National Instruments Reports Record Q2 Revenue and Operating Income
AUSTIN, Texas, July 27, 2010 /PRNewswire via COMTEX News Network/ -- National Instruments (Nasdaq: NATI) reported quarterly revenue for Q2 2010 of $212 million, representing a 39 percent year-over-year increase and an 11 percent sequential increase. For the first half of 2010, the company reported a 30 percent increase in revenue and a 15 percent increase in non-GAAP operating expenses, compared to the first half of 2009. GAAP operating expenses grew by 14 percent in the first half of 2010, compared to the first half of 2009. Growing non-GAAP expenses at half the rate of revenue delivers on the goal expressed by the company at the 2009 NIWeek Investor Conference.
Net income for Q2 2010 was $24.6 million, with GAAP fully diluted earnings per share (EPS) of $0.31. Non-GAAP net income was $28.3 million, with non-GAAP fully diluted EPS of $0.36. Operating income set a record for a second quarter, and operating margins improved significantly over last year. Included in both GAAP and non-GAAP earnings for Q2 is a net loss on foreign exchange of $2.2 million, or $0.02 per share, as a result of the dramatic weakening of European currencies in May and June. The company had not anticipated this loss when giving guidance in April. 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 Q2, GAAP gross margin increased 3.6 percentage points year-over-year to 77.0 percent. Non-GAAP gross margin increased by 3.4 percentage points year-over-year to 77.6 percent.
"While the economy remains uncertain, our outstanding performance in the first half of the year and our strong Q3 guidance give us confidence that we will be able to deliver record annual revenue and record annual profitability in 2010," said Dr. James Truchard, co-founder, president, and CEO. "We plan to maintain a disciplined approach to expense management as we increase our investments to drive long-term profitable growth through strategic R&D and sales initiatives."
NI virtual instrumentation and graphical system design product sales were up 38 percent year-over-year. NI instrument control product sales were up 54 percent year-over-year but remain 17 percent below Q2 2008 levels. Product revenue was $195 million, up 39 percent from Q2 2009, and software maintenance revenue was $17 million, up 37 percent year-over-year. Geographically, revenue in U.S. dollar terms for Q2 2010 compared to Q2 2009 was up 32 percent in the Americas, up 28 percent in Europe and up 66 percent in Asia. In local currency terms, revenue was up 19 percent in Europe and up 52 percent in Asia.
As of June 30, NI had a record $316 million in net cash and short-term investments, up $21 million from March 31, 2010. During Q2 2010, the company paid $10 million in dividends. National Instruments announced that its board of directors declared a dividend of $0.13 per share on its common stock payable on Aug. 30, 2010, to shareholders of record on Aug. 9, 2010.
Outlook
The trends of the global Purchasing Managers Index (PMI) continued to be strong in Q2, averaging 56.7 for the quarter, but it appears likely that the global PMI reached its peak for this cycle in Q2. The profit and investment plans the company laid out at the 2009 NIWeek Investor Conference anticipated this strong recovery by the global PMI followed by the necessary moderation toward its historical mean. The company's discipline in growing non-GAAP expenses at half the rate of revenue has resulted in a dramatic rebound in profitability with non-GAAP operating margins increasing from 4 percent in the first half of 2009 to 15 percent in the first half of 2010.
"At our 2009 NIWeek Investor Conference we set the goal of increasing expenses at 50 percent of revenue growth, until we returned record revenue," said Alex Davern, CFO. "Given that we are back to record revenue and profitability, we will be presenting a more balanced investment plan at our investor conference next week. Going forward we will be increasing our strategic investments and plan to increase expenses at a rate closer to that of revenue growth, while continuing to drive towards our long-term operating profit goal."
NI expects strong Q3 year-over-year revenue growth, with revenue expected to be between $206 million and $220 million. The company expects fully diluted EPS between $0.27 and $0.37, with non-GAAP fully diluted EPS expected to be between $0.32 and $0.42.
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, net income, provision for taxes and EPS for the three and six month periods ending June 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 NI earnings before interest, taxes, depreciation and amortization (EBITDA) and EBITDA diluted EPS for the three and six month periods ended June 30, 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 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 Q2 2010 conference call today, July 27, beginning at 4:00 p.m. CDT, at www.ni.com/call. Replay information is available by calling (888) 203-1112, confirmation code # 9955054, from July 27 at 7:00 p.m. CDT through Aug. 3 at midnight CDT.
