 2.5 million people have medical device implants with WiFi. Was yours fully tested? IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

9 WE MAKE APPLICATIONS STRONGER We challenge the infrastructure, harden security and visualize the applications Network Design and Rollout B I G D A T A C L O U D I o T Financial Trading Exchange 10X DDoS response speed Prevented P1 service outage Priceless! Network Design I XTEST I X S E C U R E Network Operations I X V I S I O N Network Rollout Network Operation Payment Processing Company Ability to share security tools freed $3M budget Delivered 10X ROI on cost of Security Fabric IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

10 INTRODUCING CLOUDLENS One solution for visibility across your physical network, data center and cloud CloudL ens MGR. Network Operations Application Operations Security Admin Forensics IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

11 END-TO-END APPLICATION STRENGTHENING Across the Infrastructure Mobile Endpoint Network Data Center Cloud Across ALL Platforms IxNetwork/VE Multis SDN PerfectStorm BPS vepc IxLoad/VE ac, MU-MIMO Flex Taps, ibypass, Virtual Taps Vision One, NTO, Hawkeye, xstream40, Control Tower ThreatARMOR, ATIP IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

12 CUSTOMER BASE EXPANSION 100% CUSTOMER BASE CONTINUES TO GROW AND DIVERSIFY 90% CUSTOMER SEGMENTS* 80% 70% 60% 50% 40% 30% 20% 10% 0% Target Model NEM & Carrier Enterprise Increased channel investment Targeted markets and customers >500 partners worldwide and growing CRN 5-Star Rating * Percentage based on estimated sales volume IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

13 WELL POSITIONED FOR GROWTH P O W E R F U L G R O W T H D R I V E R S D E E P A P P L I C AT I O N S AND S E C U R I T Y I P E X PA N D I N G C U S T O M E R B A S E S T R O N G F I N A N C I A L M O D E L IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

14 FINANCIALS Brent Novak, CFO IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

15 SECOND QUARTER 2016 SUMMARY R E V E N U E : $ M N O N - G A A P O P E R AT I N G M A R G I N : % N O N - G A A P E P S : $ At the top of guidance of $110M - $120M Record revenue in our Enterprise customer vertical Deferred revenue up 10% year-over-year Up from 9.8% in Q1 16 Strong gross margin of 80.1% Continued focus on financial discipline Exceeded guidance of $0.05 to $0.12 Up from $0.09 in Q1 16 Generated $25M+ in cash flow from operations Please refer to reconciliation of GAAP to Non-GAAP measures in Appendix and in the investor relations section of the company s website IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

16 NON-GAAP FINANCIALS AND MODEL YTD Q2 16 Revenue $464M $517M $233M Gross Margin 76% 78% 79% TARGET MODEL 100% 76 78% Operating Expenses 65% 60% 64% 58 53% Operating Margin 11% 18% 15% Net Margin 6% 11% 10% 18 25% 12 16% Please refer to reconciliation of GAAP to Non-GAAP measures in Appendix and in the investor relations section of the company s website IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

17 BALANCE SHEET DETAILS IN MILLIONS DEC DEC JUN Cash, cash equivalents and marketable securities $126 $67 $101 Total assets $869 $780 $757 Convertible debt $ Term loan - $38 $35 Shareholders equity * $481 $519 $525 Availability under Credit Facility - $75 $150 * On February 23, 2016, the company announced that its Board of Directors authorized a $25 million share repurchase program. As of June 30, 2016, the company has repurchased shares under the share repurchase program for a total consideration of approximately $6.9 million IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

18 THANK YOU IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

19 RECONCILIATION OF GAAP TO NON-GAAP 1 OF 3 FY 2014 FY 2015 YTD Q2/16 Revenue 100% 100% 100% GM %, GAAP 75.2% 78.0% 78.9% Inventory adjustments (a) 0.3% 0.0% 0.0% Stock-based compensation (b) 0.1% 0.1% 0.1% GM %, non-gaap 75.6% 78.1% 79.0% Operating expense, GAAP 84.8% 73.5% 77.1% Amortization of intangible assets (c) -10.1% -8.2% -8.6% Acquisition and other related (d) -0.7% -0.1% 0.0% Restructuring (e) -2.2% 0.1% 0.1% Stock-based compensation (b) -3.5% -3.6% -3.6% Legal, contract settlements, and other (f) -3.3% -1.2% -0.6% Operating expense, non-gaap 65.0% 60.5% 64.4% Operating Margin (loss), GAAP -9.6% 4.5% 1.8% Effects of reconciling items (g) 20.2% 13.1% 12.8% Operating Margin (loss), non-gaap 10.6% 17.6% 14.6% Net income (loss), GAAP -9.0% 1.2% -0.5% Effects of reconciling items (j) 15.1% 9.8% 10.1% Net income, non-gaap 6.1% 11.0% 9.6% Diluted earnings / (loss) per share, GAAP ($0.54) $0.07 ($0.01) Effects of reconciling items (k) (l) $0.90 $0.60 $0.28 Diluted earnings per share, non-gaap $0.36 $0.67 $ IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

20 RECONCILIATION OF GAAP TO NON-GAAP 2 OF 3 (a) These adjustments represent purchase price accounting adjustments related to the fair value of inventory as a result of our acquisitions. (b) These adjustments represent non-cash stock-based compensation expenses. (c) This adjustment represents the amortization of intangible assets related to the acquisitions of various businesses and technologies. (d) This adjustment 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, tax, due diligence, valuation and other related services, change in control payments, consulting fees, required regulatory costs, certain employee, facility and infrastructure costs, and other related expenses. (e) This adjustment represents costs associated with our restructuring plans/reorganization plans. employee termination benefits consisting of severance, facility-related costs, and other costs. These costs primarily relate to one-time (f) This reconciling item represents costs incurred related to (i) internal investigations and any related remediation efforts, (ii) the restatement of our financial statements for the first quarter of 2013 and for the three and six months ended June 30, 2013, (iii) 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 (iv) an SEC investigation. These costs consisted primarily of legal and accounting fees, recruiting and consulting expenses, severance and retention costs, and other related expenses. The fourth quarter of 2014 also includes a $1.0 million write-off for a one-time item related to a certain contractual matter. (g) These adjustments represent the effects of the adjustments noted in footnotes (a), (b), (c), (d), (e) and (f). (h) These adjustments represent the effects of the adjustments noted in footnotes (a), (b), (c), (d), (e) and (f), on a per share basis. (i) This adjustment, if applicable, includes the impact of the convertible senior notes if these were anti-dilutive for the equivalent GAAP earnings per share calculations IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

21 RECONCILIATION OF GAAP TO NON-GAAP 3 OF 3 Target Model - Low Target Model - High GAAP Adjustments (1) Non- GAAP GAAP Adjustments (1) Non- GAAP Revenue 100% 0% 100% 100% 0% 100% GM% 76% 0% 76% 78% 0% 78% Operating expense 70% -12% 58% 66% -13% 53% Operating income 6% 12% 18% 12% 13% 25% Interest income and other, net 0% 0% 0% 0% 0% 0% Interest expense -2% 0% -2% -1% -1% -2% Income tax expense 1% 4% 5% 3% 4% 7% Net income 3% 8% 12% 8% 8% 16% IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.