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National Instruments Reports Record Third Quarter Revenue

Company's Disciplined Execution Delivered Strong Operating Income Despite Difficult Business Conditions in Q3

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AUSTIN, Texas, Oct. 25, 2012 /PRNewswire/ --

Q3 2012 Highlights

  • Record revenue of $290 million for a third quarter, up 7 percent on a non-GAAP basis year-over-year
  • GAAP gross margin of 75 percent and non-GAAP gross margin of 76 percent
  • Record non-GAAP operating income for a third quarter
  • Fully diluted GAAP EPS of $0.20
  • Fully diluted non-GAAP EPS of $0.26
  • EBITDA of $43 million, or $0.35 per share
  • Cash and short-term investments of $364 million as of Sept. 30

National Instruments (Nasdaq: NATI) today announced Q3 revenue of $290 million, a third quarter revenue record and a 7 percent increase from Q3 2011 on a non-GAAP basis. In constant currency terms, Q3 revenue increased 11 percent from Q3 2011. Backlog decreased by $11 million during the quarter. In Q3, the company's orders greater than $20,000 grew 11 percent year-over-year and average order size reached approximately $4,900. The company's orders less than $20,000 decreased by 4 percent year-over-year, reflecting the significant decline in the Global PMI in Q3.

EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $43 million, or $0.35 per share for Q3 2012. GAAP net income for Q3 was $24 million, with fully diluted earnings per share (EPS) of $0.20, and non-GAAP net income was $32 million, with non-GAAP fully diluted EPS of $0.26.

The company's non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles and acquisition-related transaction costs. 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 this year 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. Year to date, National Instruments has received $53 million in orders for this application – $41 million of this was recognized as revenue in the first nine months of 2012, and the company anticipates recognizing the remainder in Q4. Excluding the impact of this application, orders over $20,000 would have been up by 2 percent year-over-year.

"In tough economic climates, it takes discipline to balance the short-term demands of the business and our long-term objectives in building a company that is built to last," said Dr. James Truchard, co-founder, president and CEO. "Our employees' diligent efforts resulted in revenue growth outpacing expense growth while redefining instrumentation and our competitive position with disruptive technology."

Geographic revenue in U.S. dollar terms for Q3 2012 compared to Q3 2011 was up 3 percent in the Americas, down 7 percent in Europe and up 26 percent in Asia. In local currency terms, revenue was up 4 percent in Europe and up 29 percent in Asia. As the company announced during its annual investor conference on Oct. 1, 2012, National Instruments created a new geographical territory in Asia, resulting in four regions: Americas, Europe, East Asia, and Emerging Markets, Asia/Rest of World. The company will begin reporting on these four regions next quarter.

As of Sept. 30, NI had $364 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 2012

National Instruments remains very concerned by the continued weakness of the Global PMI in Q3 with the average for the quarter of 48.5, the lowest average since Q2 2009. Of ongoing concern is the level of the new order element of the index at 48.1 in September. Its drop suggests that the overall index may remain well below 50 in Q4 and into 2013. The company believes this trend will restrain growth in the test and measurement industry for the fourth quarter.

Historically, this sort of deterioration in the industrial economy, coupled with a weak start to the quarter, can result in a delay to large orders. In this environment, National Instruments is taking a conservative approach and assumes there will not be the normal seasonal surge in orders toward the end of the quarter. Also, as the company continues to absorb the significant investments made in 2011, it expects year-over-year growth in non-GAAP operating expenses will be in the low single digits in Q4.

"We are pleased with our ability to increase our Q3 non-GAAP operating margin over last year," said Alex Davern, NI CFO. "With that said, we expect the industrial economy to remain very weak into 2013, and we will continue to focus on carefully managing expenses."

NI expects revenue for Q4 2012 to be between $265 million and $295 million. The company expects fully diluted EPS to be in the range of $0.11 to $0.25 for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.17 to $0.31.

Given the uncertain economic environment, the company plans to host a business update call for investors after the market closes on Dec. 10.