Forward-Looking Statements
This release contains "forward-looking statements," including statements related to delivering record annual revenue and record annual profitability in 2010, driving long-term profitable growth through strategic R&D and sales initiatives focused at new large opportunity areas, plan to maintain a disciplined approach to expense management, likely that the global PMI peaked for this cycle, maintaining tight budget discipline, expenses increasing at a rate closer to revenue growth, continuing to improve the company's profitability and outlook for Q3 revenue and Q3 GAAP and non-GAAP EPS. 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, 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 Dec. 31, 2009, its Form 10-Q for the quarter ended March 31, 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, ni.com and NIWeek 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)
June December
30, 31,
2010 2009
(unaudited)
-----------
Assets
Current assets:
Cash and cash
equivalents $185,418 $201,465
Short-term investments 130,857 87,196
Accounts receivable,
net 111,008 103,957
Inventories, net 95,983 86,515
Prepaid expenses and
other current assets 41,928 36,523
Deferred income taxes,
net 12,811 16,522
------ ------
Total current assets 578,005 532,178
Property and equipment,
net 150,905 153,265
Goodwill, net 68,569 64,779
Intangible assets, net 53,132 43,390
Other long-term assets 17,559 19,417
Total assets $868,170 $813,029
======== ========
Liabilities and
stockholders' equity
Current liabilities:
Accounts payable $28,786 $23,502
Accrued compensation 29,145 14,934
Deferred revenue 64,447 57,242
Accrued expenses and
other liabilities 14,566 8,560
Other taxes payable 12,910 14,181
------ ------
Total current
liabilities 149,854 118,419
Deferred income taxes 24,700 25,012
Liability for uncertain
tax position 12,389 11,062
Other long-term
liabilities 5,251 4,116
----- -----
Total liabilities $192,194 $158,609
======== ========
Stockholders' equity:
Preferred stock - -
Common stock 782 774
Additional paid-in
capital 379,468 336,446
Retained earnings 299,871 303,655
Accumulated other
comprehensive income
(loss) (4,145) 13,545
------ ------
Total stockholders'
equity $675,976 $654,420
-------- --------
Total liabilities and
stockholders' equity $868,170 $813,029
======== ========
National Instruments
Consolidated Statements of Income
(in thousands, except per share data)
Three Months Six Months
Ended Ended
June 30, June 30,
(Unaudited) (Unaudited)
----------- -----------
2010 2009 2010 2009
Net sales:
Products $194,830 $139,792 $370,225 $283,242
Software
maintenance 16,887 12,371 32,583 26,720
------ ------ ------ ------
Total net
sales 211,717 152,163 402,808 309,962
Cost of sales:
Cost of
products $47,176 $39,202 $89,438 $78,758
Cost of
software
maintenance 1,463 1,284 2,443 2,611
----- ----- ----- -----
Total cost of
sales 48,639 40,486 91,881 81,369
Gross profit $163,078 $111,677 $310,927 $228,593
-------- -------- -------- --------
Operating
expenses:
Sales and
marketing $79,231 $65,137 $153,672 $133,963
Research and
development 36,395 29,447 74,941 64,236
General and
administrative 16,969 14,752 32,309 30,532
Total
operating
expenses $132,595 $109,336 $260,922 $228,731
-------- -------- -------- --------
Operating
income (loss) $30,483 $2,341 $50,005 $(138)
Other income
(expense):
Interest
income $371 $407 $671 $996
Net foreign
exchange gain
(loss) (2,203) 1,063 (2,901) 361
Other income,
net 462 334 810 497
--- --- --- ---
Income before
income taxes $29,113 $4,145 $48,585 $1,716
Provision for
(benefit
from) income
taxes 4,511 (285) 5,630 (3,072)
Net income $24,602 $4,430 $42,955 $4,788
------- ------ ------- ------
Basic earnings
per share $0.32 $0.06 $0.55 $0.06
