National Instruments Reports Record Quarterly Revenue, Up 34 Percent Year-Over-Year

Record Operating Income for a Third Quarter and Strong Gross Margins

Oct 25, 2010, 16:00 ET from National Instruments

AUSTIN, Texas, Oct. 25, 2010 /PRNewswire-FirstCall/ --

Q3 2010 Highlights

  • Record quarterly revenue of $220 million, up 34 percent year-over-year
  • Record operating income for a third quarter
  • GAAP gross margin of 76.5 percent and non-GAAP gross margin of 77.0 percent
  • Fully diluted GAAP EPS of $0.36 and fully diluted non-GAAP EPS of $0.41
  • Record cash and short-term investments of $339 million as of Sept. 30

National Instruments (Nasdaq: NATI) reported quarterly revenue for Q3 2010 of $220 million, representing a 34 percent year-over-year increase and a 4 percent sequential increase. For the first nine months of 2010, the company reported a 31 percent year-over-year increase in revenue and a significant year-over-year increase in operating margins. Also during the quarter, backlog increased by $7 million.

Net income for Q3 2010 was $28.1 million, with GAAP fully diluted earnings per share (EPS) of $0.36. Non-GAAP net income was $32.3 million, with non-GAAP fully diluted EPS of $0.41. GAAP and non-GAAP operating income set a record for a third quarter, and operating margins improved significantly over Q3 2009. The company's non-GAAP results exclude the impact of both stock-based compensation and the amortization of acquisition-related intangibles. Reconciliations of the company's GAAP and non-GAAP results are included as part of this news release.

In Q3, GAAP gross margin increased 1.9 percentage points year-over-year to 76.5 percent. Non-GAAP gross margin increased by 1.7 percentage points year-over-year to 77.0 percent.

"I am extremely pleased with our Q3 performance and believe our long-term focus on innovation and operational excellence has helped differentiate NI from other players in the markets we serve," said Dr. James Truchard, co-founder, president and CEO. "I believe the many new opportunities created by our expanding product and services portfolio, together with the strong business momentum we saw in Q3, validate our strategy in the marketplace."

NI virtual instrumentation and graphical system design product sales were up 34 percent year-over-year. NI instrument control product sales were up 25 percent year-over-year but remain 11 percent below Q3 2008 levels. Product revenue was $203 million, up 34 percent year-over-year, and software maintenance revenue was $17 million, up 34 percent year-over-year. Geographically, revenue in U.S. dollar terms for Q3 2010 compared to Q3 2009 was up 29 percent in the Americas, up 28 percent in Europe and up 48 percent in Asia. In local currency terms, revenue was up 40 percent in Europe and up 45 percent in Asia.

As of Sept. 30, NI had a record $339 million in net cash and short-term investments, up $22 million from June 30. During the quarter, the company paid $10 million in dividends and used approximately $11 million to repurchase 379,000 shares of its common stock at an average price of $28.87 per share. National Instruments announced that its board of directors approved a dividend of $0.13 per share payable on Nov. 29 to shareholders of record on Nov. 8.

Outlook

In Q3, the global purchasing manager's index (PMI) averaged 53.5, down from a quarterly average of 56.7 in Q2. This moderation was in line with the company's expectation that the global PMI would move toward its long-term average of 51.7 in Q3 and Q4. The company currently expects that the global PMI will continue to trend toward its historical average during Q4. Given the relatively low levels of global inventory, the company believes the industrial economy is positioned to manage the moderation of the global PMI, and that NI is positioned to grow revenue through this moderating trend.

"We are confident that we will deliver record revenue and profitability in 2010 and I would like to thank all of our employees for their hard work and commitment during the recession," said Alex Davern, EVP, COO and CFO. "We have delivered a rapid recovery in our profitability, and assuming 2011 is a normal revenue growth year we will be targeting only a modest increase in operating margins. We will instead be making significant focused investments in key regions and applications to support sustained growth of the company."  

NI expects strong Q4 year-over-year revenue growth, with revenue expected to be between $230 million and $244 million. The company expects fully diluted GAAP EPS between $0.38 and $0.48, with non-GAAP fully diluted EPS expected to be between $0.43 and $0.53.