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 net sales, 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, 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 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, 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 Q3 2012 conference call today, Oct. 25, beginning at 4:00 p.m. CT, at ni.com/call. A replay will be available shortly after the call ends through Nov. 1 at 7:00 p.m. CT by calling (888) 203-1112, confirmation code 8045482, 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 revenue in Q4, a company that is built to last, redefining instrumentation and the company's competitive position with disruptive technology, remaining very concerned by the continued weakness of the Global PMI in Q3, company belief that this trend will restrain growth in the test and measurement market for the fourth quarter, that deterioration in the industrial economy coupled with a weak start to the quarter can result in a delay to large orders toward the end of a quarter, taking a conservative approach and assuming there will not be the normal seasonal surge in orders toward the end of the quarter, expecting year-over-year growth in non-GAAP operating expenses will continue to be in the low-single digits in Q4, expecting the industrial economy to remain very weak into 2013, that we will continue to focus on carefully managing expenses through the first half of 2013, NI's revenue guidance for Q4 2012 and its guidance for Q4 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, its Form 10-Q for the quarter ended June 30, 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)

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)








Sept. 30,


Dec. 31,



2012


2011



(Unaudited)








Assets





Current assets:





Cash and cash equivalents

$

311,536

$

142,608

Short-term investments


52,128


223,504

Accounts receivable, net


182,604


157,056

Inventories, net


155,273


131,995

Prepaid expenses and other current assets


49,668


38,082

Deferred income taxes, net


21,563


26,304

Total current assets


772,772


719,549






Property and equipment, net


223,144


190,148

Goodwill


129,092


130,747

Intangible assets, net


75,745


83,866

Other long-term assets


33,491


29,984

Total assets

$

1,234,244

$

1,154,294






Liabilities and Stockholders' Equity





Current liabilities:





Accounts payable

$

52,211

$

41,111

Accrued compensation


34,850


29,616

Deferred revenue - current


87,803


80,059

Accrued expenses and other liabilities


16,145


37,612

Other taxes payable


25,728


24,507

Total current liabilities


216,737


212,905






Deferred income taxes


42,030


43,186

Liability for uncertain tax positions


20,473


19,494

Deferred revenue – long-term


20,885


10,015

Other long-term liabilities


15,833


16,683

Total liabilities

$

315,958

$

302,283






Stockholders' equity:





Preferred stock

$

-

$

-

Common stock


1,225


1,207

Additional paid-in capital


515,973


471,830

Retained earnings


400,694


382,474

Accumulated other comprehensive income (loss)


394


(3,500)

Total stockholders' equity

$

918,286

$

852,011

Total liabilities and stockholders' equity

$

1,234,244

$

1,154,294

 


National Instruments

Consolidated Statements of Income

(In thousands, except per share data)












Three Months Ended


Nine Months Ended



Sept. 30,


Sept. 30,



(Unaudited)


(Unaudited)



2012


2011


2012


2011

Net sales:









Product

$

263,116

$

247,256

$

771,430

$

699,007

Software maintenance


26,858


20,839


70,587


60,222

GSA accrual


-


(13,107)


1,349


(13,107)

Total net sales


289,974


254,988


843,366


746,122










Cost of sales:









Product

$

71,796

$

63,579

$

201,374

$

169,340

Software maintenance


1,698


1,636


4,319


4,237

Total cost of sales


73,494


65,215


205,693


173,577










Gross profit

$

216,480

$

189,773

$

637,673

$

572,545










Operating expenses:









Sales and marketing

$

109,213

$

103,195

$

320,021

$

286,547

Research and development


56,627


54,674


164,928


144,569

General and administrative


20,714


21,148


63,590


61,219

Total operating expenses

$

186,554

$

179,017

$

548,539

$

492,335










Operating income

$

29,926

$

10,756

$

89,134

$

80,210










Other income (expense):









Interest income

$

133

$

354

$

495

$

1,039

Net foreign exchange (loss)


(235)


(708)


(2,139)


(1,417)

Other income, net


(899)


(95)


(644)


(220)










Income before income taxes

$

28,925

$

10,307

$

86,846

$

79,612










Provision for (benefit from) income taxes


4,585


(2,429)


17,423


9,867










Net income

$

24,340

$

12,736

$

69,423

$

69,745










Basic earnings per share

$

0.20

$

0.11

$

0.57

$

0.58

Diluted earnings per share

$

0.20

$

0.11

$

0.57

$

0.58










Weighted average shares outstanding -









Basic


122,402


120,308


121,710


119,585

Diluted


123,074


121,102


122,726


121,027










Dividends declared per share

$

0.14

$

0.10

$

0.42

$

0.30

 

National Instruments

Consolidated Statements of Cash Flows

(In thousands)



Nine Months Ended



Sept. 30,



(Unaudited)



2012


2011

Cash flow from operating activities:





Net income

$

69,423

$

69,745

Adjustments to reconcile net income to net cash provided





by operating activities:





Depreciation and amortization


41,029


35,745

Stock-based compensation


20,506


16,650

Tax expense (benefit) from deferred income taxes


3,626


(491)

Tax (benefit) from stock option plans


(2,353)


(5,047)

Changes in operating assets and liabilities:





Accounts receivable


(25,549)


(23,509)

Inventories


(23,278)


(12,376)

Prepaid expenses and other assets


(10,296)


(9,000)

Accounts payable


11,100


4,112

Deferred revenue


(2,271)


10,215

Taxes and other liabilities


8,325


30,456

Net cash provided by operating activities

$

90,262

$

116,500






Cash flow from investing activities:





Capital expenditures


(52,483)


(40,329)

Capitalization of internally developed software


(11,284)


(11,412)

Additions to other intangibles


(1,426)


(3,226)

Acquisitions, net of cash received


-


(73,558)

Purchases of short-term investments


(48,718)


(93,299)

Sales and maturities of short-term investments


220,094


86,086

Net cash provided/(used) by investing activities

$

106,183

$

(135,738)






Cash flow from financing activities:





Proceeds from issuance of common stock


21,297


27,152

Dividends paid


(51,167)


(35,897)

Tax benefit from stock option plans


2,353


5,047

Net cash used by financing activities

$

(27,517)

$

(3,698)






Net change in cash and cash equivalents


168,928


(22,936)

Cash and cash equivalents at beginning of period


142,608


219,447

Cash and cash equivalents at end of period

$

311,536

$

196,511

 

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,



2012


2011


2012


2011

Net sales









Acquisition-related deferred revenue

$

-

$

2,818

$

2,156

$

2,818

GSA accrual


-


13,107


(1,349)


13,107

Provision for income taxes


-


(5,573)


(282)


(5,573)

Total

$

-

$

10,352

$

525

$

10,352










Stock-based compensation









Cost of sales

$

436

$

401

$

1,289

$

1,116

Sales and marketing


2,994


2,630


8,579


7,009

Research and development


2,862


2,489


7,990


6,245

General and administrative


928


834


2,648


2,280

Provision for income taxes


(1,999)


(826)


(5,386)


(4,786)

Total

$

5,221

$

5,528

$

15,120

$

11,864



















Amortization of acquisition intangibles









Cost of sales

$

2,165

$

2,586

$

6,761

$

4,595

Sales and marketing


448


447


1,343


624

Other income, net


189


198


571


765

Provision for income taxes


(887)


(1,034)


(2,753)


(1,743)

Total

$

1,915

$

2,197

$

5,922

$

4,241










Acquisition-related transaction costs









Cost of sales

$

-

$

22

$

32

$

22

Sales and marketing


190


147


429


1,129

Research and development


33


70


195


70

General and administrative


(18)


31


38


458

Provision for income taxes


(72)


(95)


(243)


(146)

Total

$

133

$

175

$

451

$

1,533

 

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,



2012


2011


2012


2011

Reconciliation of Net Sales to Non-GAAP Net Sales





Net sales, as reported

$

289,974

$

254,988

$

843,366

$

746,122

Acquisition-related deferred revenue


-


2,818


2,156


2,818

GSA accrual


-


13,107


(1,349)


13,107

Non-GAAP net sales

$

289,974

$

270,913

$

844,173

$

762,047










Reconciliation of Gross Profit to Non-GAAP Gross Profit





Gross profit, as reported

$

216,480

$

189,773

$

637,673

$

572,545

Acquisition-related deferred revenue and GSA accrual


-


15,925


807


15,925

Stock-based compensation


436


401


1,289


1,116

Amortization of acquisition intangibles


2,165


2,586


6,761


4,595

Acquisition-related transaction costs


-


22


32


22

Non-GAAP gross profit

$

219,081

$

208,707

$

646,562

$

594,203

     Non-GAAP gross margin


76%


77%


77%


78%










Reconciliation of Operating Expenses to Non-GAAP Operating Expenses





Operating expenses, as reported

$

186,554

$

179,017

$

548,539

$

492,335

Stock-based compensation


(6,784)


(5,953)


(19,217)


(15,534)

Amortization of acquisition intangibles


(448)


(447)


(1,343)


(624)

Acquisition-related transaction costs


(205)


(248)


(662)


(1,657)

