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National Instruments Reports Q1 Revenue of $193 Million, Up 12.4 Percent Year-over-Year

National Instruments Reports Q1 Revenue of $193 Million, Up 12.4 Percent Year-over-YearAUSTIN, Texas – April 29, 2008 - National Instruments (Nasdaq: NATI) reported quarterly revenue of $193 million, up 12.4 percent year-over-year. This compares to NI's guidance of between $182 million and $196 million. Net income for Q1 2008 was $17.6 million with diluted earnings per share (EPS) of $0.22.

Non-GAAP net income was $22.0 million with fully diluted EPS of $0.28 at the midpoint of NI's guidance. 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.

"We saw strong growth in several key areas of the business, resulting from investments in system-level products, such as our PXI and CompactRIO platforms," said Dr. James Truchard, NI president and CEO. "Large system sales continued to drive revenue growth in Q1 with orders over $20,000 up 34 percent from a year ago. I believe our investments in R&D and our field sales force are important drivers to continuing this trend."

NI virtual instrumentation and graphical system design products, which represents over 90 percent of the company's product portfolio, had 15 percent year-over-year revenue growth in Q1 2008. This represents another quarter of double-digit year-over-year revenue growth from these products and underscores the company's strategy of strong investment in R&D and expanding its field sales force to drive new product success.

Sales of NI instrument control products, which now represent approximately 9 percent of NI revenue, were down 5 percent year-over-year in Q1 2008. This decline is in line with the weakness of the global PMI in Q1 and the company's guidance given in January 2008.

"I am pleased with the continued growth of the company in a tough environment for our industry," said Alex Davern, NI CFO. "We believe our strong product portfolio in addition to the growth of our field sales force will position us well for the eventual recovery in the industrial economy."

Geographically, revenue in U.S. dollar terms for Q1 2008 compared to Q1 2007 was up 7 percent in the Americas, up 14 percent in Europe and up 20 percent in Asia, equaling overall growth of 12.4 percent. In local currency terms, revenue was up 3 percent in Europe and 15 percent in Asia.

Today the company announced that its Board of Directors has approved a new share repurchase plan that increases the number of shares the company is authorized to repurchase by 2.2 million to 3 million shares. In addition, National Instruments announced that the Board of Directors declared a dividend of $0.11 per share on its common stock payable on June 2, 2008, to shareholders of record on May 12, 2008. As of March 31, 2008, the company had $238 million in net cash and short-term investments.

Q1 2008 Highlights

  • Quarterly revenue of $193 million, up 12.4 percent year-over-year
  • Net income of $17.6 million
  • Non-GAAP net income of $22.0 million
  • Strong growth of software, USB data acquisition, distributed I/O, PXI, and RF modular instruments
  • EE Times' presentation of the ACE Award for Small/Medium Company of the Year to NI
  • EDN's presentation of an industry Innovation Award to NI CompactRIO
  • Cash and short-term investments of $238 million
  • New repurchase plan authorizes share repurchase to 3 million shares

Guidance for Q2 2008

NI currently expects revenue for Q2 2008 to follow the seasonal pattern of being up from Q1 2008 and to be in the range of between $198 million to $210 million. This is equivalent to growth of between 10 percent and 17 percent year-over-year. Additionally, for Q2 2008, the company expects GAAP fully diluted EPS to be in the range of $0.24 to $0.33 per share. Non-GAAP EPS is expected to be in the range of $0.30 to $0.39 per share. This is consistent with the non-GAAP guidance NI gave in January.

In Q2 2008, the company expects the impact of stock-based compensation and the impact of the amortization of acquisition-related intangibles, including the recent acquisition of microLEX, to be $0.06 per share. A reconciliation of the company's Q2 2008 guidance on a GAAP basis to its guidance on a non-GAAP basis is included as part of this news release.

Non-GAAP Earnings Presentation and Non-GAAP Earnings Guidance

In addition to disclosing results determined in accordance with GAAP, NI also discloses certain non-GAAP operating results that exclude certain charges. In this news release, the company has presented its gross profit, operating margin, net income and diluted EPS results for Q1 2008 and Q1 2007 and its guidance for Q2 2008 on a GAAP and non-GAAP basis. When presenting non-GAAP results, the company includes a reconciliation of the non-GAAP results to the results under GAAP.

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 all 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. The economic substance behind management's decision to use such non-GAAP measures relates to these charges being non-cash in nature and being a useful measure of the potential future performance of the company's business.

