Document
false0000935494 0000935494 2019-10-29 2019-10-29



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
____________________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

October 29, 2019
____________________

National Instruments Corporation
(Exact name of registrant as specified in its charter)

Delaware
 
000-25426
 
74-1871327
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)

11500 North MoPac Expressway
Austin, Texas 78759
(Address of principal executive offices, including zip code)

(512) 683-0100
(Registrant’s telephone number, including area code)

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
NATI
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (ß230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company []
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act [ ]





Item 2.02
Results of Operations and Financial Condition.

Attached hereto as Exhibit 99.1 and incorporated by reference herein is the text of the press release of National Instruments Corporation ("NI"), dated October 29, 2019, regarding financial results for NI’s third fiscal quarter ended September 30, 2019.

The information in the press release attached hereto as Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act.

Item 7.01
Regulation FD Disclosure.

On October 29, 2019, NI announced that, effective February 1, 2020, Eric H. Starkloff, NI’s current President and Chief Operating Officer, will serve as NI’s Chief Executive Officer and President. NI’s current Chief Executive Officer, Alexander M. Davern, will remain as Chief Executive Officer of NI until January 31, 2020, and then will transition from his service as CEO of NI into a strategic advisory role until May 5, 2020. Mr. Davern will continue to serve as a member of the NI Board of Directors.

A copy of the press release containing the announcement is attached hereto as Exhibit 99.2 and is incorporated by reference herein.

The information in this Item 7.01, including the press release attached as Exhibit 99.2, shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act.

Item 9.01
Financial Statements and Exhibits


(d) Exhibits.

Exhibit No.
 
Description
99.1

 
99.2

 
104

 
Cover Page Interactive Data File (embedded within the Inline XBRL document)









SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
NATIONAL INSTRUMENTS CORPORATION
 
 
 
 
By:
/s/ R. Eddie Dixon, Jr.
 
 
 
Name: R. Eddie Dixon, Jr.
Title: Vice President, General Counsel and Secretary

Date: October 29, 2019



Exhibit


Contact:    Marissa Vidaurri        
Head of Investor Relations
(512) 683-5215


National Instruments Reports Third Quarter Revenue of $340 Million
Company delivers record non-GAAP net margin for a first nine months

Q3 2019 Highlights
Revenue of $340 million, down 2 percent year over year and up 2 percent sequentially
GAAP gross margin of 75 percent
Non-GAAP gross margin of 77 percent
Fully diluted GAAP EPS of $0.39 and fully diluted non-GAAP EPS of $0.44
GAAP net income of $52 million, up 20 percent year over year
Non-GAAP net income of $58 million, down 3 percent year over year
GAAP net margin of 15 percent
Non-GAAP net margin of 17 percent
GAAP net income up 5 percent year over year through first nine months
Non-GAAP net income up 5 percent year over year through first nine months
EBITDA of $84 million for a third quarter
Cash and short-term investments of $432 million as of September 30, 2019

AUSTIN, Texas - Oct. 29, 2019 - National Instruments (Nasdaq: NATI) today announced Q3 2019 revenue of $340 million, down 2 percent year over year and up 2 percent sequentially.

In Q3 2019, the value of the company's total orders was down 5 percent year over year; orders under $20,000 were down 6 percent year over year; and orders over $20,000 were down 4 percent year over year.

In Q3, GAAP gross margin was 75 percent and non-GAAP gross margin was 77 percent. Total GAAP operating expenses were $189 million, down 10 percent year over year. During Q3, the company recognized a gain of $27 million related to the sale of an office building in Austin, TX and incurred a $7 million expense related to donating a portion of the proceeds to a donor-advised fund to support our corporate social responsibility efforts. Total non-GAAP operating expenses were down 2 percent year over year at $195 million. GAAP operating margin was 19 percent in Q3, with GAAP operating income of $65 million, up 42 percent year over year. Non-GAAP operating margin was 20 percent in Q3, with non-GAAP operating income of $69 million, up 1 percent year over year. For the first nine months of 2019, GAAP operating expenses were $619 million, down 4 percent year over year, and non-GAAP operating expenses were $597 million, down 3 percent year over year. GAAP operating income for the first nine months of 2019 was $121 million, up 9 percent year over year, and non-GAAP operating income for the first nine months of 2019 was $168 million, up 4 percent year over year.

GAAP net income for Q3 was $52 million, with fully diluted earnings per share (EPS) of $0.39, and non-GAAP net income was $58 million, with non-GAAP fully diluted EPS of $0.44. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $84 million for Q3.

