National Instruments Reports Third Quarter Revenue of $289 Million Company Continues to Focus on Managing Costs to Improve Operating Margins

Q3 2013 Highlights

- Third quarter revenue of $289 million

- Strong revenue growth in RF and CompactRIO products

- Fully diluted GAAP EPS of $0.13 and fully diluted non-GAAP EPS of $0.19

- EBITDA of $39 million or $0.31 per share

AUSTIN, Texas, Oct. 31, 2013 /PRNewswire/ -- National Instruments (Nasdaq: NATI) today announced Q3 revenue of $289 million, $9 million above the midpoint of its guidance range given July 29. In Q3 2013, National Instruments recognized $4 million in revenue from its largest customer, compared with $27 million recognized in Q3 2012. The company saw a 2 percent increase year-over-year in the value of total orders received in Q3. Breaking the orders down by size, the company's orders under $20,000 grew 2 percent year-over-year; orders between $20,000 and $100,000 remained flat year-over-year; and orders above $100,000 increased 8 percent year-over-year. Excluding the company's largest customer, total orders would have increased 8 percent year-over-year, and orders over $100,000 would have grown 48 percent year-over-year.

GAAP net income for Q3 was $16 million, with fully diluted earnings per share (EPS) of $0.13, and non-GAAP net income was $24 million, with non-GAAP fully diluted EPS of $0.19. The company's non-GAAP EPS was $0.03 above the midpoint of its guidance range given on July 29. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $39 million, or $0.31 per share for Q3.

In Q3, GAAP gross margin increased to 74 percent and non-GAAP gross margin was 75 percent, up 240 basis points from Q2 2013 due primarily to a change in customer mix. Total GAAP operating expenses were relatively flat sequentially and were up 4 percent year-over-year. Total non-GAAP operating expenses were down approximately $1 million sequentially and were up 3 percent year-over-year.

The company's non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles, acquisition accounting for deferred revenue, acquisition-related adjustments and acquisition-related transaction costs. Reconciliations of the company's GAAP and non-GAAP results are included as part of this news release.

"We are pleased with the continued success of our RF and CompactRIO products, which represent key focus areas for our business," said Dr. James Truchard, NI co-founder, president and CEO. "As we saw at NIWeek, our customers continue to show strong interest in our strategic product platforms and graphical system design approach for solving the toughest engineering challenges."

Geographic revenue in U.S. dollar terms for Q3 2013 compared to Q3 2012 was up 9 percent in the Americas, up 7 percent in Europe and up 24 percent in Emerging Markets. However, revenue declined 27 percent year-over-year in East Asia as the majority of revenue from the company's largest customer is recognized in this region. In local currency terms, revenue was up 3 percent in Europe, up 28 percent in Emerging Markets and down 25 percent in East Asia.

As of Sept. 30, NI had $344 million in cash and short-term investments. The National Instruments Board of Directors approved a quarterly dividend of $0.14 per share on the company's common stock payable on Dec. 3 to stockholders of record on Nov. 12.

Guidance for Q4 2013
"We believe NI was able to continue to gain market share in this challenging time for the industry," said Alex Davern, NI COO and CFO. "We are pleased to be guiding to improved results in Q4 and we believe we have taken the actions necessary to deliver an improved operating performance next year."

NI currently expects revenue for Q4 2013 to be between $291 million and $321 million. The midpoint of this revenue guidance represents a 6 percent sequential revenue increase, which is below the company's normal historical average. While National Instruments currently expects to see relatively normal sequential order growth in Q4, the company intends to increase backlog in Q4 to better manage the mix of large orders in 2014. NI expects total non-GAAP operating expenses to be $181 million, plus or minus $2 million in Q4. The company expects fully diluted EPS to be in the range of $0.19 to $0.31 for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.25 to $0.37.

