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National Instruments Reports Record Q1 Orders and $191 Million in Revenue

Shipping Issue on March 31 Reduces Q1 Revenue by $5 Million

Apr 27, 2010 04:00 PM Eastern Daylight Time

AUSTIN, Texas, April 27, 2010 /PRNewswire via COMTEX News Network/ -- Q1 2010 Highlights

National Instruments (Nasdaq: NATI) reported quarterly revenue for Q1 2010 of $191 million, representing a 21 percent year-over-year increase and a 5 percent sequential decline. The sequential decline was exaggerated by a shipping issue on March 31 that resulted in $5 million of shipments missing the deadline for revenue recognition in Q1. The issue occurred because certain product shipments that were processed throughout the day on March 31, were not transferred to the company's freight carriers until two hours after the company's revenue recognition cut-off time, due to a delay in the completion of export documents. As a result these shipments were not recorded as revenue in Q1 financial results and will be recognized as revenue in Q2. Q1 orders were up 25 percent year-over-year, resulting in an all-time record for first quarter orders.

Net income for Q1 was $18.4 million, with GAAP fully diluted earnings per share (EPS) of $0.23, matching a first quarter record the company set in Q1 2007. Non-GAAP net income was $22 million, with non-GAAP fully diluted EPS of $0.28, matching a first quarter record the company set in Q1 2008. The shipping issue discussed earlier reduced GAAP and non-GAAP fully diluted EPS by approximately $0.05. 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 Q1, gross margin increased by 0.5 percentage points sequentially and increased 3.3 percentage points year-over-year to 77.4 percent. Non-GAAP gross margin increased by 0.4 percentage points sequentially and increased by 3.0 percentage points year-over-year to 77.9 percent. Inventory increased slightly in Q1 due to the shipping issue previously discussed.

"Our strategic decision to maintain our investments in R&D and the field sales force throughout the recession have proven their value in the record first quarter orders we received in Q1," said James Truchard, NI president, co-founder and CEO. "I believe the advances we have made in our product portfolio and the expanded reach of our sales force will continue to catalyze our growth in the recovery."

NI virtual instrumentation and graphical system design product sales were up 19 percent year-over-year and orders were up 24 percent year-over-year. NI instrument control product sales were up 48 percent year-over-year and orders were up 50 percent year-over-year. Product revenue was $175 million, up 22 percent from Q1 2009, and software maintenance revenue was $15.7 million, up 9 percent year-over-year. Geographically, revenue in U.S. dollar terms for Q1 2010 compared to Q1 2009 was up 16 percent in the Americas, up 17 percent in Europe and up 35 percent in Asia. In local currency terms, revenue was up 9 percent in Europe and up 27 percent in Asia. Orders in U.S. dollar terms for Q1 2010 compared to Q1 2009 were up 22 percent in the Americas, up 22 percent in Europe and up 33 percent in Asia. In local currency terms, orders were up 17 percent in Europe and up 25 percent in Asia.

As of March 31, NI had a record of $296 million in net cash and short-term investments, up $7 million from Dec. 31, 2009. During Q1 2010, the company paid $10 million in dividends and used $31 million to repurchase 1,014,000 shares of its common stock at an average price of $30.50 per share. National Instruments announced that its Board of Directors declared a dividend of $0.13 per share on its common stock payable on June 1, 2010, to shareholders of record on May 10, 2010.

Outlook

The trends of the global Purchasing Managers Index (PMI) continued to be positive in Q1, averaging 56 in the quarter. Nevertheless, the global PMI has averaged 46.6 for the last six quarters, and there will have to be sustained strength in the global PMI, if global gross domestic product (GDP) is to recover to 2008 levels. The company has seen very strong year-over-year order growth so far this quarter, with April on track to approximately match April 2008. If order growth remains strong, then given the rapid resurgence in large orders and their historical concentration towards the end of the quarter, NI will likely see backlog rise in coming quarters and this would adversely affect NI's revenue pattern in Q2 and Q3.

"Our guidance anticipates very strong year-over-year revenue growth in Q2, with the midpoint of guidance representing 36 percent year-over-year revenue growth," said Alex Davern, NI CFO. "We plan to continue driving operating leverage and will be careful about adding fixed cost in 2010. We are currently budgeting to grow our R&D and field sales headcount moderately, offsetting this increase by allowing attrition to reduce headcount in other areas of the business."

NI expects strong Q2 year-over-year revenue growth, with revenue expected to be between $200 million and $214 million. The company expects fully diluted EPS between $0.28 and $0.38, with non-GAAP fully diluted EPS expected to be between $0.33 and $0.43. Q2 guidance includes the $5 million or approximately $0.05 per share impact of the shipping issue discussed previously.

