National Instruments Reports Second Quarter Revenue of $296 Million

Company Continuing to Focus on Managing Costs to Improve Operating Margins

Q2 2013 Highlights

- Second quarter revenue of $296 million, up 1 percent year-over-year

- All-time revenue record for RF products

- General industry weakness

- Fully diluted GAAP EPS of $0.12 and fully diluted non-GAAP EPS of $0.18

Jul 29, 2013, 16:01 ET from National Instruments

AUSTIN, Texas, July 29, 2013 /PRNewswire/ -- National Instruments (Nasdaq: NATI) today announced Q2 revenue of $296 million, a 1 percent increase from Q2 2012. In Q2, the company's orders under $20,000 declined 4 percent year-over-year; orders between $20,000 and $100,000 grew 4 percent year-over-year; and orders above $100,000 declined 30 percent year-over-year after growing approximately 130 percent year-over-year in Q2 2012.

GAAP net income for Q2 was $14 million, with fully diluted earnings per share (EPS) of $0.12, and non-GAAP net income was $22 million, with non-GAAP fully diluted EPS of $0.18. The company's GAAP EPS was $0.03 below the midpoint of its guidance range and non-GAAP EPS was $0.04 below the midpoint of its guidance range given on April 25, including a $0.01 per share loss on foreign exchange the company did not anticipate. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $35 million, or $0.28 per share for Q2.

In Q2, GAAP gross margin decreased to 72 percent and non-GAAP gross margin was 73 percent due to lower factory utilization and the significantly lower margin on National Instruments' first RF test application with its largest customer. This application is in a highly competitive space and in an area National Instruments has not served for this customer before. Total operating expenses were down $4 million sequentially and were up 4 percent year-over-year.  Total non-GAAP operating expenses were down $5 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.

National Instruments continued to deliver value to its largest customer and secured orders from this customer related to three different applications that use NI LabVIEW software and the NI PXI platform to rapidly develop a production test solution. In H1 2013, National Instruments received $30 million in orders from its largest customer, and recognized $23 million in revenue from this customer in Q2 2013.

"Although the test and measurement industry had a challenging quarter, we were able to grow revenue while executing disciplined cost management," said Dr. James Truchard, co-founder, president and CEO. "Thanks to the efforts of our employees, we have seen accelerated growth in customer leads and opportunities for our strategic product platforms oriented around LabVIEW despite the fact that customer budgets are tight."

Geographic revenue in U.S. dollar terms for Q2 2013 compared to Q2 2012 was down 1 percent in the Americas, up 2 percent in Europe, up 10 percent in East Asia and down 15 percent in Emerging Markets. In local currency terms, revenue was up 5 percent in Europe, up 11 percent in East Asia and down 13 percent in Emerging Markets.

As of June 30, NI had $324 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 Sept. 3, 2013 to stockholders of record on Aug. 12, 2013.

Guidance for Q3 2013 "Although Q2 was a difficult quarter for our industry and for National Instruments, we believe NI was able to gain market share," said Alex Davern, NI COO and CFO. "On the expense side, we delivered on reducing our spending and are adjusting our future spending plans to align with the industry's current weakness."

National Instruments continues to be conservative in planning for Q3 due to the weak industry conditions. As a result, NI expects revenue for Q3 2013 to be between $265 million and $295 million, a decrease of 3 percent year-over-year at the midpoint of guidance. For perspective, National Instruments recognized approximately $27 million in revenue from its largest customer in Q3 2012 and the company anticipates recognizing less than $5 million in revenue from this customer in Q3 2013.  NI expects gross margins to increase approximately 250 to 300 basis points sequentially in Q3. NI expects total non-GAAP operating expenses to be $186 million, plus or minus $3 million in Q3. The company expects fully diluted EPS to be in the range of $0.04 to $0.16 for Q3, with non-GAAP fully diluted EPS expected to be in the range of $0.10 to $0.22.

Looking out to Q4, National Instruments is adjusting its spending plans to reflect the more difficult industry conditions.  The company currently expects its total non-GAAP operating expenses will decline sequentially in Q4 and that non-GAAP operating expenses will be approximately $181million, plus or minus $3 million in Q4.  National Instruments expects this to result in a significantly improved operating margin in Q4.