Non-GAAP Presentation
In addition to disclosing results determined in accordance with GAAP, NI discloses certain non-GAAP operating results and non-GAAP information that exclude certain charges. In this news release, the company has presented its gross profit, gross margin, operating expenses, operating income, operating margin, income before income taxes, provision for income taxes, net income and basic and fully diluted EPS for the three- and nine-month periods ending Sept. 30, 2013 and 2012, on a GAAP and non-GAAP basis. NI is also providing guidance on its non-GAAP operating expenses and fully diluted EPS.

When presenting non-GAAP information, the company includes a reconciliation of the non-GAAP results to the GAAP results. Management believes that including the non-GAAP results assists investors in assessing the company's operational performance and its performance relative to its competitors. The company presents these non-GAAP results as a complement to results provided in accordance with GAAP, and these results should not be regarded as a substitute for GAAP. Management uses these non-GAAP measures to manage and assess the profitability and performance of its business and does not consider stock-based compensation expense, amortization of acquisition-related intangibles, acquisition accounting for deferred revenue, acquisition-related adjustments and acquisition-related transaction costs in managing its operations. Specifically, management uses non-GAAP measures to plan and forecast future periods, to establish operational goals, to compare with its business plan and individual operating budgets, to measure management performance for the purposes of executive compensation including payments to be made under bonus plans, to assist the public in measuring the company's performance relative to the company's long-term public performance goals, to allocate resources and, relative to the company's historical financial performance, to enable comparability between periods. Management also considers such non-GAAP results to be an important supplemental measure of its performance.

This news release also discloses the company's EBITDA and EBITDA diluted EPS for the three- and nine-month periods ending Sept. 30, 2013 and 2012. The company also believes that including the EBITDA results assists investors in assessing the company's operational performance relative to its competitors. A reconciliation of EBITDA and EBITDA diluted EPS to GAAP net income and GAAP diluted EPS is included with this news release.

Conference Call Information and Availability of Presentation Materials
Interested parties can listen to the Q3 2013 conference call today, Oct. 31, at 4:00 p.m. CT at ni.com/call. Replay information is available by calling (855) 859-2056, confirmation code # 71812919, shortly after the call through Nov. 5 at 3:00 p.m. CT, or by visiting the company's website at ni.com/call. You may also view certain presentation materials that we may refer to on the conference call at ni.com/nati.

Forward-Looking Statements
This release contains "forward-looking statements," including a focus on managing costs to improve operating margins, momentum at NIWeek, significant interest in NI's strategic product platforms, guiding to improved results in Q4, the company's belief it has taken the actions necessary to deliver an improved operating performance next year, expecting to see relatively normal sequential order growth in Q4, intent to increase backlog in Q4 to better manage mix of large orders, National Instruments' Q4 guidance for revenue, non-GAAP operating expenses and GAAP and non-GAAP EPS. These statements are subject to a number of risks and uncertainties, including the risk of adverse changes or fluctuations in the global economy, U.S. budget or debt issues, foreign exchange fluctuations, component shortages, delays in the release of new products, fluctuations in customer demand for NI products including orders from NI's largest customer, fluctuations in average order size and customer mix, the company's ability to effectively manage its operating expenses, manufacturing inefficiencies and the level of capacity utilization, adjustments to acquisition earn-out accruals and the impact of NI's recent and any future acquisitions. Actual results may differ materially from the expected results.

The company directs readers to its Form 10-K for the fiscal year ended Dec. 31, 2012; its Form 10-Q for the quarter ended June 30, 2013; and the other documents it files with the SEC for other risks associated with the company's future performance.

About National Instruments
Since 1976, National Instruments (www.ni.com) has equipped engineers and scientists with tools that accelerate productivity, innovation and discovery. NI's graphical system design approach to engineering provides an integrated software and hardware platform that speeds the development of any system needing measurement and control. The company's long-term vision and focus on improving society through its technology supports the success of its customers, employees, suppliers and shareholders. Readers can obtain investment information from the company's investor relations department by calling (512) 683-5090, emailing nati@ni.com or visiting www.ni.com/nati. (NATI-F)

CompactRIO, LabVIEW, National Instruments, NI, ni.com and NIWeek are trademarks of National Instruments. Other product and company names listed are trademarks or trade names of their respective companies.

