National Instruments Reports Record Revenue for a First Quarter of $312 Million
Net income up 34 percent year over year
Q1 2018 Highlights
-
Revenue of
$312 million , up 4 percent year over year - GAAP gross margin of 76 percent and non-GAAP gross margin of 77 percent
-
GAAP net income of
$24 million , up 34 percent year over year -
Non-GAAP net income of
$34 million , up 26 percent year over year -
Fully diluted GAAP EPS of
$0.18 and fully diluted non-GAAP EPS of$0.26 -
EBITDA of
$46 million -
Cash and short-term investments of
$415 million as ofMarch 31, 2018
In Q1 2018, the value of the company's total orders was up 5 percent
year over year; orders under
GAAP net income for Q1 was
In Q1, GAAP gross margin was 76 percent and non-GAAP gross margin was 77
percent. Total GAAP operating expenses were
"I am pleased with the strong software revenue growth this quarter. We
believe our software-based platform is our most critical differentiator,
and its continued growth signals strength in our market position," said
Geographic revenue in
On January 1, 2018, NI adopted ASC Topic 606 for revenue recognition. See the schedule attached to this press release regarding the impact of adopting the new GAAP rules on NI's operating results for Q1 2018. NI does not expect these changes under ASC Topic 606 to have a significant impact on its financial results during the remainder of the year.
As of
The company's non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction costs, and restructuring charges. Reconciliations of the company's GAAP and non-GAAP results are included as part of this news release.
Change in Non-GAAP Results Presentation
In the second quarter of 2018, NI began moving toward more frequent releases for many of its software products. Accordingly, the effects of software capitalization and software amortization will be excluded from its Non-GAAP results starting in Q2. Specifically, the company 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.
Beginning with the non-GAAP metrics included in its guidance for the
three months ended
Guidance
NI currently expects Q2 revenue to be in the range of
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, 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-month periods ending
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, and restructuring 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 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-month
periods ending
Conference Call Information and Availability of Presentation Materials
Interested parties can listen to the Q1 2018 earnings conference call
with NI management today,
Forward-Looking Statements
This release contains "forward-looking statements" including statements
regarding that our software-based platform is our most critical
differentiator and its continued growth signals strength in our market
position, being encouraged by the strong performance of our broad-based
data acquisition portfolio, that in Q2 we want to continue to deliver on
our profit goals while continuing to increase our backlog to improve
efficiency and visibility, not expecting these changes under ASC Topic
606 to have a significant impact on its financial results during the
remainder of the year, our Q2 revenue guidance, expecting that GAAP
fully diluted EPS will be in the range of
NI directs readers to its Form 10-K for the year ended
About NI
NI (ni.com) empowers engineers and scientists with a software-centric 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)
LabVIEW,
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||||||||||
Condensed Consolidated Balance Sheets | ||||||||||
(in thousands) | ||||||||||
|
|
|||||||||
2018 | 2017 | |||||||||
(unaudited) | ||||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 250,365 | $ | 290,164 | ||||||
Short-term investments | 164,159 | 121,888 | ||||||||
Accounts receivable, net | 242,291 | 248,825 | ||||||||
Inventories, net | 193,273 | 184,592 | ||||||||
Prepaid expenses and other current assets | 65,701 | 48,621 | ||||||||
Total current assets | 915,789 | 894,090 | ||||||||
Property and equipment, net | 248,799 | 249,715 | ||||||||