Non-GAAP Earnings Presentation and Non-GAAP Expense Guidance

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 expense, operating income, net income, provision for taxes and EPS for Q1 2010 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 NI earnings before interest, taxes, depreciation and amortization (EBITDA) for the three-month periods ended March 31, 2010 and 2009. Management also believes that including the EBITDA results assists investors in assessing the company's operational performance relative to its competitors. A reconciliation of EBITDA to GAAP net income is included with this news release.

Conference Call Information

Interested parties can listen to the Q1 2010 conference call today, April 27, beginning at 4:00 p.m. CDT, at www.ni.com/call. Replay information is available by calling (888) 203-1112, confirmation code # 3642695, from April 27 at 7:00 p.m. CDT through May 3 at midnight CDT.

Forward-Looking Statements

This release contains "forward-looking statements," including statements related to our advances continuing to catalyze our growth, April being on track to approximately match April 2008, the rapid resurgence in large orders, continuation and timing of supply chain issues, order backlog potentially rising and impacting our revenue patterns, strong year-over-year growth in Q2, continuing to drive operating leverage, being careful about adding fixed costs in 2010, budgeting to grow R&D and field sales headcount moderately, allowing attrition to reduce headcount, expecting revenue for Q2 to be between $200 million and $214 million with diluted EPS between $0.28 and $0.38 with non-GAAP fully diluted EPS expected between $0.33 and $0.43. These statements are subject to a number of risks and uncertainties, including the risk of further adverse changes or fluctuations in the global economy, disruption of European logistics, component shortages, delays in the release of new products, fluctuations in customer demand for NI products, our ability to continue to control our 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 and 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
      Condensed Consolidated Balance Sheets
                  (in thousands)


                                   March         December
                                     31,             31,
                                       2010          2009
                                (unaudited)
                                -----------

    Assets
    Current assets:
    Cash and cash
     equivalents                   $184,618      $201,465
    Short-term
     investments                    110,952        87,196
    Accounts receivable,
     net                            104,818       103,957
    Inventories, net                 89,826        86,515
    Prepaid expenses and
     other current assets            34,937        36,523
    Deferred income
     taxes, net                      15,222        16,522
                                     ------        ------
    Total current assets            540,373       532,178

    Property and
     equipment, net                 152,567       153,265
    Goodwill, net                    69,296        64,779
    Intangible assets,
     net                             48,369        43,390
    Other long-term
     assets                          19,647        19,417
    Total assets                   $830,252      $813,029
                                   ========      ========

    Liabilities and
     Stockholders' Equity
    Current liabilities:
    Accounts payable                $27,450       $23,502
    Accrued compensation             19,465        14,934
    Deferred revenue                 60,972        57,242
    Accrued expenses and
     other liabilities               12,619         8,560
    Other taxes payable              12,306        14,181
                                     ------        ------
    Total current
     liabilities                    132,812       118,419

    Deferred income taxes            25,088        25,012
    Liability for
     uncertain tax
     position                        10,926        11,062
    Other long-term
     liabilities                      4,259         4,116
                                      -----         -----
    Total liabilities              $173,085      $158,609
                                   ========      ========

    Stockholders' equity:
    Preferred stock                       -             -
    Common stock                        774           774
    Additional paid-in
     capital                        362,856       336,446
    Retained earnings               285,422       303,655
    Accumulated other
     comprehensive income             8,115        13,545
                                      -----        ------
    Total stockholders'
     equity                        $657,167      $654,420
                                   --------      --------
    Total liabilities and
     stockholders' equity          $830,252      $813,029
                                   ========      ========




                National Instruments
    Condensed Consolidated Statements of Income
       (in thousands, except per share data)


                                         Three Months
                                             Ended
                                          March 31,

                                         2010             2009
                                  (unaudited)      (unaudited)
                                  -----------      -----------
    Net sales:
    Products                         $175,395         $143,450
    Software maintenance               15,696           14,349
                                       ------           ------
    Total net sales                   191,091          157,799

    Cost of sales:
    Cost of products                  $42,262          $39,556
    Cost of software
     maintenance                          980            1,327
                                          ---            -----
    Total cost of sales                43,242           40,883

    Gross profit                     $147,849         $116,916
                                     --------         --------

    Operating expenses:
    Sales and marketing               $74,441          $68,826
    Research and
     development                       38,546           34,789
    General and
     administrative                    15,340           15,780
    Total operating
     expenses                        $128,327         $119,395
                                     --------         --------

    Operating income                  $19,522          $(2,479)