Contact: Caitlin Gursslin, Investor Relations, caitlin.gursslin@ni.com

 

 

National Instruments

Consolidated Balance Sheets

(in thousands)








Sept. 30, 2013


Dec. 31,



(unaudited)


2012

Assets





Current assets:





Cash and cash equivalents

$

190,208

$

161,996

Short-term investments


153,906


173,166

Accounts receivable, net


182,723


187,060

Inventories, net


178,904


169,990

Prepaid expenses and other current assets


66,412


48,009

Deferred income taxes, net


26,464


27,479

Total current assets


798,617


767,700






Property and equipment, net


262,966


249,721

Goodwill


147,319


147,258

Intangible assets, net


84,424


93,913

Other long-term assets


28,269


26,177

Total assets

$

1,321,595

$

1,284,769






Liabilities and Stockholders' Equity





Current liabilities:





Accounts payable

$

54,582

$

65,080

Accrued compensation


29,559


29,978

Deferred revenue – current


96,043


90,714

Accrued expenses and other liabilities


20,003


34,373

Other taxes payable


31,021


24,811

Total current liabilities


231,208


244,956






Deferred income taxes


45,046


47,630

Liability for uncertain tax positions


23,399


20,920

Deferred revenue – long-term


21,309


20,446

Other long-term liabilities


9,455


11,689

Total liabilities


330,417


345,641






Stockholders' equity:





Preferred stock


-


-

Common stock


1,252


1,229

Additional paid-in capital


586,406


532,845

Retained earnings


400,798


404,210

Accumulated other comprehensive income


2,722


844

Total stockholders' equity


991,178


939,128

Total liabilities and stockholders' equity

$

1,321,595

$

1,284,769

 

 

 


 



National Instruments

Consolidated Statements of Income

(in thousands, except per share data)





Three Months Ended


Nine Months Ended



Sept. 30,


Sept. 30,



(unaudited)


(unaudited)



2013


2012


2013


2012

Net sales:









Product

$

269,582

$

267,894

$

810,663

$

776,208

Software maintenance


19,556


22,080


61,089


65,809

GSA accrual


-


-


-


1,349

Total net sales


289,138


289,974


871,752


843,366










Cost of sales:









Product


73,541


71,796


224,954


201,374

Software maintenance


1,665


1,698


4,307


4,319

Total cost of sales


75,206


73,494


229,261


205,693










Gross profit


213,932


216,480


642,491


637,673










Operating expenses:









Sales and marketing


111,253


109,213


337,884


320,021

Research and development


60,791


56,627


180,520


164,928

General and administrative


21,363


20,714


66,363


63,590

Acquisition-related adjustment


-


-


(1,316)


-

Total operating expenses


193,407


186,554


583,451


548,539










Operating income


20,525


29,926


59,040


89,134










Other income (expense):









Interest income


133


133


495


495

Net foreign exchange gain (loss)


456


(235)


(2,057)


(2,139)

Other income (loss), net


304


(899)


728


(644)










Income before taxes


21,418


28,925


58,206


86,846










Provision for income taxes


5,654


4,585


9,421


17,423








Net income

$

15,764

$

24,340

$

48,785

$

69,423










Basic earnings per share

$

0.13

$

0.20

$

0.39

$

0.57

Diluted earnings per share

$

0.13

$

0.20

$

0.39

$

0.57










Weighted average shares outstanding -









Basic


125,032


122,402


124,244


121,710

Diluted


125,608


123,074


125,221


122,726










Dividends declared per share

$

0.14

$

0.14

$

0.42

$

0.42




























 


National Instruments

Consolidated Statements of Cash Flows

(in thousands)



Nine Months Ended



Sept. 30,



(unaudited)



2013


2012

Cash flow from operating activities:





