analyst deck-20160524-final

1 | © 2016 IXIA AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

WE MAKE APPLICATIONS STRONGER

Investor Presentation – First Quarter 2016


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.

SAFE HARBOR STATEMENT


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 non-

recurring income and expense items such as proceeds and expenses from certain legal and contractual settlements,

expenses relating to internal investigations and any related remediation efforts, the restatement of our financial

statements for the first and second quarters of 2013 and for the six months ended June 30, 2013, the pending

securities class action against the company and certain of its current and former officers and directors as well as a

pending shareholder derivative action and an ongoing SEC investigation, 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. 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, 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 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. 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.

NON-GAAP INFORMATION


COMPANY OVERVIEWBethany Mayer, President and CEO


IXIA HAS A STRONG HISTORY OF PERFORMANCE

0

100

200

300

400

500

600

2009 2010 2011 2012 2013 2014 2015

REVENUE

BUSINESS NOW RELATES TO SECURITY

TO MARKET WITH 10G, 40G, 100G, 400G,

25G, 50G

OF EMPLOYEES IN R&D

($MM)

U.S. AND FOREIGN PATENTS PENDING OR ISSUED

~50%

~400

1st

~30%

FOUNDED 1997

HEADQUARTERS CALABASAS, CA

EMPLOYEES ~1783

MARKET CAP* ~$760 MILLION

ENTERPRISE

VALUE*~$715 MILLION

*As of 5-4-16


WE ARE PROUD TO SERVE

ENTERPRISESERVICE PROVIDERSNEMs

77OF THE

FORTUNE 100

47OF THE

TOP 50 CARRIERS

15OF THE

TOP 15 NEMS


INTERNET OF THINGSCLOUD NETWORK SECURITY BIG DATA

MARKET DYNAMICS DRIVINGMore Data, More Complexity, More to Secure

MOBILE DATA TRAFFIC

MOVES TO CLOUD APPS

BY 2019

90%BILLION CONNECTED

THINGS REQUESTING

SUPPORT BY 2018

6GIGABYTES OF

NEW DATA PER

PERSON / DAY BY 2020

150GROWTH IN

GLOBAL SECURITY

INCIDENTS 2014 to 2015

38%


Jeep Hack

Forces 1.4M

Recalls; Drives

Congress

to Action

OPM Hack:

4 Million

Government

Workers Completely

Exposed

2.5 million people

have medical

device implants

with WiFi. Was

yours fully tested?

One out of three

Americans’

health records

were breached

CUSTOMER PAIN POINTSThe Cost of Inadequate Network Design, Monitoring and Security:


We challenge the infrastructure, harden security and visualize the applications


SECURITYTEST VISIBIL ITY


SECURITYTEST VISIBIL ITY

A better foundation leads to lower cost of ownership

3-year OPEX savings and 10X

ROI by installing visibility

framework

$800KAnnual OPEX savings and 15X

ROI by installing ThreatARMOR

as first line of defense

$300K3-year OPEX savings and 4X

ROI by validating vCPE

without truck rolls

$500K



END-TO-END APPLICATION STRENGTHENINGAcross the Infrastructure

Across ALL Platforms

Flex Taps, iBypass, Virtual Taps

802.11ac, MU-MIMO

PerfectStormBPS vEPCIxLoad/VE

IxNetwork/VEMultis SDN

ThreatARMOR,ATIP

Mobile Endpoint Network Data Center Cloud

Vision One, NTO, Hawkeye,

xStream40, Control Tower


INTRODUCING VISION ONE™See Everything. Miss Nothing.