    Other income (expense):
    Interest income                      $300             $589
    Net foreign exchange
     gain (loss)                         (698)            (702)
    Other income (expense),
     net                                  348              163
                                          ---              ---

    Income before income
     taxes                            $19,472          $(2,429)

    Provision for (benefit
     from) income taxes                 1,119           (2,787)

    Net income                        $18,353             $358
                                      -------              ---

    Basic earnings per
     share                              $0.24            $0.00
                                        -----            -----
    Diluted earnings per
     share                              $0.23            $0.00
                                        -----            -----

    Weighted average shares
     outstanding -
    basic                              77,380           77,277
    diluted                            78,435           77,436

    Dividends declared per
     share                              $0.13            $0.12




                  National Instruments
    Condensed Consolidated Statements of Cash Flows
                     (in thousands)

                                            Three Months
                                               Ended
                                             March 31,

                                           2010             2009
                                    (unaudited)      (unaudited)
                                    -----------      -----------
    Cash flow from operating
     activities:
    Net income                          $18,353             $358
    Adjustments to reconcile
     net income to net cash
     provided
    by operating activities:
    Depreciation and
     amortization                         9,442            8,385
    Stock-based compensation              4,916            5,082
    Tax expense (benefit from)
     deferred income taxes                1,709           (1,486)
    Tax expense stock option
     plans                                1,587              242
    Changes in operating
     assets and liabilities:
    Accounts receivable                    (613)          30,631
    Inventories                          (3,006)           4,740
    Prepaid expenses and other
     assets                                (297)          (5,766)
    Accounts payable                      3,618           (5,747)
    Deferred revenue                      3,730             (549)
    Taxes and other
     liabilities                          2,162          (11,084)
    Net cash provided by
     operating activities               $41,601          $24,806
                                        -------          -------

    Cash flow from investing
     activities:
    Capital expenditures                 (5,271)          (3,004)
    Capitalization of
     internally developed
     software                            (3,404)          (3,114)
    Additions to other
     intangibles                           (543)          (1,340)
    Acquisition, net of cash
     received                            (2,191)               -
    Purchases of short-term
     and long-term
     investments                        (35,823)         (11,850)
    Sales and maturities of
     short-term and long-
     term investments                     9,037            4,026
    Net cash (used by)
     provided by investing
     activities                        $(38,195)        $(15,282)
                                       --------         --------

    Cash flow from financing
     activities:
    Proceeds from issuance of
     common stock                        22,341            7,237
    Repurchase of common stock          (30,935)          (9,186)
    Dividends paid                      (10,072)          (9,285)
    Tax (benefit from) stock
     option plans                        (1,587)            (242)
    Net cash used in financing
     activities                        $(20,253)        $(11,476)
                                       --------         --------

    Net change in cash and
     cash equivalents                   (16,847)          (1,952)
    Cash and cash equivalents
     at beginning of period             201,465          229,400
    Cash and cash equivalents
     at end of period                  $184,618         $227,448
                                       ========         ========





    Detail of GAAP charges related to stock-based compensation and
          amortization of acquisition intangibles (unaudited)


                                      Three Months
                                         Ended
                                       March 31,

                                     2010          2009


    Stock-based
     compensation
    Cost of sales                    $362          $310
    Sales and marketing             2,104         2,185
    Research and
     development                    1,765         1,737
    General and
     administrative                   685           799
                                      ---           ---
    Provision for income
     taxes                         (1,545)       (3,014)
                                   ------        ------
    Total                          $3,371        $2,017
                                   ------        ------


    Amortization of
     acquisition
     intangibles
    Cost of sales                    $722          $887
    Sales and marketing               122           126
    Research and
     development                        -             -
    General and
     administrative                     -             -
                                      ---           ---
    Provision for income
     taxes                           (253)         (280)
                                     ----          ----
    Total                            $591          $733
                                      ---           ---




                  National Instruments
       Reconciliation of GAAP to Non-GAAP Measures
          (in thousands, except per share data)
                       (unaudited)

    Reconciliation of Gross Profit to Non-GAAP Gross Profit

                                         Three Months
                                                 Ended
                                          March 31,
                                         2010          2009
                                         ----          ----
    Gross profit, as reported      $147,849      $116,916
    Stock-based compensation              362           310
    Amortization of acquisition
     intangibles                          722           887
                                          ---           ---
    Non-GAAP gross profit          $148,933      $118,113



    Reconciliation of Operating Expense
     to Non-GAAP Operating Expenses
                                        Three Months
                                               Ended
                                         March 31,
                                       2010          2009
                                       ----          ----
    Operating expense, as
     reported                      $128,327      $119,395
    Stock-based compensation         (4,554)       (4,721)
    Amortization of acquisition
     intangibles                       (122)         (126)
                                       ----          ----
    Non-GAAP operating
     expenses                      $123,651      $114,548