“In this difficult business environment, we remain focused on our long-term growth strategy. We believe the differentiation and flexibility of our software-centric platform will enable us to increase market share as customers look for new options to meet market demands,” said Alex Davern, NI CEO. “We remain committed to our goal of delivering structurally higher profitability and believe we are on track to achieve our 18 percent non-GAAP operating margin goal in 2019. With our clear focus on industries coupled with our strong balance sheet, we believe we are in a position to accelerate growth when the market recovers.”






“I am pleased to see the significant impact our company realignment is having on our profitability. Our culture of operational excellence and increased scalability led to strong earnings performance in the third quarter,” said Karen Rapp, NI CFO. “Our ability to deliver record operating margin for a third quarter in a tough industrial economy is a testament to our confidence in achieving our 18 percent non-GAAP operating margin goal in 2019 and through the cycle.”
“Today, we also announced Eric Starkloff as CEO effective February 1, 2020. His leadership over the last 22 years at NI and his passion for innovation make him the right choice to take our business forward to become the leader in software-defined automated test and automated measurement,” said Alex Davern, NI CEO.

For more information on the leadership transition, please visit ni.com/nati/news

Geographic revenue in U.S. dollar terms for Q3 2019, compared with Q3 2018, was flat in the Americas, down 2 percent in APAC and down 4 percent in EMEIA. Excluding the impact of foreign currency exchange, revenue was flat in the Americas, flat in APAC and down 2 percent in EMEIA. Historical revenue from these three regions can be found on NI’s investor website at www.ni.com/nati.

As of September 30, 2019, NI had $432 million in cash and short-term investments. During the third quarter, NI paid $33 million in dividends and repurchased 1.1 million shares of our common stock at an average price of $42.42. The NI Board of Directors approved a quarterly dividend of $0.25 per share, payable on December 2, 2019, to stockholders of record on November 11, 2019. In October 2019, the NI Board of Directors increased the number of shares authorized for repurchase by NI under its stock repurchase program by 3 million shares.
The company’s non-GAAP results exclude, as applicable, the impact of stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction costs, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, restructuring charges, tax reform charges, disposal gains on buildings and related charitable contributions, 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 Q4 revenue to be in the range of $345 million to $375 million. The company currently expects that GAAP fully diluted EPS will be in the range of $0.25 to $0.39 for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.43 to $0.57.

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 and nine months ended September 30, 2019 and 2018, 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, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, restructuring charges, tax reform charges, disposal gains on buildings and related charitable contributions, 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 nine months ended September 30, 2019 and 2018. 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
Interested parties can listen to the Q3 2019 earnings conference call with NI management today, October 29, at 4:00 p.m. CT at ni.com/call or by dialing 855-212-2361 and entering confirmation code 9485738 ten minutes prior to the call start time. Replay information is available by calling (855) 859-2056 and entering confirmation code 9485738, shortly after the call through November 2 at 10:00 p.m. CT or by visiting the company’s website at ni.com/call.

Forward-Looking Statements
This release contains “forward-looking statements” including statements regarding remaining focused on our long-term growth strategy, believing the differentiation and flexibility of our software-centric platform will enable us to increase market share as customers look to new options to meet market demands, remaining committed to our goal of delivering structurally higher profitability, believing we are on track to achieve our 18 percent non-GAAP operating margin goal in 2019, believing we are in a position to accelerate growth when the market recovers, the significant impact our company realignment is having on our profitability, our confidence in achieving our 18 percent non-GAAP operating margin goal in 2019 and through the cycle, being the right choice to take our business forward to become the leader in software-defined automated test and automated measurement, expecting Q4 revenue to be in the range of $345 million to $375 million, and expecting that GAAP fully diluted EPS will be in the range of $0.25 to $0.39 for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.43 to $0.57. These statements are subject to a number of risks and uncertainties, including the risk of adverse changes or fluctuations in the global economy, further adverse fluctuations in our industry, 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, and adverse effects of price changes or effective tax rates. Actual results may differ materially from the expected results.

The company directs readers to its Form 10-K for the year ended Dec. 31, 2018, its Form 10-Q for the quarter ended June 30, 2019 and the other documents it files with the SEC for other risks associated with the company’s future performance.

About NI
NI (ni.com) develops high-performance automated test and automated measurement systems to help you solve your engineering challenges now and into the future. Our open, software-defined platform uses modular hardware and an expansive ecosystem to help you turn powerful possibilities into real solutions. (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.