In line with common industry practice and to help enable comparability with other technology companies, the company's non-GAAP presentation excludes the impact of both stock-based compensation and the amortization of acquisition-related intangibles. Other companies may calculate non-GAAP results differently than the company, limiting its usefulness as a comparative measure. In addition, such non-GAAP measures may exclude financial information that some may consider important in evaluating the company's performance. Management compensates for the foregoing limitations of non-GAAP measures by presenting certain information on both a GAAP and non-GAAP basis and providing reconciliations of these certain GAAP and non-GAAP measures.

Interested parties can listen to a conference call today, April 29, beginning at 4:00 p.m. CDT, at www.ni.com/call. Replay information is available by calling (719) 457-0820, confirmation code #2752549, from April 29 at 7:00 p.m. CDT through May 6 at midnight CDT.

This release contains "forward-looking statements," including statements related to the company's investment in R&D and the accelerated growth of the NI field sales force being key to continuing this trend; continued weakness of the global PMI; continued growth of the company; strong product portfolio and growth of the field sales force positioning NI well; and NI guidance for Q2 2008, including, as applicable, revenue, GAAP and non-GAAP diluted EPS, the estimated impact of stock-based compensation and acquisition-related intangibles. These statements are subject to a number of risks and uncertainties, including the risk of further adverse changes in the global economy, delays in the release of new products, fluctuations in customer demand for NI products, manufacturing inefficiencies and foreign exchange fluctuations. Actual results may differ materially from the expected results. The company directs readers to documents filed 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 25,000 different companies worldwide, with no one customer representing more than 3 percent of revenue and no one industry representing more than 10 percent of revenue. Headquartered in Austin, Texas, NI has more than 4,800 employees and direct operations in nearly 40 countries. For the past nine 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.

CompactRIO, 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.



National Instruments
Condensed Consolidated Balance Sheets
(in thousands)
 

March 31,

December 31,

 

2008

2007

 

(unaudited)

 

ASSETS

   

Current assets:

   

  Cash and cash equivalents

 $     205,865

 $        194,839

  Short-term investments

         31,791

             93,838

  Accounts receivable, net

       128,595

           131,282

  Inventories, net

         89,879

             82,675

  Other current assets

         50,626

             42,576

  Total current assets

       506,756

           545,210

 

Long-term investments

           8,477

                     -

Property and equipment, net

       152,694

           151,462

Goodwill, net

         65,375

             54,111

Intangibles, net

         44,415

             40,357

Other long-term assets

         28,578

             27,672

Total assets

 $     806,295

 $        818,812

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

  Accounts payable

 $      41,765

 $          36,187

  Deferred revenue

         39,665

             36,091

  Accrued expenses and other liabilities

         51,483

             53,058

  Total current liabilities

       132,913

           125,336

     

Deferred income taxes, net

         22,273

             21,221

Other long-term liabilities

         11,471

             11,169

  Total liabilities

       166,657

           157,726

 

Stockholders’ equity:

   

 Preferred stock

 -

 -

 Common stock

             781

                 794

 Additional paid-in capital

         56,234

             89,809

 Retained earnings

       572,317

           563,418

 Other

         10,306

               7,065

  Total stockholders’ equity

       639,638

           661,086

  Total liabilities and stockholders’ equity

 $     806,295

 $        818,812



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

Three Months

 

Ended March 31,

   
 

(unaudited)

   
 

2008

 

2007

Net sales

 $    192,918

 

 $171,641

Cost of sales

        48,247

 

     42,148

Gross profit

      144,671

 

   129,493

 

 

Sales and marketing

        74,339

 

     63,580

Research and development

        35,604

 

     29,236

General and administrative

        16,661

 

     14,534

Patent litigation

                2

 

           41

Total operating expenses

      126,606

 

   107,391

 

 

Operating income

        18,065

 

     22,102

 

 

Interest income

          2,137

 

      2,236

Foreign currency gain 

          1,548

 

         189

Other income (expense), net

              61

 

       (106)

 

 

Income before income taxes

        21,811

 

     24,421

Provision for income taxes (benefit)

          4,195

 

      5,372

 

 

Net income

 $     17,616

 

 $  19,049

 

 

Earnings per share:

 

Basic

 $         0.22

 

 $     0.24

Diluted

 $         0.22

 

 $     0.23

 

 

Weighted average shares

 

outstanding:

 

Basic

        78,840

 

     79,842

Diluted

        79,825

 

     81,232

 

 

Dividends declared per share

 $         0.11

 

 $     0.07


National Instruments Condensed Consolidated Statements of Cash Flows

(in thousands)

 

Three Months Ended

 

March 31,

March 31,

 