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, operating expenses, operating income, income before income taxes, provision for (benefit from) income taxes, net income and basic and fully diluted EPS for the three- and nine-month periods ending Sept. 30, 2010 and 2009, on a GAAP and non-GAAP basis. 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 or amortization of acquired intangibles that are non-cash charges 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 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 our earnings before interest, taxes, depreciation and amortization (EBITDA) and EBITDA diluted EPS for the three- and nine- month periods ended Sept. 30, 2010 and 2009. We also believe 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 2010 conference call today, Oct. 25, beginning at 4:00 p.m. CDT, at www.ni.com/call. Replay information is available by calling (888) 203-1112, confirmation code #8494302, from Oct. 25 at 7:00 p.m. CDT through Oct. 30 at 7:00 p.m. CDT.

Forward-Looking Statements

This release contains "forward-looking statements," including statements related to our long-term focus on innovation and operational excellence differentiating NI from other players, the many new opportunities created by our expanding product and services portfolio, together with the strong business momentum validating our strategy, expecting that the global PMI will continue to trend toward its historical average during Q4, our belief that the industrial economy is well positioned to manage the moderation of the global PMI, that NI is positioned to grow revenue through this moderating trend, being confident that we will deliver record revenue and profitability in 2010, targeting a modest increase in operating margins, making significant focused investments in key regions and applications to support our sustained growth, expecting strong Q4 revenue growth and our outlook for Q4 revenue and Q4 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 continue to control its operating expenses, manufacturing inefficiencies and foreign exchange fluctuations. Actual results may differ materially from the expected results. The company directs readers to its Form 10-K for the fiscal year ended December 31, 2009, its Form 10-Q for the quarter ended June 30, 2010, and the other documents it files with the SEC for other risks associated with the company's future performance.

About National Instruments

National Instruments (www.ni.com) is transforming the way engineers and scientists design, prototype and deploy systems for measurement, automation and embedded applications. NI empowers customers with off-the-shelf software such as NI LabVIEW and modular cost-effective hardware, and sells to a broad base of more than 30,000 different companies worldwide, with no one customer representing more than 3 percent of revenue and no one industry representing more than 15 percent of revenue. Headquartered in Austin, Texas, NI has more than 5,000 employees and direct operations in more than 40 countries. For the past 11 years, FORTUNE magazine has named NI one of the 100 best companies to work for in America. Readers can obtain investment information from the company's investor relations department by calling (512) 683-5090, e-mailing 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:

Veronica Garza


Investor Relations


(512) 683-6873




National Instruments

Consolidated Balance Sheets

(in thousands)








September


December 31,



2010


2009



(unaudited)








Assets





Current assets:





Cash and cash equivalents

$

226,844

$

201,465

Short-term investments


111,903


87,196

Accounts receivable, net


121,503


103,957

Inventories, net


101,532


86,515

Prepaid expenses and other current assets


42,132


36,523

Deferred income taxes, net


15,449


16,522

Total current assets


619,363


532,178






Property and equipment, net


151,667


153,265

Goodwill, net


69,383


64,779

Intangible assets, net


52,553


43,390

Other long-term assets


19,269


19,417

Total assets

$

912,235

$

813,029






Liabilities and Stockholders' Equity





Current liabilities:





Accounts payable

$

33,005

$

23,502

Accrued compensation


39,075


14,934

Deferred revenue


63,940


57,242

Accrued expenses and other liabilities


18,313


8,560

Other taxes payable


15,324


14,181

Total current liabilities


169,657


118,419






Deferred income taxes


24,725


25,012

Liability for uncertain tax position


11,608


11,062

Other long-term liabilities


5,225


4,116

Total liabilities

$

211,215

$

158,609






Stockholders' equity:





Preferred stock


-


-

Common stock


780


774

Additional paid-in capital


388,502


336,446

Retained earnings


308,535


303,655

Accumulated other comprehensive income


3,203


13,545

Total stockholders' equity

$

701,020

$

654,420

Total liabilities and stockholders' equity

$

912,235

$

813,029




National Instruments

Consolidated Statements of Income

(in thousands, except per share data)












Three Months Ended


Nine Months Ended



September 30,


September 30,



(Unaudited)


(Unaudited)



2010


2009


2010


2009

Net sales:









Products

$

203,188

$

152,106

$

573,413

$

435,348

Software maintenance


17,261


12,929


49,844


39,649

Total net sales


220,449


165,035


623,257


474,997










Cost of sales:









Cost of products

$

50,380

$

40,476

$

139,818

$

119,234

Cost of software maintenance


1,523


1,423


3,966


4,034

Total cost of sales


51,903


41,899


143,784


123,268










Gross profit

$

168,546

$

123,136

$

479,473

$

351,729










Operating expenses:









Sales and marketing

$

79,494

$

65,126

$

233,166

$

199,089

Research and development


39,971


35,016


114,912


99,252

General and administrative


17,392


12,306


49,701


42,838

Total operating expenses

$

136,857

$

112,448

$

397,779

$

341,179










Operating income

$

31,689

$

10,688

$

81,694

$

10,550










Other income (expense):









Interest income

$

380

$

339

$

1,051

$

1,335

Net foreign exchange gain (loss)


426


940


(2,475)


1,301

Other income, net


160


482


970


979










Income before income taxes

$

32,655

$

12,449

$

81,240

$

14,165










Provision for (benefit from) income taxes


4,522


2,518


10,152


(554)










Net income

$

28,133

$

9,931

$

71,088

$

14,719










Basic earnings per share

$

0.36

$

0.13

$

0.91

$

0.19

Diluted earnings per share

$

0.36

$

0.13

$

0.90

$

0.19










Weighted average shares outstanding -









basic


78,176


77,653


77,832


77,497

diluted


78,862


78,103


78,848


77,842










Dividends declared per share

$

0.13

$

0.12

$

0.39

$

0.36




National Instruments

Consolidated Statements of Cash Flows

(in thousands)



Nine Months Ended



September 30,



(Unaudited)



2010


2009

Cash flow from operating activities:





Net income

$

71,088

$

14,719

Adjustments to reconcile net income to net cash provided





by operating activities:





Depreciation and amortization


28,220


28,536

Stock-based compensation


14,194


15,238

Tax expense (benefit) from deferred income taxes


1,174


(6,802)

Tax expense stock option plans


599


1,445

Changes in operating assets and liabilities:





Accounts receivable


(17,298)


30,758

Inventories


(14,712)


18,632

Prepaid expenses and other assets


(15,328)


3,920

Accounts payable


9,171


(5,444)

Deferred revenue


6,698


3,588

Taxes and other liabilities


33,938


(14,245)

Net cash provided by operating activities

$

117,744

$

90,345






Cash flow from investing activities:





Capital expenditures


(14,404)


(12,331)

Capitalization of internally developed software


(14,300)


(10,611)

Additions to other intangibles


(2,253)


(4,009)

Acquisition, net of cash received


(2,191)


-

Purchases of short-term and long-term investments


(88,226)


(38,876)

Sales and maturities of short-term and long-term investments


63,519


10,034

Net cash (used by) provided by investing activities

$

(57,855)

$

(55,793)






Cash flow from financing activities:





Proceeds from issuance of common stock


38,368


16,351

Repurchase of common stock


(41,862)


(18,200)

Dividends paid


(30,417)


(27,958)

Tax (benefit) from stock option plans


(599)


(1,445)

Net cash (used by) financing activities

$

(34,510)

$

(31,252)






Net change in cash and cash equivalents


25,379


3,300

Cash and cash equivalents at beginning of period


201,465


229,400

Cash and cash equivalents at end of period

$

226,844

$

232,700




Detail of GAAP charges related to stock-based compensation and

amortization of acquisition intangibles

(Unaudited)












Three Months Ended


Nine Months Ended



September 30,


September 30,












2010


2009


2010


2009

Stock-based compensation









Cost of sales

$

332

$

335

$

1,014

$

975

Sales and marketing


1,960


2,210


6,060


6,626

Research and development


1,771


1,929


5,129


5,349

General and administrative


672


728


1,991


2,288

Provision for income taxes


(1,295)


(409)


(4,422)


(5,288)

Total

$

3,440

$

4,793

$

9,772

$

9,950



















Amortization of acquisition intangibles









Cost of sales

$

921

$

853

$

2,565

$

2,593

Sales and marketing


89


125


311


377

Research and development


-


-


-


-

General and administrative


-


-


-


-

Provision for income taxes


(324)


(277)


(904)


(834)

Total

$

686

$

701

$

1,972

$

2,136




National Instruments

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share data)

(unaudited)












Three Months Ended


Nine Months Ended



September 30,


September 30,



2010


2009


2010


2009










Reconciliation of Gross Profit to Non-GAAP Gross Profit










Gross profit, as reported

$

168,546

$

123,136

$

479,473

$

351,729

Stock-based compensation


332


335


1,014


975

Amortization of acquisition intangibles


921


853


2,565


2,593

Non-GAAP gross profit

$

169,799

$

124,324

$

483,052

$

355,297










Reconciliation of Operating Expenses to Non-GAAP Operating Expenses










Operating expenses, as reported

$

136,857

$

112,448

$

397,779

$

341,179

Stock-based compensation


(4,403)