Intuitive UI and patented

filter compiler

See Everything

ATI for SSL decryption

& App intelligence

Look Within

Manage traffic from

physical and virtual taps

Virtualize

ZERO-loss advanced

packet processing

Optimize

Flexibly deploy tools inline

and out-of-band

Layered Defense


Increased channel investment

Targeted markets and customers

More than 500 partners worldwide

CRN 5-Star Rating0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2015 Target Model

CUSTOMER SEGMENTS*

NEM & Carrier Enterprise

CUSTOMER BASE CONTINUES

TO GROW AND DIVERSIFY

* Percentage based on estimated sales volume

CUSTOMER BASE EXPANSION


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

A N D

S E C U R I T Y I P

E X PA N D I N G

C U S TO 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

WELL POSITIONED FOR GROWTH


FINANCIALSBrent Novak, CFO


TARGET MODEL

100%

76 – 78%

58 – 53%

18 – 25%

12 – 16%

2014 2015 Q1’16

Revenue $464M $517M $113M

Gross Margin 76% 78% 78%

Operating

Expenses65% 60% 68%

Operating Margin 11% 18% 10%

Net Margin 6% 11% 7%

Please refer to reconciliation of GAAP to Non-GAAP measures in Appendix and in the investor relations section of the company’s website.

NON-GAAP FINANCIALS AND MODEL


IN MILLIONS DEC. 2014 DEC. 2015 MAR. 2016

Cash, cash equivalents

and marketable securities$126 $67 $81

Total assets $869 $780 $753

Convertible debt $199 - -

Term loan - $38 $36

Shareholders’ equity * $481 $519 $523

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 March 31, 2016,

the company has not repurchased any shares under the share repurchase program.

BALANCE SHEET DETAILS


THANK YOU


RECONCILIATION OF GAAP TO NON-GAAP 1 OF 3FY 2014 FY 2015 Q1/16

Revenue 100% 100% 100%

GM %, GAAP 75.2% 78.0% 77.6%

Inventory adjustments (a) 0.3% 0.0% -

Stock-based compensation (b) 0.1% 0.1% 0.1%

GM %, non-GAAP 75.6% 78.1% 77.7%

Operating expense, GAAP 84.8% 73.5% 81.8%

Amortization of intangible assets (c) -10.1% -8.2% -8.9%

Acquisition and other related (d) -0.7% -0.1% 0.0%

Restructuring (e)-2.2% 0.1% 0.2%

Stock-based compensation (b) -3.5% -3.6% -4.3%

Legal, contract settlements, and other (f ) -3.3% -1.2% -0.9%

Operating expense, non-GAAP 65.0% 60.5% 68.0%

Operating Margin (loss), GAAP -9.6% 4.5% -4.2%

Effects of reconciling items (g) 20.2% 13.1% 14.0%

Operating Margin (loss), non-GAAP 10.6% 17.6% 9.8%

Interest income and other, net, GAAP 0.0% -0.1% 0.3%

Interest income and other, net, non-GAAP 0.0% -0.1% 0.3%

Interest expense, GAAP 1.8% 1.6% 0.5%

Effects of reconciling items (h) -0.1% 0.0% 0.0%

Interest expense, non-GAAP 1.7% 1.6% 0.5%

Income tax expense (benefit), GAAP -2.4% 1.6% -2.0%

Effects of reconciling items (i) 5.3% 3.3% 5.0%

Income tax expense (benefit), non-GAAP 2.9% 4.9% 3.0%

Net income (loss), GAAP -9.0% 1.2% -2.4%

Effects of reconciling items (j) 15.1% 9.8% 9.0%

Net income, non-GAAP 6.1% 11.0% 6.6%

Diluted earnings / (basic loss) per share, GAAP ($0.54) $0.07 ($0.03)

Effects of reconciling items (k) (l) $0.90 $0.60 $0.12

Diluted earnings per share, non-GAAP $0.36 $0.67 $0.09


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. These costs primarily relate to one-time

employee termination benefits consisting of severance, facility-related costs, and other costs.

(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 $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) This reconciling item includes $458,000 related to the acceleration of certain of our debt issuance costs during the fourth quarter of 2014.

(i) These adjustments represent the income tax effects of the adjustments noted in footnotes (a), (b), (c), (d), (e), (f), and (h) as well as certain

other non-cash income tax impacts such as changes in the valuation allowance relating to the company’s deferred tax assets.

(j) These adjustments represent the effects of the adjustments noted in footnotes (a), (b), (c), (d), (e), (f), (h), and (i).

(k) These adjustments represent the effects of the adjustments noted in footnotes (a), (b), (c), (d), (e), (f), (h), and (i), on a per share basis.

(l) 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.


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%

analyst deck-20160524-final

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