2008

2007

 

(unaudited)

(unaudited)

Cash flow from operating activities:

   

Net income

 $      17,616

 $      19,049

Adjustments to reconcile net income to net cash provided

   

by operating activities:

   

Depreciation and amortization

10,675

9,371

Stock-based compensation

4,739

3,732

Benefit from deferred income taxes

(2,711)

(741)

Tax benefit from stock option plans

(161)

(1,395)

Changes in operating assets and liabilities:

   

Accounts receivable

5,112

6,837

Inventories

(7,099)

76

Prepaid expenses and other assets

(5,677)

(6,793)

Accounts payable

5,241

820

Deferred revenue

3,574

2,150

Taxes and other liabilities

(867)

(2,613)

Net cash provided by operating activities

30,442

30,493

     

Cash flow from investing activities:

   

Capital expenditures

(5,051)

(6,216)

Capitalization of internally developed software

(1,528)

(2,452)

Additions to other intangibles

(431)

(3,602)

Acquisition, net of cash received

(17,055)

               -  

Purchases of short-term and long-term investments

(12,638)

(23,408)

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

66,208

65,829

Purchases of foreign currency option contracts

(1,481)

               -  

Net cash provided by (used in) investing activities

28,024

30,151

     

Cash flow from financing activities:

   

Proceeds from issuance of common stock

10,197

9,824

Repurchase of common stock

(49,081)

(29,242)

Dividends paid

(8,717)

(5,592)

Tax benefit from stock option plans

161

1,395

Net cash provided by (used in) financing activities

(47,440)

(23,615)

     

Net change in cash and cash equivalents

11,026

37,029

Cash and cash equivalents at beginning of period

194,839

100,287

Cash and cash equivalents at end of period

 $     205,865

 $    137,316


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

   

Three Months Ended

   

March 31,

         
   

2008

2007

Stock-based compensation

       

Cost of sales

 

 $     244

 

 $     184

Sales and marketing

      2,007

      1,523

Research and development

 

      1,727

 

      1,357

General and administrative

 

        754

 

        592

Provision for income taxes

 

    (1,083)

 

       (746)

Total

 

 $   3,649

 

 $   2,910

         
         

Amortization of acquisition intangibles

 

 

Cost of sales

 

 $     850

 

 $     677

Sales and marketing

 

        141

 

        113

Research and development

 

            9

 

            7

General and administrative

            -

 

 -

Provision for income taxes

       (268)

 

       (254)

Total

 $     732

 

 $     543

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,

         
   

2008

2007

         

Gross profit, as reported

 

 $ 144,671

 

 $ 129,493

Stock-based compensation

 

         244

 

         184

Amortization of acquisition intangibles

 

         850

 

         677

         

Non-GAAP gross profit

 

 $ 145,765

 

 $ 130,354

         
         
         

Reconciliation of Operating Income to Non-GAAP Operating Income

         
   

Three Months Ended

   

March 31,

         
   

2008

2007

         

Operating income, as reported

 

 $  18,065

 

 $  22,102

Stock-based compensation

 

       4,732

 

       3,656

Amortization of acquisition intangibles

 

       1,000

 

         797

         

Non-GAAP operating income

 

 $  23,797

 

 $  26,555

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

   

Three Months Ended

 
   

March 31,

 
           
   

2008

2007

 
           

Net income, as reported

 

 $ 17,616

 

 $ 19,049

 

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

       

  Stock-based compensation, net of tax effect

 

      3,649

 

      2,910

 

  Amortization of acquisition intangibles, net of tax effect

 

        732

 

        543

 
           

Non-GAAP net income

 

 $ 21,997

 

 $ 22,502

 
           

Diluted EPS, as reported

 

 $     0.22

 

 $     0.23

 

Adjustment to reconcile diluted EPS to non-GAAP

         

diluted EPS:

         

  Impact of stock-based compensation, net of tax effect

 

 $     0.05

 

 $     0.04

 

  Impact of amortization of acquisition intangibles, net of tax effect

 $     0.01

 

 $     0.01

 
           

Non-GAAP diluted EPS

 

 $     0.28

 

 $     0.28

 
           
           
Weighted average shares outstanding - diluted  

    79,825

 

    81,232

 

Reconciliation of GAAP to non-GAAP Guidance for Q2 2008

   

Q2 2008

     

Range of diluted GAAP net earnings per share

 

$0.24 – $0.33

Estimated stock-based compensation and amortization of acquisition intangibles

 

$0.06

Amortization of acquisition intangibles

 

$0.30 – $0.39