2014

National Instruments Reports Record Quarterly Revenue Graphical System Design Continues to Create Long-Term Sustainable Differentiation

AUSTIN, Texas, July 26, 2012 /PRNewswire/ --

Q2 2012 Highlights

  • Record revenue of $292 million, up 15 percent year-over-year
  • Record Q2 revenue for PXI and NI CompactRIO products
  • GAAP gross margin of 76 percent and non-GAAP gross margin of 77 percent
  • Record operating income for a second quarter
  • Fully diluted GAAP EPS of $0.22
  • Fully diluted non-GAAP EPS of $0.27
  • EBITDA of $47 million, or $0.38 per share
  • Cash and short-term investments of $351 million as of June 30

 

National Instruments (Nasdaq: NATI) today announced Q2 revenue of $292 million, an all-time revenue record and a 15 percent increase from Q2 2011. In constant currency terms, Q2 revenue increased 18 percent from Q2 2011. Orders were up 24 percent year-over-year in Q2, with backlog increasing by $16 million and short-term deferred revenue increasing by $5 million during the quarter. In Q2, the company's orders greater than $20,000 grew 40 percent year-over-year, and the average order size reached a new record of approximately $5,300.

GAAP net income for Q2 was $26 million, with fully diluted earnings per share (EPS) of $0.22, and non-GAAP net income was $33 million, with non-GAAP fully diluted EPS of $0.27. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $47 million, or $0.38 per share.

In Q2, GAAP gross margin was 76 percent and non-GAAP gross margin was 77 percent, down sequentially from 77 and 78 percent, respectively.

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 transaction costs and the adjustment of NI's GSA accrual. Reconciliations of the company's GAAP and non-GAAP results are included as part of this news release.

A significant contributor to National Instruments' success in the first half of 2012 was winning the largest application sale in the history of the company. This application involves the use of NI LabVIEW system design software and the NI PXI hardware platform to rapidly develop a production test solution. This test solution offers the customer outstanding performance and accuracy at a very low cost of test per unit. In H1 2012, National Instruments received $40 million in orders for this application – $25 million of this was recognized as revenue in Q1 and Q2, and the company anticipates recognizing the remainder in Q3.

"The resilience of our business despite a significant weakening of the global industrial economy demonstrates the strength of our long-term approach," said Dr. James Truchard, co-founder, president and CEO. "The strong growth in larger orders and the record quarter for PXI products illustrate the increased acceptance of our technology, and I remain optimistic that our strategic investments over the last decade will support our goal of achieving $2 billion in annual revenue by 2016."

Excluding NI's recent AWR and Phase Matrix acquisitions, geographic revenue in U.S. dollar terms for Q2 2012 compared to Q2 2011 was down 2 percent in the Americas, down 4 percent in Europe and up 45 percent in Asia. In local currency terms, revenue was up 1 percent in Europe and up 48 percent in Asia. Also during the quarter, the acquisitions of AWR and Phase Matrix contributed $10 million of revenue. Including these acquisitions, revenue was up 9 percent in the Americas.

As of June 30, NI had $351 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 Aug. 31 to stockholders of record on Aug. 13.

Guidance for Q3 2012

National Instruments remains very concerned with the continued weakness of the Global PMI in Q2, especially with the drop below 50 in June. Of ongoing concern is the drop in the new order element of the PMI to below 48 in June. The company believes this trend, coupled with the fall in the Euro, will restrain growth in the test and measurement industry in the second half of the year. Despite this challenging economic backdrop, NI expects continued year-over-year revenue growth in Q3 as a result of its success in growing its systems sales this year. Also, as the company continues to absorb the significant investments made in 2011, it expects the year-over-year growth in non-GAAP operating expenses to continue to moderate in Q3.

"Despite the weak global economy, we are pleased with our execution in Q2," said Alex Davern, NI COO and CFO. "Looking forward, we plan to leverage the investments we made in 2011 to enable sustained revenue growth and to continue to drive toward our goal of $2 billion in annual revenue by 2016."

NI expects revenue for Q3 2012 to be between $272 million and $302 million. The company expects fully diluted EPS to be in the range of $0.14 to $0.26 for Q3, with non-GAAP fully diluted EPS expected to be in the range of $0.20 to $0.32. Built into the company's guidance is a $.01 per share loss on foreign exchange due to fall of the Euro in July.   National Instruments expects revenue in Q3 to benefit from a reduction in backlog as the company completes shipment of the large system order discussed earlier. As a result, National Instruments expects sequential revenue growth in Q4 to be below the company's historical seasonal average.