|
269,620 | 266,783 | ||||||||
Intangible assets, net | 126,242 | 123,293 | ||||||||
Other long-term assets | 31,155 | 32,553 | ||||||||
Total assets | $ | 1,591,605 | $ | 1,566,434 | ||||||
Liabilities and Stockholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable and accrued liabilities | $ | 52,856 | $ | 49,733 | ||||||
Accrued compensation | 34,640 | 43,309 | ||||||||
Deferred revenue - current | 127,766 | 120,638 | ||||||||
Other current liabilities | 32,478 | 23,782 | ||||||||
Other taxes payable | 28,229 | 31,793 | ||||||||
Total current liabilities | 275,969 | 269,255 | ||||||||
Deferred income taxes | 32,774 | 33,609 | ||||||||
Liability for uncertain tax positions | 10,486 | 10,158 | ||||||||
Income tax payable - long-term | 81,515 | 81,515 | ||||||||
Deferred revenue - long-term | 31,021 | 33,742 | ||||||||
Other long-term liabilities | 10,134 | 10,134 | ||||||||
Total liabilities | $ | 441,899 | $ | 438,413 | ||||||
Stockholders' equity: | ||||||||||
Preferred stock | $ | — | $ | — | ||||||
Common stock | 1,312 | 1,310 | ||||||||
Additional paid-in capital | 846,743 | 829,979 | ||||||||
Retained earnings | 315,951 | 313,241 | ||||||||
Accumulated other comprehensive loss | (14,300 | ) | (16,509 | ) | ||||||
Total stockholders' equity | 1,149,706 | 1,128,021 | ||||||||
Total liabilities and stockholders' equity | $ | 1,591,605 | $ | 1,566,434 | ||||||
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|||||||||
Condensed Consolidated Statements of Income | |||||||||
(in thousands, except per share data, unaudited) | |||||||||
Three Months Ended | |||||||||
|
|||||||||
2018 | 2017 | ||||||||
Net sales: | |||||||||
Product | $ | 280,359 | $ | 271,512 | |||||
Software maintenance | 31,538 | 28,594 | |||||||
Total net sales | 311,897 | 300,106 | |||||||
Cost of sales: | |||||||||
Product | 72,317 | 75,196 | |||||||
Software maintenance | 2,206 | 1,328 | |||||||
Total cost of sales | 74,523 | 76,524 | |||||||
Gross profit | 237,374 | 223,582 | |||||||
Operating expenses: | |||||||||
Sales and marketing | 120,117 | 117,258 | |||||||
Research and development | 61,843 | 58,263 | |||||||
General and administrative | 27,277 | 25,743 | |||||||
Total operating expenses | 209,237 | 201,264 | |||||||
Operating income | 28,137 | 22,318 | |||||||
Other income (expense): | |||||||||
Interest income | 1,015 | 343 | |||||||
Net foreign exchange (loss) gain | 979 | 82 | |||||||
Other (expense) income, net | (519 | ) | 431 | ||||||
Income before income taxes | 29,612 | 23,174 | |||||||
Provision for income taxes | 5,344 | 5,026 | |||||||
Net income | $ | 24,268 | $ | 18,148 | |||||
Basic earnings per share | $ | 0.19 | $ | 0.14 | |||||
Diluted earnings per share | $ | 0.18 | $ | 0.14 | |||||
Weighted average shares outstanding - | |||||||||
Basic | 131,127 | 129,438 | |||||||
Diluted | 132,624 | 130,108 | |||||||
Dividends declared per share | $ | 0.23 | $ | 0.21 | |||||
|
||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||
(in thousands, unaudited) | ||||||||||
Three Months Ended | ||||||||||
|
||||||||||
2018 | 2017 | |||||||||
Cash flow from operating activities: | ||||||||||
Net income | $ | 24,268 | $ | 18,148 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 17,436 | 18,669 | ||||||||
Stock-based compensation | 8,204 | 6,402 | ||||||||
Tax benefit from deferred income taxes | (2,046 | ) | (2,984 | ) | ||||||
Net change in operating assets and liabilities | (7,879 | ) | 6,441 | |||||||
Net cash provided by operating activities | 39,983 | 46,676 | ||||||||
Cash flow from investing activities: | ||||||||||
Capital expenditures | (8,115 | ) | (10,811 | ) | ||||||
Capitalization of internally developed software | (7,668 | ) | (11,624 | ) | ||||||
Additions to other intangibles | (2,855 | ) | (525 | ) | ||||||
Purchases of short-term investments | (52,355 | ) | (25,253 | ) | ||||||
Sales and maturities of short-term investments | 10,211 | 11,931 | ||||||||
Net cash used by investing activities | (60,782 | ) | (36,282 | ) | ||||||
Cash flow from financing activities: | ||||||||||
Proceeds from issuance of common stock | 8,600 | 7,817 | ||||||||
