Value of orders up 11 percent year over year in the second quarter

Q2 2018 Highlights

• Revenue of $341 million, up 7 percent year over year
• GAAP gross margin of 76 percent
• Non-GAAP gross margin of 78 percent
• Fully diluted GAAP EPS of $0.23 and fully diluted non-GAAP EPS of $0.34
• GAAP net income of $31 million, up 23 percent year over year
• Record Non-GAAP net income of $45 million, up 49 percent year over year
• EBITDA of $51 million
• Cash and short-term investments of $428 million as of June 30, 2018

H1 2018 Highlights

• Revenue of $653 million, up 6 percent year over year
• GAAP net income up 28 percent year over year through first six months of 2018
• Non-GAAP net income up 47 percent year over year through first six months of 2018

AUSTIN, Texas--(BUSINESS WIRE)--Jul. 26, 2018-- National Instruments (Nasdaq: NATI) today announced Q2 2018 revenue of $341 million, up 7 percent year over year.

In Q2 2018, the value of the company's total orders was up 11 percent year over year; orders under $20,000 were up 6 percent year over year; and orders over $20,000 were up 16 percent year over year.

GAAP net income for Q2 was $31 million, with fully diluted earnings per share (EPS) of $0.23, and non-GAAP net income was $45 million, with non-GAAP fully diluted EPS of $0.34. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $51 million for Q2.

In Q2, GAAP gross margin was 76 percent and non-GAAP gross margin was 78 percent. Total GAAP operating expenses were $222 million, up 7 percent year over year. Total non-GAAP operating expenses were $212 million, up 2 percent year over year. GAAP operating margin was 11 percent in Q2, with GAAP operating income of $37 million, up 29 percent year over year. Non-GAAP operating margin was 16 percent in Q2, with non-GAAP operating income of $55 million, up 52 percent year over year. Through the first six months of 2018, GAAP operating expenses were $431 million, up 5 percent year over year, and non-GAAP operating expenses were $418 million, up 2 percent year over year. GAAP operating income through the first six months of the year was $65 million, up 28 percent year over year, and non-GAAP operating income was $94 million, up 46 percent year over year.

“We have made tremendous progress toward our profitability goal over the last 18 months. I am proud of what our team has accomplished,” said Alex Davern, NI president and CEO. “Looking forward we plan to continue to align our investments and our business behind our new Core Strategic Vision with the goal of driving improved revenue growth while maintaining the discipline needed to hit our long-term operating model.”

Karen Rapp, NI CFO, said, “We had great performance in the first half of 2018. I am encouraged by our focus on growth and profitability. We remain committed to our operating model that we shared at our investor conference on May 22, 2018 and the leverage it provides. National Instruments is focused on gaining market share and delivering structural excellence in our operating profitability.”

As of June 30, 2018, NI had $428 million in cash and short-term investments. During the second quarter, NI paid $30 million in dividends. The NI Board of Directors approved a quarterly dividend of $0.23 per share payable on Sept. 4, 2018, to stockholders of record on Aug. 13, 2018.

Geographic revenue in U.S. dollar terms for Q2 2018 compared with Q2 2017 was up 7 percent in the Americas, up 5 percent in APAC and up 9 percent in EMEIA. The impact of foreign currency exchange had a positive impact in Q2. Historical revenue from these three regions can be found on NI’s investor website at ni.com/nati.

The company’s non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction costs, restructuring charges, and capitalization and amortization of internally developed software costs. Reconciliations of the company’s GAAP and non-GAAP results are included as part of this news release.

Guidance

NI currently expects Q3 revenue to be in the range of $325 million to $355 million, which would be a new Q3 record at the midpoint. The company currently expects that GAAP fully diluted EPS will be in the range of $0.20 to $0.34 for Q3, with non-GAAP fully diluted EPS expected to be in the range of $0.32 to $0.46.

NI has not completed its accounting for the tax effects of the Tax Cuts and Jobs Act (the “Tax Act”). NI previously made a reasonable estimate of the effects of the Tax Act and expects to finalize its analysis in Q3 2018. NI’s guidance does not include any estimate related to the finalization of this calculation.