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 revenue, 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 six-month periods ending June 30, 2012 and 2011, on a GAAP and non-GAAP basis. NI is also providing guidance on its non-GAAP 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 transaction costs and the adjustment of our GSA accrual 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 six-month periods ending June 30, 2012 and 2011. 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

Interested parties can listen to the Q2 2012 conference call today, July 26, beginning at 4:00 p.m. CT, at ni.com/call. A replay will be available shortly after the call ends through Aug. 2 at 7:00 p.m. CT by calling (888) 203-1112, confirmation code 6340145, or by visiting the company's website at ni.com/call.

Forward-Looking Statements

This release contains "forward-looking statements," including statements related to recognizing the remainder of the large application sale revenue over the coming quarters, demonstrating the strength of the company's long-term approach, illustrating the increased acceptance of NI technology, remaining optimistic that the company's strategic investments will support its long-term goal of achieving $2 billion in annual revenue by 2016, remaining very concerned with the continued weakness of the Global PMI in Q2, company belief that this trend will restrain growth in the second half of the year, NI expects continued year-over-year revenue growth in Q3, continuing to absorb the significant investments made in 2011, expecting the year-over-year growth in non-GAAP operating expenses to continue to moderate in Q3, plan to leverage the investments NI made in 2011 to enable sustained revenue growth and to continue to drive toward its goal of $2 billion in annual revenue by 2016, NI's revenue guidance for Q3 2012 and its guidance for Q3 2012 fully diluted 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, component shortages, delays in the release of new products, fluctuations in customer demand for NI products, the company's ability to effectively manage its operating expenses, manufacturing inefficiencies, adjustments to acquisition earn-out accruals, foreign exchange fluctuations 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, 2011, Form 10-Q for the quarter ended March 31, 2012, 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 and ni.com 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


(512) 683-8456

 

National Instruments

Consolidated Balance Sheets

(in thousands)








June 30,


Dec. 31,



2012


2011



(unaudited)








Assets





Current assets:





Cash and cash equivalents

$

271,402

$

142,608

Short-term investments


79,325


223,504

Accounts receivable, net


188,258


157,056

Inventories, net


148,989


131,995

Prepaid expenses and other current assets


56,089


38,082

Deferred income taxes, net


19,588


26,304

Total current assets


763,651


719,549






Property and equipment, net


205,754


190,148

Goodwill


128,963


130,747

Intangible assets, net


80,679


83,866

Other long-term assets


34,584


29,984

Total assets

$

1,213,631

$

1,154,294






Liabilities and Stockholders' Equity





Current liabilities:





Accounts payable

$

51,707

$

41,111

Accrued compensation


33,354


29,616

Deferred revenue – current


89,497


80,059

Accrued expenses and other liabilities


22,007


37,612

Other taxes payable


22,165


24,507

Total current liabilities


218,730


212,905






Deferred income taxes


43,128


43,186

Liability for uncertain tax positions


21,289


19,494

Deferred revenue – long-term


18,488


10,015

Other long-term liabilities


15,668


16,683

Total liabilities

$

317,303

$

302,283






Stockholders' equity:





Preferred stock


-


-

Common stock


1,222


1,207

Additional paid-in capital


501,885


471,830

Retained earnings


393,502


382,474

Accumulated other comprehensive (loss)


(281)


(3,500)

Total stockholders' equity

$

896,328

$

852,011

Total liabilities and stockholders' equity

$

1,213,631

$

1,154,294




National Instruments

Consolidated Statements of Income

(in thousands, except per share data)












Three Months Ended


Six Months Ended



June 30,


June 30,



(Unaudited)


(Unaudited)



2012


2011


2012


2011

Net sales:









Product

$

268,979

$

233,141

$

508,314

$

451,751

Software maintenance


21,931


20,143


43,729


39,383

GSA accrual


1,349


-


1,349


-

Total net sales


292,259


253,284


553,392


491,134










Cost of sales:









Product

$

69,787

$

54,803

$

129,578

$

105,761

Software maintenance


1,064


1,083


2,621


2,601

Total cost of sales


70,851


55,886


132,199


108,362










Gross profit

$

221,408

$

197,398

$

421,193

$

382,772










Operating expenses:









Sales and marketing

$

110,756

$

96,197

$

210,808

$

183,352

Research and development


54,286


47,027


108,301


89,895

General and administrative


21,502


21,232


42,876


40,071

Total operating expenses

$

186,544

$

164,456

$

361,985

$

313,318










Operating income

$

34,864

$

32,942

$

59,208

$

69,454










Other income (expense):









Interest income

$

132

$

344

$

362

$

685

Net foreign exchange (loss)


(1,016)


(486)


(1,904)


(709)

Other income, net


151


(571)


255


(125)










Income before income taxes

$

34,131

$

32,229

$

57,921

$

69,305










Provision for income taxes


7,690


5,681


12,838


12,296










Net income

$

26,441

$

26,548

$

45,083

$

57,009










Basic earnings per share

$

0.22

$

0.22

$

0.37

$

0.48

Diluted earnings per share

$

0.22

$

0.22

$

0.37

$

0.47










Weighted average shares outstanding:









Basic


121,801


119,736


121,360


119,218

Diluted


122,759


121,161


122,376


120,810










Dividends declared per share

$

0.14

$

0.10

$

0.28

$

0.20















National Instruments

Consolidated Statements of Cash Flows

(in thousands)



Six Months Ended



June 30,



(Unaudited)



2012


2011

Cash flow from operating activities:





Net income

$

45,083

$

57,009

Adjustments to reconcile net income to net cash provided





by operating activities:





Depreciation and amortization


27,316


23,390

Stock-based compensation


13,285


10,296

Tax expense from deferred income taxes


5,037


2,770

Tax (benefit) from stock option plans


(2,094)


(5,035)

Changes in operating assets and liabilities:





Accounts receivable


(31,203)


(13,841)

Inventories


(16,994)


(21,393)

Prepaid expenses and other assets


(15,967)


2,186

Accounts payable


10,596


937

Deferred revenue


17,911


7,051

Taxes and other liabilities


(11,169)


9,926

Net cash provided by operating activities

$

41,801

$

73,296






Cash flow from investing activities:





Capital expenditures


(28,934)


(23,053)

Capitalization of internally developed software


(9,664)


(9,391)

Additions to other intangibles


(1,085)


(1,756)

Acquisitions, net of cash received


-


(73,558)

Purchases of short-term investments


(38,879)


(54,097)

Sales and maturities of short-term investments


183,058


73,915

Net cash provided/(used) by investing activities

$

104,496

$

(87,940)






Cash flow from financing activities:





Proceeds from issuance of common stock


14,422


21,389

Dividends paid


(34,019)


(23,860)

Tax benefit from stock option plans


2,094


5,035

Net cash (used)/provided by financing activities

$

(17,503)

$

2,564






Net change in cash and cash equivalents


128,794


(12,080)

Cash and cash equivalents at beginning of period


142,608


219,447

Cash and cash equivalents at end of period

$

271,402

$

207,367




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

Six Months Ended



June 30,

June 30,



2012


2011


2012


2011

Revenue









Acquisition-related deferred revenue

$

887

$

-

$

2,156

$

-

GSA accrual


(1,349)


-


(1,349)


-

Benefit from (provision for) income taxes


162


-


(282)


-

Total

$

(300)

$

-

$

525

$

-










Stock-based compensation









Cost of sales

$

438

$

398

$

853

$

715

Sales and marketing


2,945


2,457


5,585


4,379

Research and development


2,679


2,070


5,128


3,756

General and administrative


921


781


1,720


1,446

Provision for income taxes


(1,880)


(2,120)


(3,387)


(3,960)

Total

$

5,103

$

3,586

$

9,899

$

6,336



















Amortization of acquisition intangibles









Cost of sales

$

2,186

$

1,005

$

4,596

$

2,009

Sales and marketing


448


100


895


177

Other income, net


193


-


382


-

Provision for income taxes


(894)


(359)


(1,866)


(709)

Total

$

1,933

$

746

$

4,007

$

1,477










Acquisition-related transaction costs









Cost of sales

$

-

$

-

$

32

$

-

Sales and marketing


19


982


239


982

Research and development


56


-


162


-

General and administrative


9


427


56


427

Provision for income taxes


(29)


(51)


(171)


(51)

Total

$

55

$

1,358

$

318

$

1,358




National Instruments

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share data)

(unaudited)












Three Months Ended


Six Months Ended



June 30,


June 30,



2012


2011


2012


2011

Reconciliation of Net Revenue to Non-GAAP Net Revenue





Net sales, as reported

$

292,259

$

253,284

$

553,392

$

491,134

Acquisition-related deferred revenue


887


-


2,156


-

GSA accrual


(1,349)


-


(1,349)


-

Non-GAAP net sales

$

291,797

$

253,284

$

554,199

$

491,134










Reconciliation of Gross Profit to Non-GAAP Gross Profit





Gross profit, as reported

$

221,408

$

197,398

$

421,193

$

382,772

Acquisition-related deferred revenue and GSA accrual


(462)


-


807


-

Stock-based compensation


438


398


853


715

Amortization of acquisition intangibles


-


-


32


-

Acquisition-related transaction costs


2,186


1,005


4,596


2,009

Non-GAAP gross profit

$

223,570

$

198,801

$

427,481

$

385,496

      Non-GAAP gross margin


77%


78%


77%


78%










Reconciliation of Operating Expenses to Non-GAAP Operating Expenses





Operating expenses, as reported

$

186,544

$

164,456

$

361,985

$

313,318

Stock-based compensation


(6,545)


(5,308)


(12,433)


(9,581)

Amortization of acquisition intangibles


(448)


(100)