Non-GAAP operating expenses

$

179,117

$

172,369

$

527,317

$

474,520










Reconciliation of Operating Income to Non-GAAP Operating Income





Operating income, as reported

$

29,926

$

10,756

$

89,134

$

80,210

Acquisition-related deferred revenue and GSA accrual


-


15,925


807


15,925

Stock-based compensation


7,220


6,354


20,506


16,650

Amortization of acquisition intangibles


2,613


3,033


8,104


5,219

Acquisition-related transaction costs


205


270


694


1,679

Non-GAAP operating income

$

39,964

$

36,338

$

119,245

$

119,683

     Non-GAAP operating margin


14%


13%


14%


16%










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



Income before income taxes, as reported

$

28,925

$

10,307

$

86,846

$

79,612

Acquisition-related deferred revenue and GSA accrual


-


15,925


807


15,925

Stock-based compensation


7,220


6,354


20,506


16,650

Amortization of acquisition intangibles


2,802


3,231


8,675


5,984

Acquisition-related transaction costs


205


270


694


1,679

Non-GAAP income before income taxes

$

39,152

$

36,087

$

117,528

$

119,850










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



Provision for (benefit from) income taxes, as reported

$

4,585

$

(2,429)

$

17,423

$

9,867

Acquisition-related deferred revenue and GSA accrual


-


5,573


282


5,573

Stock-based compensation


1,999


826


5,386


4,786

Amortization of acquisition intangibles


887


1,034


2,753


1,743

Acquisition-related transaction costs


72


95


243


146

Non-GAAP provision for income taxes

$

7,543

$

5,099

$

26,087

$

22,115












 

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,



2012


2011


2012


2011

Net income, as reported

$

24,340

$

12,736

$

69,423

$

69,745

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









Acquisition-related deferred revenue and GSA accrual,

net of tax effect


-


10,352


525


10,352

  Stock-based compensation, net of tax effect


5,221


5,528


15,120


11,864

  Amortization of acquisition intangibles, net of tax effect


1,915


2,197


5,922


4,241

  Acquisition-related transaction costs, net of tax effect


133


175


451


1,533

Non-GAAP net income

$

31,609

$

30,988

$

91,441

$

97,735










Basic EPS, as reported

$

0.20

$

0.11

$

0.57

$

0.58

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









  Impact of acquisition-related deferred revenue and GSA accrual,

net of tax effect


-


0.09


0.01


0.09

  Impact of stock-based compensation, net of tax effect


0.04


0.04


0.12


0.10

  Impact of amortization of acquisition intangibles, net of tax effect


0.02


0.02


0.05


0.04

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


-


-


-


0.01

Non-GAAP basic EPS

$

0.26

$

0.26

$

0.75

$

0.82



















Diluted EPS, as reported

$

0.20

$

0.11

$

0.57

$

0.58

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









  Impact of acquisition-related deferred revenue, and GSA accrual,

net of tax effect


-


0.08


0.01


0.09

  Impact of stock-based compensation, net of tax effect


0.04


0.05


0.12


0.10

  Impact of amortization of acquisition intangibles, net of tax effect


0.02


0.02


0.05


0.03

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


-


0.00


-


0.01

Non-GAAP diluted EPS

$

0.26

$

0.26

$

0.75

$

0.81










Weighted average shares outstanding -









Basic


122,402


120,308


121,710


119,585

Diluted


123,074


121,102


122,726


121,027















 

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,



2012


2011


2012


2011

Net income, as reported

$

24,340

$

12,736

$

69,423

$

69,745

Adjustments to reconcile net income to EBITDA:









     Interest income


(133)


(354)


(495)


(1,039)

     Taxes


4,585


(2,429)


17,423


9,867

     Depreciation and amortization


13,713


12,355


41,029


35,745

EBITDA

$

42,505

$

22,308

$

127,380

$

114,318










Diluted EPS, as reported

$

0.20

$

0.11

$

0.57

$

0.58

Adjustment to reconcile diluted EPS to EBITDA:









     Interest income


(0.00)


(0.01)


(0.00)


(0.01)

     Taxes


0.04


(0.02)


0.14


0.08

     Depreciation and amortization


0.11


0.10


0.33


0.29

EBITDA diluted EPS

$

0.35

$

0.18

$

1.04

$

0.94










Weighted average shares outstanding - Diluted


123,074


121,102


122,726


121,027

 

National Instruments

Reconciliation of GAAP to Non-GAAP EPS Guidance

(unaudited)










Three months ended




Dec. 31, 2012




Low


High

GAAP fully diluted EPS, guidance

$

0.11

$

0.25

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

$

0.17

$

0.31

 

SOURCE National Instruments



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