Dividends paid | (30,177 | ) | (27,201 | ) | ||||||
Net cash used by financing activities | (21,577 | ) | (19,384 | ) | ||||||
Impact of changes in exchange rates on cash | 2,577 | 2,715 | ||||||||
Net change in cash and cash equivalents | (39,799 | ) | (6,275 | ) | ||||||
Cash and cash equivalents at beginning of period | 290,164 | 285,283 | ||||||||
Cash and cash equivalents at end of period | $ | 250,365 | $ | 279,008 | ||||||
The following tables provide details with respect to the amount of GAAP charges related to stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction costs, and restructuring charges that were recorded in the line items indicated below (unaudited) (in thousands)
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Three Months Ended | ||||||||||
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2018 | 2017 | |||||||||
Stock-based compensation | ||||||||||
Cost of sales | $ | 724 | $ | 575 | ||||||
Sales and marketing | 3,338 | 2,626 | ||||||||
Research and development | 2,518 | 2,054 | ||||||||
General and administrative | 1,623 | 1,224 | ||||||||
Provision for income taxes | (1,658 | ) | (1,675 | ) | ||||||
Total | $ | 6,545 | $ | 4,804 | ||||||
Amortization of acquisition intangibles | ||||||||||
Cost of sales | $ | 902 | $ | 1,590 | ||||||
Sales and marketing | 537 | 478 | ||||||||
Research and development | 28 | 263 | ||||||||
Provision for income taxes | (192 | ) | (554 | ) | ||||||
Total | $ | 1,275 | $ | 1,777 | ||||||
Acquisition transaction costs, restructuring charges, and other | ||||||||||
Cost of sales | $ | 28 | $ | 336 | ||||||
Sales and marketing | 1,645 | 2,375 | ||||||||
Research and development | 209 | 399 | ||||||||
General and administrative | 612 | 177 | ||||||||
Provision for income taxes | (553 | ) | (1,065 | ) | ||||||
Total | $ | 1,941 | $ | 2,222 | ||||||
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Reconciliation of GAAP to Non-GAAP Measures | ||||||||||
(in thousands, unaudited) | ||||||||||
Three Months Ended | ||||||||||
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2018 | 2017 | |||||||||
Reconciliation of Gross Profit to Non-GAAP Gross Profit | ||||||||||
Gross profit, as reported | $ | 237,374 | $ | 223,582 | ||||||
Stock-based compensation | 724 | 575 | ||||||||
Amortization of acquisition intangibles | 902 | 1,590 | ||||||||
Acquisition transaction costs, restructuring charges, and other | 28 | 336 | ||||||||
Non-GAAP gross profit | $ | 239,028 | $ | 226,083 | ||||||
Non-GAAP gross margin | 76.6 | % | 75.3 | % | ||||||
Reconciliation of Operating Expenses to Non-GAAP Operating Expenses | ||||||||||
Operating expenses, as reported | $ | 209,237 | $ | 201,264 | ||||||
Stock-based compensation | (7,479 | ) | (5,904 | ) | ||||||
Amortization of acquisition intangibles | (565 | ) | (741 | ) | ||||||
Acquisition transaction costs, restructuring charges, and other | (2,466 | ) | (2,951 | ) | ||||||
Non-GAAP operating expenses | $ | 198,727 | $ | 191,668 | ||||||
Reconciliation of Operating Income to Non-GAAP Operating Income | ||||||||||
Operating income, as reported | $ | 28,137 | $ | 22,318 | ||||||
Stock-based compensation | 8,203 | 6,479 | ||||||||
Amortization of acquisition intangibles | 1,467 | 2,331 | ||||||||
Acquisition transaction costs, restructuring charges, and other | 2,494 | 3,287 | ||||||||
Non-GAAP operating income | $ | 40,301 | $ | 34,415 | ||||||
Non-GAAP operating margin | 12.9 | % | 11.5 | % | ||||||
Reconciliation of Income before income taxes to Non-GAAP Income before income taxes | ||||||||||
Income before income taxes, as reported | $ | 29,612 | $ | 23,174 | ||||||
Stock-based compensation | 8,203 | 6,479 | ||||||||
Amortization of acquisition intangibles | 1,467 | 2,331 | ||||||||
Acquisition transaction costs, restructuring charges, and other | 2,494 | 3,287 | ||||||||
Non-GAAP income before income taxes | $ | 41,776 | $ | 35,271 | ||||||
Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes | ||||||||||
Provision for income taxes, as reported | $ | 5,344 | $ | 5,026 | ||||||
Stock-based compensation | 1,658 | 1,675 | ||||||||