(895)


(177)

Acquisition-related transaction costs


(84)


(1,409)


(457)


(1,408)

 Non-GAAP operating expenses

$

179,467

$

157,639

$

348,200

$

302,152










Reconciliation of Operating Income to Non-GAAP Operating Income





Operating income, as reported

$

34,864

$

32,942

$

59,208

$

69,454

Acquisition-related deferred revenue and GSA accrual


(462)


-


807


-

Stock-based compensation


6,983


5,706


13,286


10,296

Amortization of acquisition intangibles


2,634


1,105


5,491


2,186

Acquisition-related transaction costs


84


1,409


489


1,409

Non-GAAP operating income

$

44,103

$

41,162

$

79,281

$

83,345

      Non-GAAP operating margin


15%


16%


14%


17%










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



Income before income taxes, as reported

$

34,131

$

32,229

$

57,921

$

69,305

Acquisition-related deferred revenue and GSA accrual


(462)


-


807


-

Stock-based compensation


6,983


5,706


13,286


10,296

Amortization of acquisition intangibles


2,827


1,105


5,873


2,186

Acquisition-related transaction costs


84


1,409


489


1,409

Non-GAAP income before income taxes

$

43,563

$

40,449

$

78,376

$

83,196










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



Provision for income taxes, as reported

$

7,690

$

5,681

$

12,838

$

12,296

Acquisition-related deferred revenue and GSA accrual


(162)


-


282


-

Stock-based compensation


1,880


2,120


3,387


3,960

Amortization of acquisition intangibles


894


359


1,866


709

Acquisition-related transaction costs


29


51


171


51

Non-GAAP provision for income taxes

$

10,331

$

8,211

$

18,544

$

17,016
















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

(unaudited)












Three Months Ended


Six Months Ended



June 30,


June 30,



2012


2011


2012


2011

Net income, as reported

$

26,441

$

26,548

$

45,083

$

57,009

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









Acquisition-related deferred revenue and GSA accrual,

net of tax effect


(300)


-


525


-

Stock-based compensation, net of tax effect


5,103


3,586


9,899


6,336

Amortization of acquisition intangibles, net of tax effect


1,933


746


4,007


1,477

Acquisition-related transaction costs, net of tax effect


55


1,358


318


1,358

Non-GAAP net income

$

33,232

$

32,238

$

59,832

$

66,180










Basic EPS, as reported

$

0.22

$

0.22

$

0.37

$

0.48

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









Impact of acquisition-related deferred revenue and GSA accrual,

net of tax effect


(0.00)


-


0.01


-

Impact of stock-based compensation, net of tax effect


0.04


0.03


0.08


0.06

Impact of amortization of acquisition intangibles, net of tax effect


0.01


0.01


0.03


0.01

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


0.00


0.01


0.00


0.01

Non-GAAP basic EPS

$

0.27

$

0.27

$

0.49

$

0.56



















Diluted EPS, as reported

$

0.22

$

0.22

$

0.37

$

0.47

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









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


(0.00)


-


0.01


-

Impact of stock-based compensation, net of tax effect


0.04


0.03


0.08


0.06

Impact of amortization of acquisition intangibles, net of tax effect


0.01


0.01


0.03


0.01

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


0.00


0.01


0.00


0.01

Non-GAAP diluted EPS

$

0.27

$

0.27

$

0.49

$

0.55










Weighted average shares outstanding:









Basic


121,801


119,736


121,360


119,218

Diluted


122,759


121,161


122,376


120,810

















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

(unaudited)












Three Months Ended


Six Months Ended



June 30,


June 30,



2012


2011


2012


2011

Net income, as reported

$

26,441

$

26,548

$

45,083

$

57,009

Adjustments to reconcile net income to EBITDA:









     Interest income


(132)


(344)


(362)


(685)

     Taxes


7,690


5,681


12,838


12,296

     Depreciation and amortization


13,201


12,417


27,316


23,390

EBITDA

$

47,200

$

44,302

$

84,875

$

92,010










Diluted EPS, as reported

$

0.22

$

0.22

$

0.37

$

0.47

Adjustment to reconcile diluted EPS to EBITDA:









     Interest income


(0.00)


(0.00)


(0.00)


(0.01)

     Taxes


0.06


0.05


0.10


0.10

     Depreciation and amortization


0.10


0.10


0.22


0.20

EBITDA diluted EPS

$

0.38

$

0.37

$

0.69

$

0.76










Weighted average shares outstanding – Diluted


122,759


121,161


122,376


120,810



National Instruments

Reconciliation of GAAP to Non-GAAP EPS Guidance

(unaudited)










Three months ended




September 30, 2012




Low


High

GAAP fully diluted EPS, guidance

$

0.14

$

0.26

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

$

0.20

$

0.32

SOURCE National Instruments



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