    Reconciliation of Operating Income
     to Non-GAAP Operating Income
                                        Three Months
                                               Ended
                                         March 31,
                                       2010          2009
                                       ----          ----
    Operating income, as
     reported                       $19,522       $(2,479)
    Stock-based compensation          4,916         5,031
    Amortization of acquisition
     intangibles                        844         1,013
                                        ---         -----
    Non-GAAP operating income       $25,282        $3,565



    Reconciliation of Income before income
     taxes to Non-GAAP Income before income
     taxes
                                        Three Months
                                               Ended
                                         March 31,
                                       2010          2009
                                       ----          ----
    Income before income
     taxes, as reported             $19,472       $(2,429)
    Stock-based compensation          4,916         5,031
    Amortization of acquisition
     intangibles                        844         1,013
                                        ---         -----
    Non-GAAP income before
     income taxes                   $25,232        $3,615



    Reconciliation of Provision for Income
     Taxes to Non-GAAP Provision for Income
     Taxes
                                        Three Months
                                               Ended
                                         March 31,
                                       2010          2009
                                       ----          ----
    Provision for income
     taxes, as reported              $1,119       $(2,787)
    Stock-based compensation          1,545         3,014
    Amortization of acquisition
     intangibles                        253           280
                                        ---           ---
    Non-GAAP provision for
     income taxes                    $2,917          $507





    Reconciliation of Net Income and Diluted EPS to Non-GAAP Net Income
                                and Non-GAAP
                                Diluted EPS
                                (unaudited)


                                               Three
                                                 Months
                                                  Ended
                                            March 31,
                                          2010         2009
                                          ----         ----
    Net income, as reported          $18,353         $358
    Adjustments to reconcile net
     income to non-GAAP net
     income:
       Stock-based compensation, net
        of tax effect                  3,371        2,017
       Amortization of acquisition
        intangibles, net of tax
        effect                           591          733
                                         ---          ---
    Non-GAAP net income              $22,315       $3,108


    Basic EPS, as reported             $0.24        $0.00
    Adjustment to reconcile basic
     EPS to non-GAAP
    basic EPS:
       Impact of stock-based
        compensation, net of tax
        effect                         $0.04        $0.03
       Impact of amortization of
        acquisition intangibles,
        net of tax effect              $0.01        $0.01

    Non-GAAP basic EPS                 $0.29        $0.04



    Diluted EPS, as reported           $0.23        $0.00
    Adjustment to reconcile
     diluted EPS to non-GAAP
    diluted EPS:
       Impact of stock-based
        compensation, net of tax
        effect                         $0.04        $0.03
       Impact of amortization of
        acquisition intangibles,
        net of tax effect              $0.01        $0.01

    Non-GAAP diluted EPS               $0.28        $0.04


    Weighted average shares
     outstanding -
    Basic                             77,380       77,277
                                      ------       ------
    Diluted                           78,435       77,436
                                      ------       ------

         Reconciliation of Net Income and Diluted
           EPS to EBITDA and EBITDA Diluted EPS
                        (unaudited)
                                             Three
                                              Months
                                               Ended
                                          March 31,
                                        2010         2009
                                        ----         ----
    Net income, as reported          $18,353         $358
    Adjustments to reconcile net
     income to EBITDA:
          Interest income               (300)        (589)
          Taxes                        1,119       (2,787)
          Depreciation and amortization    9,442        8,385
    EBITDA                           $28,614       $5,367


    Diluted EPS, as reported           $0.23        $0.00
    Adjustment to reconcile
     diluted EPS to EBITDA
          Interest income             $(0.00)      $(0.01)
          Taxes                        $0.01       $(0.03)
          Depreciation and
           amortization                $0.12        $0.11
    EBITDA diluted EPS                 $0.36        $0.07


    Weighted average shares
     outstanding - Diluted            78,435       77,436
                                      ------       ------




                  National Instruments
    Reconciliation of GAAP to Non-GAAP Estimated Measures
          (in thousands, except per share data)
                       (unaudited)

    Reconciliation of Estimated GAAP Fully Diluted EPS to Non-GAAP Fully
                       Diluted EPS


                                           Three
                                          months
                                           ended
                                         June 30,
                                             2010
                                          ---------

                                        Low       High
    GAAP Fully Diluted EPS,
     estimated                        $0.28      $0.38
    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,
     estimated                        $0.33      $0.43
                                      =====      =====




SOURCE National Instruments

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