Non-GAAP Presentation

In the quarter ended June 30, 2018, NI began moving toward more frequent releases for many of its software products. Specifically, for many of its software development projects, NI started applying agile development methodologies, which are characterized by a more dynamic development process with more frequent and iterative revisions to a product release’s features and functions as the software is being developed. Due to the shorter development cycle and focus on rapid production associated with agile development, NI expects that for a significant majority of its software development projects the costs incurred subsequent to the achievement of technological feasibility will be immaterial in future periods and it expects to record significantly less capitalized software development costs than under its historical software development approaches. NI also expects amortization of previously capitalized software development costs to steadily decline as previously capitalized software development costs become fully amortized over the next four years.

As a result, beginning with its non-GAAP metrics for the three months ended June 30, 2018, NI will exclude the net effects of capitalization and amortization of software development costs from its non-GAAP operating results, along with its previously excluded non-GAAP items, and will provide a reconciliation of such non-GAAP results to its GAAP results. NI believes these changes will be useful to investors as they will provide greater comparability between its R&D spend in future periods. NI will also make available on its website its historical non-GAAP results, excluding the effects of software capitalization and amortization together with other applicable non-GAAP adjustments, for the fiscal quarters ended March 31, 2005 through June 30, 2018. No changes are being made to NI’s previously reported GAAP results.

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, gross margin, operating expenses, operating income, operating margin, income before income taxes, provision for income taxes, net income and basic and fully diluted EPS for the three and six months ended June 30, 2018 and 2017, on a GAAP and non-GAAP basis. NI is also providing guidance on its non-GAAP fully diluted EPS.

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, amortization of acquisition-related intangibles, acquisition-related transaction costs, restructuring charges, and capitalization and amortization of internally developed software costs 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 the 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 discloses the company’s EBITDA for the three and six months ended June 30, 2018 and 2017. The company 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 and Availability of Presentation Materials

Interested parties can listen to the Q2 2018 earnings conference call with NI management today, July 26, at 4:00 p.m. CT at ni.com/call. Replay information is available by calling (855) 212-2361, confirmation code 1498595, shortly after the call through August 2 at 10:00 p.m. CT or by visiting the company’s website at ni.com/call. Presentation materials referred to on the conference call can be found at ni.com/nati.

Forward-Looking Statements

This release contains “forward-looking statements” including statements regarding tremendous progress toward our profitability goal, plan to continue to align our investments and our business behind our new Core Strategic Vision with the goal of driving improved revenue growth while maintaining the discipline needed to hit our long term operating model, being encouraged by our focus on growth and profitability, remaining committed to our operating model shared at our investor conference on May 22, 2018 and the leverage it provides, being focused on gaining market share and delivering structural excellence in our operating profitability, expecting Q3 revenue to be in the range of $325 million to $355 million, expecting that GAAP fully diluted EPS will be in the range of $0.20 to $0.34 for Q3, with non-GAAP fully diluted EPS expected to be in the range of $0.32 to $0.46, and expecting to finalize its analysis of the effects of the Tax Act in Q3 2018. These statements are subject to a number of risks and uncertainties, including the risk of adverse changes or fluctuations in the global economy, foreign exchange fluctuations, fluctuations in demand for NI products including orders from NI’s large customers, component shortages, delays in the release of new products, the company’s ability to effectively manage its operating expenses, manufacturing inefficiencies and the level of capacity utilization, the impact of any recent or future acquisitions by NI, expense overruns, adverse effects of price changes or effective tax rates or the impact of the Tax Act. Actual results may differ materially from the expected results.

The company directs readers to its Form 10-K for the year ended Dec. 31, 2017, its Form 10-Q for the quarter ended March 31, 2018 and the other documents it files with the SEC for other risks associated with the company’s future performance.

About NI

NI (ni.com) empowers engineers and scientists with a software-defined platform that incorporates modular hardware and an expansive ecosystem. This proven approach puts users firmly in control of defining what they need to accelerate their system design within test, measurement and control. NI’s solution helps build high-performance systems that exceed requirements, quickly adapt to change and ultimately improve the world. (NATI-F)

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.

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Source: National Instruments

National Instruments
Marissa Vidaurri, 512-683-6873
Investor Relations