Net income

$

48,785

$

69,423

Adjustments to reconcile net income to net cash provided





by operating activities:





Depreciation and amortization


50,897


41,029

Stock-based compensation


21,996


20,506

Tax (benefit) expense from deferred income taxes


(1,272)


3,626

Tax benefit from stock option plans


(2,185)


(2,353)

Changes in operating assets and liabilities:





Accounts receivable


4,789


(25,549)

Inventories


(8,358)


(23,278)

Prepaid expenses and other assets


(18,320)


(10,296)

Accounts payable


(10,636)


11,100

Deferred revenue


6,192


(2,271)

Taxes and other liabilities


2,834


8,325

Net cash provided by operating activities


94,722


90,262






Cash flow from investing activities:





Capital expenditures


(40,795)


(52,483)

Capitalization of internally developed software


(10,566)


(11,284)

Additions to other intangibles


(4,146)


(1,426)

Purchases of short-term investments


(16,039)


(48,718)

Sales and maturities of short-term investments


35,299


220,094

Net cash (used in) provided by investing activities


(36,247)


106,183






Cash flow from financing activities:





Proceeds from issuance of common stock


28,809


21,297

AWR earn-out payment


(9,016)


-

Dividends paid


(52,241)


(51,167)

Tax benefit from stock option plans


2,185


2,353

Net cash used in financing activities


(30,263)


(27,517)






Net change in cash and cash equivalents


28,212


168,928

Cash and cash equivalents at beginning of period


161,996


142,608

Cash and cash equivalents at end of period

$

190,208

$

311,536

 


 

National Instruments

Detail of GAAP Charges Related to Revenue, Stock-Based Compensation,

Amortization of Acquisition Intangibles and Acquisition-Related Transaction Costs

(in thousands)

(unaudited)


















Three Months Ended


Nine Months Ended



Sept. 30,


Sept. 30,



2013


2012


2013


2012

Revenue









Acquisition-related deferred revenue

$

-

$

-

$

-

$

2,156

GSA accrual


-


-


-


(1,349)

Provision for income taxes


-


-


-


(282)

Total

$

-

$

-

$

-

$

525










Stock-Based Compensation









Cost of sales

$

390

$

436

$

1,219

$

1,289

Sales and marketing


2,908


2,994


8,907


8,579

Research and development


3,803


2,862


9,136


7,990

General and administrative


889


928


2,734


2,648

Provision for income taxes


(2,894)


(1,999)


(6,585)


(5,386)

Total

$

5,096

$

5,221

$

15,411

$

15,120










Amortization of Acquisition Intangibles









Cost of sales

$

2,672

$

2,165

$

8,045

$

6,761

Sales and marketing


490


448


1,506


1,343

Research and development


396


-


1,638


-

Other income, net


185


189


566


571

Provision for income taxes


(1,232)


(887)


(3,850)


(2,753)

Total

$

2,511

$

1,915

$

7,905

$

5,922










Acquisition-Related Transaction Costs









Cost of sales

$

4

$

-

$

7

$

32

Sales and marketing


146


190


406


429

Research and development


281


33


691


195

General and administrative


71


(18)


246


38

Acquisition-related adjustment


-


-


(1,316)


-

Provision for income taxes


(153)


(72)


(412)


(243)

Total

$

349

$

133

$

(378)

$

451











 


 


National Instruments

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share data)

(unaudited)




Three Months Ended


Nine Months Ended



Sept. 30,


Sept. 30,



2013


2012


2013


2012

Reconciliation of Net Sales to Non-GAAP Net Sales





Net sales, as reported

$

289,138

$

289,974

$

871,752

$

843,366

Acquisition-related deferred revenue


-


-


-


2,156

GSA accrual


-


-


-


(1,349)

