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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 04:00 PM Eastern Daylight Time

AUSTIN, Texas, Oct. 25, 2010 /PRNewswire via COMTEX News Network/ -- Q3 2010 Highlights

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)

                                                 December
                                September            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               Nine Months
                                 Ended                     Ended
                               September                 September
                                    30,                         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             Nine Months
                           Ended                  Ended
                         September              September
                             30,                      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                   Nine
                                 Months                  Months
                                  Ended                  Ended
                             September              September
                                     30,                      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
                                                        September 30,
                                                        2010          2009
                                                        ----          ----
    Net income, as reported                          $28,133        $9,931
    Adjustments to reconcile net income to
     non-GAAP net income:
      Stock-based compensation, net of tax
       effect                                          3,440         4,793
      Amortization of acquisition intangibles,
       net of tax effect                                 686           701
                                                         ---           ---
    Non-GAAP net income                              $32,259       $15,425
                                                     =======       =======

    Basic EPS, as reported                             $0.36         $0.13
    Adjustment to reconcile basic EPS to non-
     GAAP
    basic EPS:
      Impact of stock-based compensation, net
       of tax effect                                   $0.04         $0.06
      Impact of amortization of acquisition
       intangibles, net of tax effect                  $0.01         $0.01
                                                       -----         -----
    Non-GAAP basic EPS                                 $0.41         $0.20
                                                       =====         =====


    Diluted EPS, as reported                           $0.36         $0.13
    Adjustment to reconcile diluted EPS to
     non-GAAP
    diluted EPS:
      Impact of stock-based compensation, net
       of tax effect                                   $0.04         $0.06
      Impact of amortization of acquisition
       intangibles, net of tax effect                  $0.01         $0.01
                                                       -----         -----
    Non-GAAP diluted EPS                               $0.41         $0.20
                                                       =====         =====

    Weighted average shares outstanding -
    Basic                                             78,176        77,653
                                                      ------        ------
    Diluted                                           78,862        78,103
                                                      ------        ------




                                                         Nine Months
                                                            Ended
                                                        September 30,
                                                        2010          2009
                                                        ----          ----
    Net income, as reported                          $71,088       $14,719
    Adjustments to reconcile net income to
     non-GAAP net income:
      Stock-based compensation, net of tax
       effect                                          9,772         9,950
      Amortization of acquisition intangibles,
       net of tax effect                               1,972         2,136
                                                       -----         -----
    Non-GAAP net income                              $82,832       $26,805
                                                     =======       =======

    Basic EPS, as reported                             $0.91         $0.19
    Adjustment to reconcile basic EPS to non-
     GAAP
    basic EPS:
      Impact of stock-based compensation, net
       of tax effect                                   $0.12         $0.13
      Impact of amortization of acquisition
       intangibles, net of tax effect                  $0.03         $0.03
                                                       -----         -----
    Non-GAAP basic EPS                                 $1.06         $0.35
                                                       =====         =====


    Diluted EPS, as reported                           $0.90         $0.19
    Adjustment to reconcile diluted EPS to
     non-GAAP
    diluted EPS:
      Impact of stock-based compensation, net
       of tax effect                                   $0.12         $0.13
      Impact of amortization of acquisition
       intangibles, net of tax effect                  $0.03         $0.03
                                                       -----         -----
    Non-GAAP diluted EPS                               $1.05         $0.35
                                                       =====         =====

    Weighted average shares outstanding -
    Basic                                             77,832        77,497
                                                      ------        ------
    Diluted                                           78,848        77,842
                                                      ------        ------



      Reconciliation of Net Income and Diluted EPS to EBITDA and EBITDA
                                 Diluted EPS
                                 (unaudited)


                                                 Three Months
                                                    Ended
                                                September 30,
                                                2010          2009
                                                ----          ----
    Net income, as reported                  $28,133        $9,931
    Adjustments to reconcile net
     income to EBITDA:
         Interest income                        (380)         (339)
         Taxes                                 4,522         2,518
         Depreciation and amortization         9,232         9,513
    EBITDA                                   $41,507       $21,623
                                             =======       =======

    Diluted EPS, as reported                   $0.36         $0.13
    Adjustment to reconcile diluted
     EPS to EBITDA
         Interest income                      $(0.01)       $(0.00)
         Taxes                                 $0.06         $0.03
         Depreciation and amortization         $0.12         $0.12
    EBITDA diluted EPS                         $0.53         $0.28
                                               =====         =====

    Weighted average shares
     outstanding -Diluted                     78,862        78,103
                                              ------        ------



                                                  Nine Months
                                                     Ended
                                                September 30,
                                                 2010          2009
                                                 ----          ----
    Net income, as reported                   $71,088       $14,719
    Adjustments to reconcile net
     income to EBITDA:
         Interest income                       (1,051)       (1,335)
         Taxes                                 10,152          (554)
         Depreciation and amortization         28,220        28,536
    EBITDA                                   $108,409       $41,366
                                             ========       =======

    Diluted EPS, as reported                    $0.90         $0.19
    Adjustment to reconcile diluted
     EPS to EBITDA
         Interest income                       $(0.01)       $(0.02)
         Taxes                                  $0.13        $(0.01)
         Depreciation and amortization          $0.35         $0.37
    EBITDA diluted EPS                          $1.37         $0.53
                                                =====         =====

    Weighted average shares
     outstanding -Diluted                      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

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