National Instruments
Condensed Consolidated Balance Sheets
(in thousands)
 
 
September 30,
 
December 31,
 
 
2019
 
2018
 
 
(unaudited) 
 
 
 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
222,773

$
259,386

Short-term investments
 
209,416

 
271,396

Accounts receivable, net
 
224,305

 
242,955

Inventories, net
 
206,727

 
194,146

Prepaid expenses and other current assets
 
66,313

 
54,337

Total current assets
 
929,534

 
1,022,220

 
 
 
 
 
Property and equipment, net
 
239,140

 
245,201

Goodwill
 
259,430

 
264,530

Intangible assets, net
 
91,162

 
110,783

Operating lease right-of-use assets
 
63,766

 

Other long-term assets
 
45,289

 
28,501

Total assets
$
1,628,321

$
1,671,235

 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable and accrued expenses
$
56,839

$
48,388

Accrued compensation
 
43,109

 
45,821

Deferred revenue - current
 
124,386

 
127,288

Operating lease liabilities - current
 
14,038

 

Other current liabilities
 
22,761

 
25,913

Other taxes payable
 
31,958

 
35,574

Total current liabilities
 
293,091

 
282,984

 
 
 
 
 
 
 


 
 
Deferred income taxes
 
25,949

 
25,457

Liability for uncertain tax positions
 
7,631

 
9,775

Income tax payable - non-current
 
67,046

 
74,546

Deferred revenue - non-current
 
31,920

 
32,636

Operating lease liabilities - non-current
 
33,112

 

Other long-term liabilities
 
7,411

 
7,479

Total liabilities
 
466,160

 
432,877

 
 
 
 
 
Stockholders' equity:
 
 
 
 
Common stock
 
1,311

 
1,327

Additional paid-in capital
 
939,121

 
897,544

Retained earnings
 
245,465

 
356,418

Accumulated other comprehensive loss
 
(23,736
)
 
(16,931
)
Total stockholders' equity
 
1,162,161

 
1,238,358

Total liabilities and stockholders' equity
$
1,628,321

$
1,671,235








National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data, unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net sales:
 
 
 
 
 
 
 
 
Product
$
305,247

$
310,216

$
882,747

$
897,355

Software maintenance
 
35,195

 
35,911

 
103,000

 
101,678

Total net sales
 
340,442

 
346,127

 
985,747

 
999,033

 
 
 
 
 
 
 
 
 
Cost of sales:
 
 
 
 
 
 
 
 
Product
 
84,127

 
87,082

 
240,056

 
239,205

Software maintenance
 
1,788

 
1,933

 
5,700

 
6,493

Total cost of sales
 
85,915

 
89,015

 
245,756

 
245,698

 
 
 
 
 
 
 
 
 
Gross profit
 
254,527

 
257,112

 
739,991

 
753,335

 
 
74.8%
 
74.3%
 
75.1%
 
75.4%
Operating expenses:
 
 
 
 
 
 
 
 
Sales and marketing
 
113,922

 
118,220

 
352,340

 
365,474

Research and development
 
66,558

 
66,170

 
200,981

 
194,921

General and administrative
 
35,711

 
26,712

 
92,639

 
81,882

Gain on sale of assets
 
(26,842
)
 

 
(26,842
)
 

Total operating expenses
 
189,349

 
211,102

 
619,118

 
642,277

 
 
 
 
 
 
 
 
 
Operating income
 
65,178

 
46,010

 
120,873

 
111,058

 
 
19.1%
 
13.3%
 
12.3%
 
11.1%
Other income (expense):
 
 
 
 
 
         

 
 
Interest income
 
1,930

 
1,539

 
6,187

 
3,845

Net foreign exchange loss
 
(378
)
 
(956
)
 
(1,623
)
 
(2,082
)
Other gain, net
 
697

 
1,782

 
815

 
169

 
 
 
 
 
 
 
 
 
Income before income taxes
 
67,427

 
48,375

 
126,252

 
112,990

 
 
 
 
 
 
 
 
 
Provision for income taxes
 
15,783


5,181


22,697


14,474

 
 
 
 
 
 
 
 
 
Net income
$
51,644

$
43,194

$
103,555

$
98,516

 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.39

$
0.33

$
0.79

$
0.75

Diluted earnings per share
$
0.39

$
0.32

$
0.78

$
0.74

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding -
 
 
 
 
 
 
 
 
Basic
 
131,385

 
132,357

 
131,896

 
131,792

Diluted
 
131,889

 
133,197

 
132,890

 
133,067

 
 
 
 
 
 
 
 
 
Dividends declared per share
$
0.25

 
0.23

 
0.75

 
0.69












National Instruments
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
 
 
Cash flow from operating activities:
 
 
 
 
Net income
$
103,555

 
98,516

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
54,546

 
53,735

Stock-based compensation
 
38,054

 
27,492

Gain on sale of assets
 
(26,842
)
 