Non-GAAP net sales

$

289,138

$

289,974

$

871,752

$

844,173










Reconciliation of Gross Profit to Non-GAAP Gross Profit





Gross profit, as reported

$

213,932

$

216,480

$

642,491

$

637,673

Acquisition-related deferred revenue and GSA accrual


-


-


-


807

Stock-based compensation


390


436


1,219


1,289

Amortization of acquisition intangibles


2,672


2,165


8,045


6,761

Acquisition-related transaction costs


4


-


7


32

Non-GAAP gross profit

$

216,998

$

219,081

$

651,762

$

646,562

      Non-GAAP gross margin


75%


76%


75%


77%










Reconciliation of Operating Expenses to Non-GAAP Operating Expenses





Operating expenses, as reported

$

193,407

$

186,554

$

583,451

$

548,539

Stock-based compensation


(7,600)


(6,784)


(20,777)


(19,217)

Amortization of acquisition intangibles


(886)


(448)


(3,144)


(1,343)

Acquisition-related adjustment


-


-


1,316


-

Acquisition-related transaction costs


(498)


(205)


(1,343)


(662)

 Non-GAAP operating expenses

$

184,423

$

179,117

$

559,503

$

527,317










Reconciliation of Operating Income to Non-GAAP Operating Income





Operating income, as reported

$

20,525

$

29,926

$

59,040

$

89,134

Acquisition-related deferred revenue and GSA accrual


-


-


-


807

Stock-based compensation


7,990


7,220


21,996


20,506

Amortization of acquisition intangibles


3,558


2,613


11,189


8,104

Acquisition-related adjustment


-


-


(1,316)


-

Acquisition-related transaction costs


502


205


1,350


694

Non-GAAP operating income

$

32,575

$

39,964

$

92,259

$

119,245

      Non-GAAP operating margin


11%


14%


11%


14%










Reconciliation of Income Before Income Taxes to Non-GAAP Income Before Income Taxes





Income before income taxes, as reported

$

21,418

$

28,925

$

58,206

$

86,846

Acquisition-related deferred revenue and GSA accrual


-


-


-


807

Stock-based compensation


7,990


7,220


21,996


20,506

Amortization of acquisition intangibles


3,743


2,802


11,755


8,675

Acquisition-related adjustment


-


-


(1,316)


-

Acquisition-related transaction costs


502


205


1,350


694

Non-GAAP income before income taxes

$

33,653

$

39,152

$

91,991

$

117,528










Reconciliation of Provision for Income Taxes to Non-GAAP Provision for Income Taxes





Provision for income taxes, as reported

$

5,654

$

4,585

$

9,421

$

17,423

Acquisition-related deferred revenue and GSA accrual


-


-


-


282

Stock-based compensation


2,894


1,999


6,585


5,386

Amortization of acquisition intangibles


1,232


887


3,850


2,753

Acquisition-related transaction costs


153


72


412


243

Non-GAAP provision for income taxes

$

9,933

$

7,543

$

20,268

$

26,087

 

 

 

National Instruments

Reconciliation of GAAP Net Income, Basic EPS and Diluted EPS to Non-GAAP Net Income, Basic EPS and Diluted EPS

(in thousands, except per share data)

(unaudited)











Three Months Ended


Nine Months Ended



Sept. 30,


Sept. 30,



2013


2012


2013


2012

Net income, as reported

$

15,764

$

24,340

$

48,785

$

69,423

Adjustments to reconcile net income to non-GAAP net income:









Acquisition-related deferred revenue, net of tax effect


-


-


-


525

  Stock-based compensation, net of tax effect


5,096


5,221


15,411


15,120

  Amortization of acquisition intangibles, net of tax effect


2,511


1,915


7,905


5,922

  Acquisition-related adjustment


-


-


(1,316)


-

  Acquisition-related transaction costs, net of tax effect


349


133


938


451

Non-GAAP net income

$

23,720

$

31,609

$

71,723

$

91,441










Basic EPS, as reported

$

0.13

$

0.20

$

0.39

$

0.57










Adjustment to reconcile basic EPS to non-GAAP basic EPS:









  Impact of acquisition-related deferred revenue, net of tax effect


-


-


-


0.01

  Impact of stock-based compensation, net of tax effect


0.04


0.04


0.13


0.12

  Impact of amortization of acquisition intangibles, net of tax effect


0.02


0.02


0.06


0.05

  Impact of acquisition-related adjustment


-


-


(0.01)


-

  Impact of acquisition-related transaction costs, net of tax effect


-


-


0.01


-

Non-GAAP basic EPS

$

0.19

$

0.26

$

0.58

$

0.75



















Diluted EPS, as reported

$

0.13

$

0.20

$

0.39

$

0.57

Adjustment to reconcile diluted EPS to non-GAAP diluted EPS:









  Impact of acquisition-related deferred revenue, net of tax effect


-


-


-


0.01

  Impact of stock-based compensation, net of tax effect


0.04


0.04


0.12


0.12

  Impact of amortization of acquisition intangibles, net of tax effect


0.02


0.02


0.06


0.05

  Impact of acquisition-related adjustment


-


-


(0.01)


-

  Impact of acquisition-related transaction costs, net of tax effect


-


-


0.01


-

Non-GAAP diluted EPS

$

0.19

$

0.26

$

0.57

$

0.75










Weighted average shares outstanding -









Basic


125,032


122,402


124,244


121,710

Diluted


125,608


123,074


125,221


122,726

 


 

National Instruments

Reconciliation of Net Income and Diluted EPS to EBITDA and EBITDA Diluted EPS

(in thousands, except per share data)

(unaudited)












Three Months Ended


Nine Months Ended



Sept. 30,


Sept. 30,



2013


2012


2013


2012

Net income, as reported

$

15,764

$

24,340

$

48,785

$

69,423

Adjustments to reconcile net income to EBITDA:









     Interest income


(133)


(133)


(495)


(495)

     Taxes


5,654


4,585


9,421


17,423

     Depreciation and amortization


17,342


13,713


50,897


41,029

EBITDA

$

38,627

$

42,505

$

108,608

$

127,380










Diluted EPS, as reported

$

0.13

$

0.20

$

0.39

$

0.57

Adjustment to reconcile diluted EPS to EBITDA:









     Interest income


-


-


-


-

     Taxes


0.04


0.04


0.07


0.14

     Depreciation and amortization


0.14


0.11


0.41


0.33

EBITDA diluted EPS

$

0.31

$

0.35

$

0.87

$

1.04










Weighted average shares outstanding - diluted


125,608


123,074


125,221


122,726

 

National Instruments

Net Revenue Excluding Its Largest Customer

(in millions)

(unaudited)














Three Months Ended


Nine Months Ended




Sept. 30,


Sept. 30,




2013


2012


2013


2012

Net sales, as reported

$

289

$

290

$

872

$

844

Year-over-year change


0%




3%












        Net sales from its largest customer


4


27


31


52

Net sales, excluding its largest customer

$

285

$

263

$

841

$

792

Year-over-year change


8%




6%
















 


National Instruments

Reconciliation of GAAP to Non-GAAP Operating Expense Guidance

(in millions)

(unaudited)










Three Months Ended




Dec. 31, 2013




Low


High

GAAP operating expense, guidance

$

187

$

191

Adjustment to reconcile operating expense to non-GAAP





Operating expense:





  Impact of stock-based compensation


7


7

  Impact of amortization of acquisition intangibles


1


1







Non-GAAP operating expense, guidance

$

179

$

183

 

 

National Instruments

Reconciliation of GAAP to Non-GAAP EPS Guidance

(unaudited)










Three Months Ended




Dec. 31, 2013




Low


High

GAAP fully diluted EPS, guidance

$

0.19

$

0.31

Adjustment to reconcile diluted EPS to non-GAAP diluted EPS:





  Impact of stock-based compensation, net of tax effect


0.04


0.04

  Impact of amortization of acquisition intangibles, net of tax effect


0.02


0.02







Non-GAAP diluted EPS, guidance

$

0.25

$

0.37

 

 

SOURCE National Instruments



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