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 six-month periods ending June 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 six-month periods ending June 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 Q2 2013 conference call today, July 29, at 4:00 p.m. CT at ni.com/call. Replay information is available by calling (855) 859-2056, confirmation code #12343855, shortly after the call through Aug. 3 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 continuing to focus on managing costs to improve operating margins, growth and customer leads and opportunities for our strategic product platforms while customer budgets are tight, gaining market share, adjusting future spending plans to align with industry weakness, being conservative in planning for Q3, anticipating recognizing less than $5 million in revenue from such customer in Q3 2013, National Instruments' Q3 guidance for revenue, gross margins, non-GAAP operating expenses and GAAP and non-GAAP EPS, adjusting spending plans to reflect the more difficult industry conditions, currently expecting total non-GAAP operating expenses will decline sequentially in Q4 and that non-GAAP operating expenses will be approximately $181 million, plus or minus $3 million in Q4 and expecting this to result in a significantly improved operating margin in Q4.  These statements are subject to a number of risks and uncertainties, including the risk of adverse changes or fluctuations in the global economy, 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 March 31, 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)

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, caitlin.gursslin@ni.com

 

 

National Instruments

Consolidated Balance Sheets

(in thousands)

June 30, 2013

Dec. 31,

(unaudited)

2012

Assets

Current assets:

Cash and cash equivalents

$

169,580

$

161,996

Short-term investments

153,970

173,166

Accounts receivable, net

172,880

187,060

Inventories, net

185,278

169,990

Prepaid expenses and other current assets

68,202

48,009

Deferred income taxes, net

30,197

27,479

Total current assets

780,107

767,700

Property and equipment, net

263,915

249,721

Goodwill

146,922

147,258

Intangible assets, net

87,972

93,913

Other long-term assets

25,303

26,177

Total assets

$

1,304,219

$

1,284,769

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

54,606

$

65,080

Accrued compensation

28,467

29,978

Deferred revenue – current

95,137

90,714

Accrued expenses and other liabilities

33,412

34,373

Other taxes payable

22,315

24,811

Total current liabilities

233,937

244,956

Deferred income taxes

46,480

47,630

Liability for uncertain tax positions

22,277

20,920

Deferred revenue – long-term

21,120

20,446

Other long-term liabilities

8,646

11,689

Total liabilities

332,460

345,641

Stockholders' equity:

Preferred stock

-

-

Common stock

1,248

1,229

Additional paid-in capital

568,426

532,845

Retained earnings

402,597

404,210

Accumulated other comprehensive (loss) income

(512)

844

Total stockholders' equity

971,759

939,128

Total liabilities and stockholders' equity

$

1,304,219

$

1,284,769

National Instruments

Consolidated Statements of Income

(in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

(unaudited)

(unaudited)

2013

2012

2013

2012

Net sales:

Product

$

275,663

$

268,979

$

541,081

$

508,314

Software maintenance

20,463

21,931

41,533

43,729

GSA accrual

-

1,349

-

1,349

Total net sales

296,126

292,259

582,614

553,392

Cost of sales:

Product

82,787

69,787

151,413

129,578

Software maintenance

1,028

1,064

2,642

2,621

Total cost of sales

83,815

70,851

154,055

132,199

Gross profit

212,311

221,408

428,559

421,193

Operating expenses:

Sales and marketing

112,561

110,756

226,631

210,808

Research and development

58,473

54,286

119,729

108,301

General and administrative

22,156

21,502

45,000

42,876

Acquisition-related adjustment

-

-

(1,316)

-

Total operating expenses

193,190

186,544

390,044

361,985

Operating income

19,121

34,864

38,515

59,208

Other income (expense):

Interest income

177

132

362

362

Net foreign exchange loss

(1,051)

(1,016)

(2,513)

(1,904)

Other income, net

400

151

424

255

Income before taxes

18,647

34,131

36,788

57,921

Provision for income taxes

4,226

7,690

3,767

12,838

Net income

$

14,421

$

26,441

$

33,021

$

45,083

Basic earnings per share

$

0.12

$

0.22

$

0.27

$

0.37

Diluted earnings per share

$

0.12

$

0.22

$

0.26

$

0.37

Weighted average shares outstanding:

Basic

124,377

121,801

123,845

121,360

Diluted

125,270

122,759

124,824

122,376

Dividends declared per share

$

0.14

$

$              0.14

$

0.28

$

0.28

National Instruments

Consolidated Statements of Cash Flows

(in thousands)

Six Months Ended

June 30,

(unaudited)

2013

2012

Cash flow from operating activities:

Net income

$

33,021

$

45,083

Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization

33,555

27,316

Stock-based compensation

14,006

13,285

Tax (expense) benefit from deferred income taxes

(3,633)

6,695

Tax benefit from stock option plans

(2,042)

(2,094)

Changes in operating assets and liabilities:

Accounts receivable

14,358

(31,203)

Inventories

(14,732)

(16,994)

Prepaid expenses and other assets

(18,418)

(17,625)

Accounts payable

(10,612)

10,596

Deferred revenue

5,097

17,911

Taxes and other liabilities

(6,208)

(11,169)

Net cash provided by operating activities

44,392

41,801

Cash flow from investing activities:

Capital expenditures

(33,147)

(28,934)

Capitalization of internally developed software

(8,073)

(9,664)

Additions to other intangibles

(2,710)

(1,085)

Purchases of short-term investments

(16,039)

(38,879)

Sales and maturities of short-term investments

35,234

183,058

Net cash (used in) provided by investing activities

(24,735)

104,496

Cash flow from financing activities:

Proceeds from issuance of common stock

20,612

14,422

Dividends paid

(34,727)

(34,019)

Tax benefit from stock option plans

2,042

2,094

Net cash used in financing activities

(12,073)

(17,503)

Net change in cash and cash equivalents

7,584

128,794

Cash and cash equivalents at beginning of period

161,996

142,608

Cash and cash equivalents at end of period

$

169,580

$

271,402

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

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

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

$

408

$

438

$

829

$

853

Sales and marketing

2,926

2,945

5,999

5,585

Research and development

2,596

2,679

5,333

5,128

General and administrative

942

921

1,845

1,720

Provision for income taxes

(1,877)

(1,880)

(3,691)

(3,387)

Total

$

4,995

$

5,103

$

10,315

$

9,899

Amortization of acquisition intangibles

Cost of sales

$

2,613

$

2,186

$

5,373

$

4,596

Sales and marketing

498

448

1,016

895

Research and development

569

-

1,242

-

Other income, net

188

193

381

382

Provision for income taxes

(1,268)

(894)

(2,618)

(1,866)

Total

$

2,600

$

1,933

$

5,394

$

4,007

Acquisition-related transaction costs

Cost of sales

$

3

$

-

$

3

$

32

Sales and marketing

142

19

260

239

Research and development

266

56

410

162

General and administrative

69

9

175

56

Acquisition-related adjustment

-

-

(1,316)

-

Provision for income taxes

(153)

(29)

(259)

(171)

Total

$

327

$

55

$

(727)

$

318

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,

2013

2012

2013

2012

Reconciliation of Net Sales to Non-GAAP Net Sales

Net sales, as reported

$

296,126

$

292,259

$

582,614

$

553,392

Acquisition-related deferred revenue

-

887

-

2,156

GSA accrual

-

(1,349)

-

(1,349)

Non-GAAP net sales

$

296,126

$

291,797

$

582,614

$

554,199

Reconciliation of Gross Profit to Non-GAAP Gross Profit

Gross profit, as reported

$

212,311

$

221,408

$

428,559

$

421,193

Acquisition-related deferred revenue and GSA accrual

-

(462)

-

807

Stock-based compensation

408

438

829

853

Amortization of acquisition intangibles

2,613

-

5,373

32

Acquisition-related transaction costs

3

2,186

3

4,596

Non-GAAP gross profit

$

215,335

$

223,570

$

434,764

$

427,481

      Non-GAAP gross margin

73%

77%

75%

77%

Reconciliation of Operating Expenses to Non-GAAP Operating Expenses

Operating expenses, as reported

$

193,190

$

186,544

$

390,044

$

361,985

Stock-based compensation

(6,464)

(6,545)

(13,177)

(12,433)

Amortization of acquisition intangibles

(1,067)

(448)

(2,258)

(895)

Acquisition-related adjustment

-

-

1,316

-

Acquisition-related transaction costs

(477)

(84)

(845)

(457)

 Non-GAAP operating expenses

$

185,182

$

179,467

$

375,080

$

348,200

Reconciliation of Operating Income to Non-GAAP Operating Income

Operating income, as reported

$

19,121

$

34,864

$

38,515

$

59,208

Acquisition-related deferred revenue and GSA accrual

-

(462)

-

807

Stock-based compensation

6,872

6,983

14,006

13,286

Amortization of acquisition intangibles

3,680

2,634

7,631

5,491

Acquisition-related adjustment

-

-

(1,316)