(4,867)


(13,180)


(14,263)

Amortization of acquisition intangibles


(89)


(125)


(311)


(377)

Non-GAAP operating expenses

$

132,365

$

107,456

$

384,288

$

326,539










Reconciliation of Operating Income to Non-GAAP Operating Income










Operating income, as reported

$

31,689

$

10,688

$

81,694

$

10,550

Stock-based compensation


4,735


5,202


14,194


15,238

Amortization of acquisition intangibles


1,010


978


2,876


2,970

Non-GAAP operating income

$

37,434

$

16,868

$

98,764

$

28,758










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










Income before income taxes, as reported

$

32,655

$

12,449

$

81,240

$

14,165

Stock-based compensation


4,735


5,202


14,194


15,238

Amortization of acquisition intangibles


1,010


978


2,876


2,970

Non-GAAP income before income taxes

$

38,400

$

18,629

$

98,310

$

32,373



















Reconciliation of Provision for (Benefit From) Income Taxes to Non-GAAP Provision for Income Taxes


Provision for (benefit from) income taxes, as reported

$

4,522

$

2,518

$

10,152

$

(554)

Stock-based compensation


1,295


409


4,422


5,288

Amortization of acquisition intangibles


324


277


904


834

Non-GAAP provision for income taxes

$

6,141

$

3,204

$

15,478

$

5,568





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

(unaudited)












Three Months Ended


Nine Months Ended



September 30,


September 30,



2010


2009


2010


2009

Net income, as reported

$

28,133

$

9,931

$

71,088

$

14,719

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









 Stock-based compensation, net of tax effect


3,440


4,793


9,772


9,950

 Amortization of acquisition intangibles, net of tax effect


686


701


1,972


2,136

Non-GAAP net income

$

32,259

$

15,425

$

82,832

$

26,805










Basic EPS, as reported

$

0.36

$

0.13

$

0.91

$

0.19

Adjustment to reconcile basic EPS to non-GAAP









basic EPS:









 Impact of stock-based compensation, net of tax effect

$

0.04

$

0.06

$

0.12

$

0.13

 Impact of amortization of acquisition intangibles, net of tax effect

$

0.01

$

0.01

$

0.03

$

0.03

Non-GAAP basic EPS

$

0.41

$

0.20

$

1.06

$

0.35



















Diluted EPS, as reported

$

0.36

$

0.13

$

0.90

$

0.19

Adjustment to reconcile diluted EPS to non-GAAP









diluted EPS:









 Impact of stock-based compensation, net of tax effect

$

0.04

$

0.06

$

0.12

$

0.13

 Impact of amortization of acquisition intangibles, net of tax effect

$

0.01

$

0.01

$

0.03

$

0.03

Non-GAAP diluted EPS

$

0.41

$

0.20

$

1.05

$

0.35










Weighted average shares outstanding -









Basic


78,176


77,653


77,832


77,497

Diluted


78,862


78,103


78,848


77,842












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

(unaudited)












Three Months Ended


Nine Months Ended



September 30,


September 30,



2010


2009


2010


2009

Net income, as reported

$

28,133

$

9,931

$

71,088

$

14,719

Adjustments to reconcile net income to EBITDA:









    Interest income


(380)


(339)


(1,051)


(1,335)

    Taxes


4,522


2,518


10,152


(554)

    Depreciation and amortization


9,232


9,513


28,220


28,536

EBITDA

$

41,507

$

21,623

$

108,409

$

41,366










Diluted EPS, as reported

$

0.36

$

0.13

$

0.90

$

0.19

Adjustment to reconcile diluted EPS to EBITDA









    Interest income

$

(0.01)

$

(0.00)

$

(0.01)

$

(0.02)

    Taxes

$

0.06

$

0.03

$

0.13

$

(0.01)

    Depreciation and amortization

$

0.12

$

0.12

$

0.35

$

0.37

EBITDA diluted EPS

$

0.53

$

0.28

$

1.37

$

0.53










Weighted average shares outstanding - Diluted


78,862


78,103


78,848


77,842




National Instruments

Reconciliation of GAAP Diluted EPS Guidance to Non-GAAP Diluted EPS Guidance

(unaudited)




Three months ended



December 31, 2010








Low


High

GAAP Diluted EPS, guidance

$

0.38

$

0.48

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

$

0.01

$

0.01






Non-GAAP Diluted EPS, guidance

$

0.43

$

0.53




SOURCE National Instruments



RELATED LINKS

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