----- ----- ----- -----
Diluted
earnings per
share $0.31 $0.06 $0.55 $0.06
----- ----- ----- -----
Weighted
average
shares
outstanding -
basic 77,932 77,556 77,657 77,417
diluted 78,992 77,824 78,752 77,596
Dividends
declared per
share $0.13 $0.12 $0.26 $0.24
National Instruments
Consolidated Statements of Cash Flows
(in thousands)
Six Months
Ended
June 30,
(Unaudited)
-----------
2010 2009
Cash flow from operating
activities:
Net income $42,955 $4,788
Adjustments to reconcile
net income to net cash
provided
by operating activities:
Depreciation and
amortization 18,988 19,023
Stock-based compensation 9,459 10,036
Tax expense (benefit) from
deferred income taxes 3,774 (2,610)
Tax expense stock option
plans 579 1,379
Changes in operating assets
and liabilities:
Accounts receivable (6,803) 30,155
Inventories (9,163) 12,089
Prepaid expenses and other
assets (18,740) (624)
Accounts payable 4,953 (6,498)
Deferred revenue 7,205 2,178
Taxes and other liabilities 18,513 (11,922)
Net cash provided by
operating activities $71,720 $57,994
------- -------
Cash flow from investing
activities:
Capital expenditures (10,015) (7,706)
Capitalization of
internally developed
software (11,021) (9,390)
Additions to other
intangibles (1,690) (2,420)
Acquisition, net of cash
received (2,191) -
Purchases of short-term
and long-term investments (85,199) (23,989)
Sales and maturities of
short-term and long-term
investments 41,538 1,218
Net cash (used by)
investing activities $(68,578) $(42,287)
-------- --------
Cash flow from financing
activities:
Proceeds from issuance of
common stock 32,550 11,520
Repurchase of common stock (30,935) (14,908)
Dividends paid (20,225) (18,617)
Tax (benefit) from stock
option plans (579) (1,379)
Net cash (used by)
financing activities $(19,189) $(23,384)
-------- --------
Net change in cash and cash
equivalents (16,047) (7,677)
Cash and cash equivalents
at beginning of period 201,465 229,400
Cash and cash equivalents
at end of period $185,418 $221,723
======== ========
Detail of GAAP charges related to stock-based compensation and
amortization of acquisition intangibles
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
Stock-based
compensation
Cost of sales $320 $330 $682 $640
Sales and
marketing 1,996 2,231 4,100 4,416
Research and
development 1,593 1,683 3,358 3,420
General and
administrative 634 761 1,319 1,560
--- --- ----- -----
Provision for
income taxes (1,582) (1,865) (3,127) (4,879)
------ ------ ------ ------
Total $2,961 $3,140 $6,332 $5,157
------ ------ ------ ------
Amortization
of
acquisition
intangibles
Cost of sales $922 $853 $1,644 $1,740
Sales and
marketing 100 126 222 252
Research and
development - - - -
General and
administrative - - - -
--- --- --- ---
Provision for
income taxes (327) (277) (580) (557)
---- ---- ---- ----
Total $695 $702 $1,286 $1,435
--- --- ------ ------
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 Six
Months Months
Ended Ended
June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
Gross profit, as
reported $163,078 $111,677 $310,927 $228,593
Stock-based
compensation 320 330 682 640
Amortization of
acquisition
intangibles 922 853 1,644 1,740
--- --- ----- -----
Non-GAAP gross
profit $164,320 $112,860 $313,253 $230,973
Reconciliation of Operating
Expenses to Non-GAAP
Operating Expenses
Three Six
Months Months
Ended Ended
June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
Operating expenses,
as reported $132,595 $109,336 $260,922 $228,731
Stock-based
compensation (4,223) (4,675) (8,777) (9,396)
Amortization of
acquisition
intangibles (100) (126) (222) (252)
---- ---- ---- ----
Non-GAAP operating
expenses $128,272 $104,535 $251,923 $219,083
Reconciliation of Operating
Income (Loss) to Non-GAAP
Operating Income
Three Six
Months Months
Ended Ended