-

Acquisition-related transaction costs

480

84

848

489

Non-GAAP operating income

$

30,153

$

44,103

$

59,684

$

79,281

      Non-GAAP operating margin

10%

15%

10%

14%

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

Income before income taxes, as reported

$

18,647

$

34,131

$

36,788

$

57,921

Acquisition-related deferred revenue and GSA accrual

-

(462)

-

807

Stock-based compensation

6,872

6,983

14,006

13,286

Amortization of acquisition intangibles

3,868

2,827

8,012

5,873

Acquisition-related adjustment

-

-

(1,316)

-

Acquisition-related transaction costs

480

84

848

489

Non-GAAP income before income taxes

$

29,867

$

43,563

$

58,338

$

78,376

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

Provision for income taxes, as reported

$

4,226

$

7,690

$

3,767

$

12,838

Acquisition-related deferred revenue and GSA accrual

-

(162)

-

282

Stock-based compensation

1,877

1,880

3,691

3,387

Amortization of acquisition intangibles

1,268

894

2,618

1,866

Acquisition-related transaction costs

153

29

259

171

Non-GAAP provision for income taxes

$

7,524

$

10,331

$

10,335

$

18,544

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

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Net income, as reported

$

14,421

$

26,441

$

33,021

$

45,083

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

Acquisition-related deferred revenue, net of tax effect

-

(300)

-

525

  Stock-based compensation, net of tax effect

4,995

5,103

10,315

9,899

  Amortization of acquisition intangibles, net of tax effect

2,600

1,933

5,394

4,007

  Acquisition-related adjustment

-

-

(1,316)

-

  Acquisition-related transaction costs, net of tax effect

327

55

589

318

Non-GAAP net income

$

22,343

$

33,232

$

48,003

$

59,832

Basic EPS, as reported

$

0.12

$

0.22

$

0.27

$

0.37

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

0.09

0.08

  Impact of amortization of acquisition intangibles, net of tax effect

0.02

0.01

0.04

0.03

  Impact of acquisition-related adjustment

-

-

(0.01)

-

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

-

-

-

-

Non-GAAP basic EPS

$

0.18

$

0.27

$

0.39

$

0.49

Diluted EPS, as reported

$

0.12

$

0.22

$

0.26

$

0.37

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

0.09

0.08

  Impact of amortization of acquisition intangibles, net of tax effect

0.02

0.01

0.04

0.03

  Impact of acquisition-related adjustment

-

-

(0.01)

-

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

-

-

-

-

Non-GAAP diluted EPS

$

0.18

$

0.27

$

0.38

$

0.49

Weighted average shares outstanding:

Basic

124,377

121,801

123,845

121,360

Diluted

125,270

122,759

124,824

122,376

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

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Net income, as reported

$

14,421

$

26,441

$

33,021

$

45,083

Adjustments to reconcile net income to EBITDA:

     Interest income

(177)

(132)

(362)

(362)

     Taxes

4,226

7,690

3,767

12,838

     Depreciation and amortization

16,726

13,201

33,555

27,316

EBITDA

$

35,196

$

47,200

$

69,981

$

84,875

Diluted EPS, as reported

$

0.12

$

0.22

$

0.26

$

0.37

Adjustments to reconcile diluted EPS to EBITDA:

     Interest income

-

-

-

-

     Taxes

0.03

0.06

0.03

0.10

     Depreciation and amortization

0.13

0.10

0.27

0.22

EBITDA diluted EPS

$

0.28

$

0.38

$

0.56

$

0.69

Weighted average shares outstanding – Diluted

125,270

122,759

124,824

122,376

National Instruments

Reconciliation of GAAP to Non-GAAP Operating Expense Guidance

(in millions)

(unaudited)

Three months ended

Sept. 30, 2013

Low

High

GAAP operating expense, guidance

$

191

$

197

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

$

183

$

189

Reconciliation of GAAP to Non-GAAP EPS Guidance

(unaudited)

Three months ended

Sept. 30, 2013

Low

High

GAAP fully diluted EPS, guidance

$

0.04

$

0.16

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

$

0.10

$

0.22

Reconciliation of GAAP to Non-GAAP EPS Guidance

(in millions)

(unaudited)

Three months ended

Dec. 31, 2013

Low

High

GAAP operating expense, guidance

$

186

$

192

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

$

178

$

184

 

 

SOURCE National Instruments



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