Amortization of acquisition intangibles | 192 | 554 | ||||||||
Acquisition transaction costs, restructuring charges, and other | 553 | 1,065 | ||||||||
Non-GAAP provision for income taxes | $ | 7,747 | $ | 8,320 | ||||||
Reconciliation of GAAP Net Income, Basic EPS and Diluted EPS to Non-GAAP Net Income, Non-GAAP Basic EPS and Non-GAAP Diluted EPS | ||||||||
(in thousands, except per share data, unaudited) | ||||||||
Three Months Ended | ||||||||
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2018 | 2017 | |||||||
Net income, as reported | $ | 24,268 | $ | 18,148 | ||||
Adjustments to reconcile net income to non-GAAP net income: | ||||||||
Stock-based compensation, net of tax effect | 6,545 | 4,804 | ||||||
Amortization of acquisition intangibles, net of tax effect | 1,275 | 1,777 | ||||||
Acquisition transaction costs, restructuring, and other, net of tax effect | 1,941 | 2,222 | ||||||
Acquisition-related fair value adjustments | — | — | ||||||
Non-GAAP net income | $ | 34,029 | $ | 26,951 | ||||
Basic EPS, as reported | $ | 0.19 | $ | 0.14 | ||||
Adjustment to reconcile basic EPS to non-GAAP basic 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 | ||||||
Impact of acquisition transaction costs, restructuring, and other, net of tax effect | 0.01 | 0.02 | ||||||
Non-GAAP basic EPS | $ | 0.26 | $ | 0.21 | ||||
Diluted EPS, as reported | $ | 0.18 | $ | 0.14 | ||||
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 | ||||||
Impact of acquisition transaction costs, restructuring, and other, net of tax effect | 0.02 | 0.02 | ||||||
Non-GAAP diluted EPS | $ | 0.26 | $ | 0.21 | ||||
Weighted average shares outstanding - | ||||||||
Basic | 131,127 | 129,438 | ||||||
Diluted | 132,624 | 130,108 | ||||||
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Reconciliation of Net Income to EBITDA | ||||||||||
(in thousands, unaudited) | ||||||||||
Three Months Ended | ||||||||||
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2018 | 2,017 | |||||||||
Net income, as reported | $ | 24,268 | $ | 18,148 | ||||||
Adjustments to reconcile net income to EBITDA: | ||||||||||
Interest income, net | (927 | ) | (86 | ) | ||||||
Tax expense | 5,344 | 5,026 | ||||||||
Depreciation and amortization | 17,436 | 18,669 | ||||||||
EBITDA | $ | 46,121 | $ | 41,757 | ||||||
Weighted average shares outstanding - Diluted | 132,624 | 130,108 | ||||||||
Reconciliation of GAAP to Non-GAAP EPS Guidance | ||||||||||
(unaudited) | ||||||||||
Three Months Ended | ||||||||||
|
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Low | High | |||||||||
GAAP Fully Diluted EPS, guidance | $ | 0.15 |
$ |
0.29 | ||||||
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 and acquisition accounting adjustments, net of tax effect | 0.01 | 0.01 | ||||||||
Impact of acquisition transaction costs, restructuring, and other, net of tax effect | 0.01 | 0.01 | ||||||||
Impact of capitalization and amortization of internally developed software costs, net of tax effect | 0.02 | 0.02 | ||||||||
Non-GAAP diluted EPS, guidance | $ | 0.23 | $ | 0.37 | ||||||
Schedule of Impact of Adoption of ASC 606 on Q1 2018 Results |
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(in thousands, unaudited, except per share data) |
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For the three month period ended |
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As Reported |
Without Adoption of |
Effect of Adoption |
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|
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Products | $ | 280,359 |
$ |
273,947 |
$ | 6,412 | |||||||
Software Maintenance | 31,538 | 31,538 | — | ||||||||||
Total net sales | 311,897 | 305,485 | 6,412 | ||||||||||
Operating Expenses | 209,237 | 209,260 | (23 | ) | |||||||||
Operating Income | 28,137 | 21,702 | 6,435 | ||||||||||
Provision for income taxes | 5,344 | 4,186 | 1,158 | ||||||||||
Net income | $ | 24,268 |
$ |
18,991 |
$ | 5,277 | |||||||
— | |||||||||||||
Basic earnings per share | $ | 0.19 |
$ |
0.15 |
$ | 0.04 | |||||||
Diluted earnings per share | $ | 0.18 |
$ |
0.14 |
$ | 0.04 | |||||||
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