June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
Operating income
(loss), as reported $30,483 $2,341 $50,005 $(138)
Stock-based
compensation 4,543 5,005 9,459 10,036
Amortization of
acquisition
intangibles 1,022 979 1,866 1,992
----- --- ----- -----
Non-GAAP operating
income $36,048 $8,325 $61,330 $11,890
Reconciliation of Income before
income taxes to Non-GAAP
Income before income taxes
Three Six
Months Months
Ended Ended
June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
Income before income
taxes, as reported $29,113 $4,145 $48,585 $1,716
Stock-based
compensation 4,543 5,005 9,459 10,036
Amortization of
acquisition
intangibles 1,022 979 1,866 1,992
----- --- ----- -----
Non-GAAP income
before income taxes $34,678 $10,129 $59,910 $13,744
Reconciliation of Provision for
(Benefit From) Income Taxes to
Non-GAAP Provision For
(Benefit From) Income Taxes
Three Six
Months Months
Ended Ended
June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
Provision
for(benefit from)
income taxes, as
reported $4,511 $(285) $5,630 $(3,072)
Stock-based
compensation 1,582 1,865 3,127 4,879
Amortization of
acquisition
intangibles 327 277 580 557
--- --- --- ---
Non-GAAP provision
for income taxes $6,420 $1,857 $9,337 $2,364
Reconciliation of GAAP Net Income, Basic EPS and Diluted EPS to Non-
GAAP Net Income, Basic EPS and
Diluted EPS
(unaudited)
Three Six
Months Months
Ended Ended
June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
Net income, as
reported $24,602 $4,430 $42,955 $4,788
Adjustments to
reconcile net income
to non-GAAP net
income:
Stock-based
compensation, net of
tax effect 2,961 3,140 6,332 5,157
Amortization of
acquisition
intangibles, net of
tax effect 695 702 1,286 1,435
--- --- ----- -----
Non-GAAP net income $28,258 $8,272 $50,573 $11,380
Basic EPS, as reported $0.32 $0.06 $0.55 $0.06
Adjustment to reconcile
basic EPS to non-GAAP
basic EPS:
Impact of stock-based
compensation, net of
tax effect $0.03 $0.04 $0.08 $0.07
Impact of amortization
of acquisition
intangibles, net of
tax effect $0.01 $0.01 $0.02 $0.02
Non-GAAP basic EPS $0.36 $0.11 $0.65 $0.15
Diluted EPS, as
reported $0.31 $0.06 $0.55 $0.06
Adjustment to reconcile
diluted EPS to non-
GAAP
diluted EPS:
Impact of stock-based
compensation, net of
tax effect $0.04 $0.04 $0.08 $0.07
Impact of amortization
of acquisition
intangibles, net of
tax effect $0.01 $0.01 $0.01 $0.02
Non-GAAP diluted EPS $0.36 $0.11 $0.64 $0.15
Weighted average shares
outstanding -
Basic 77,932 77,556 77,657 77,417
------ ------ ------ ------
Diluted 78,992 77,824 78,752 77,596
------ ------ ------ ------
Reconciliation of Net Income and Diluted
EPS to EBITDA and EBITDA Diluted EPS
(unaudited)
Three Six
Months Months
Ended Ended
June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
Net income, as
reported $24,602 $4,430 $42,955 $4,788
Adjustments to
reconcile net income
to EBITDA:
Interest income (371) (407) (671) (996)
Taxes 4,511 (285) 5,630 (3,072)
Depreciation and
amortization 9,546 10,638 18,988 19,023
EBITDA $38,288 $14,376 $66,902 $19,743
Diluted EPS, as
reported $0.31 $0.06 $0.55 $0.06
Adjustment to reconcile
diluted EPS to EBITDA
Interest income $(0.01) $(0.01) $(0.01) $(0.01)
Taxes $0.06 $(0.01) $0.07 $(0.04)
Depreciation and
amortization $0.12 $0.14 $0.24 $0.24
EBITDA diluted EPS $0.48 $0.18 $0.85 $0.25
Weighted average shares
outstanding -Diluted 78,992 77,824 78,752 77,596
------ ------ ------ ------
National Instruments
Reconciliation of GAAP to Non-GAAP EPS
Guidance
(unaudited)
Three
months
ended
September
30, 2010
----------
Low High
GAAP Fully Diluted EPS
guidance $0.27 $0.37
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 $0.32 $0.42
===== =====
SOURCE National Instruments
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