Deferred income taxes
 
(1,461
)
 
732

Net change in operating assets and liabilities
 
(18,507
)
 
6,862

Net cash provided by operating activities
 
149,345

 
187,337

 
 
 
 
 
Cash flow from investing activities:
 
 
 
 
Capital expenditures
 
(47,183
)
 
(27,373
)
Proceeds from sale of building
 
32,492

 

Capitalization of internally developed software
 
(7,179
)
 
(13,152
)
Additions to other intangibles
 
(1,132
)
 
(5,165
)
Acquisitions of equity-method investments
 
(13,670
)
 

Purchases of short-term investments
 
(141,074
)
 
(172,462
)
Sales and maturities of short-term investments
 
204,046

 
122,726

Net cash provided by (used by) investing activities
 
26,300

 
(95,426
)
 
 
 
 
 
Cash flow from financing activities:
 
 
 
 
Proceeds from issuance of common stock
 
25,823

 
24,424

Repurchase of common stock
 
(137,171
)
 

Dividends paid
 
(99,083
)
 
(91,034
)
Net cash used by financing activities
 
(210,431
)
 
(66,610
)
 
 
 

 
 
Impact of changes in exchange rates on cash
 
(1,827
)
 
(4,084
)
 
 
 
 
 
Net change in cash and cash equivalents
 
(36,613
)
 
21,217

Cash and cash equivalents at beginning of period
 
259,386

 
290,164

Cash and cash equivalents at end of period
$
222,773

 
311,381

















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, capitalization and amortization of internally developed software costs, restructuring charges, disposal gains on office buildings and related charitable contributions, and other that were recorded in the line items indicated below (unaudited) (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
2019
 
2018
Stock-based compensation
 
 
 
 
 
 
 
 
Cost of sales
$
904

$
844

$
2,587

$
2,415

Sales and marketing
 
5,231

 
3,452

 
14,745

 
10,408

Research and development
 
4,099

 
3,318

 
12,029

 
9,091

General and administrative
 
3,158

 
1,942

 
8,693

 
5,578

Provision for income taxes
 
(2,128
)
 
(1,455
)
 
(7,904
)
 
(6,115
)
Total
$
11,264

 
8,101

 
30,150

 
21,377

 
 
 
 
 
 
 
 
 
Amortization of acquisition intangibles
 
 
 
 
 
 
 
 
Cost of sales
$
833

$
701

$
2,525

$
2,448

Sales and marketing
 
492

 
510

 
1,485

 
1,580

Research and development
 
28

 
28

 
84

 
84

Other loss, net
 
124

 

 
285

 

Provision for income taxes
 
(190
)
 
(149
)
 
(576
)
 
(518
)
Total
$
1,287

$
1,090

$
3,803

$
3,594

 
 
 
 
 
 
 
 
 
Acquisition transaction costs, restructuring charges, and other
 
 
 
 
 
 
 
 
Cost of sales
$

$
1,784

$

$
1,813

Sales and marketing
 
2,993

 
3,676

 
8,290

 
8,354

Research and development
 
244

 
692

 
899

 
1,794

General and administrative (1)
 
7,998

 
373

 
9,525

 
1,538

Gain on sale of assets (1)
 
(26,842
)
 

 
(26,842
)
 

Other loss, net
 

 

 

 
709

Provision for income taxes
 
3,090

 
(1,800
)
 
1,240

 
(3,983
)
Total
$
(12,517
)
$
4,725

$
(6,888
)
$
10,225

(1): During the third quarter of 2019, the company recognized a gain of $27 million related to the sale of an office building, presented within "Gain on sale of assets". The company also recognized a charitable contribution expense of $7 million related to an infrequent donation using a portion of the proceeds from the sale of the building, presented within "General and administrative".
 
Capitalization and amortization of internally developed software costs
 
 
 
 
 
 
 
 
Cost of sales
$
6,954

$
6,412

$
20,073

$
18,736

Research and development
 
(2,682
)
 
(1,808
)
 
(7,179
)
 
(13,152
)
Provision for income taxes
 
(897
)
 
(967
)
 
(2,708
)
 
(1,173
)
Total
$
3,375

$
3,637

$
10,186

$
4,411













National Instruments
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Reconciliation of Gross Profit to Non-GAAP Gross Profit
 
 
 
 
Gross profit, as reported
$
254,527

$
257,112

$
739,991

$
753,335

Stock-based compensation
 
904

 
844

 
2,587

 
2,415

Amortization of acquisition intangibles
 
833

 
701

 
2,525

 
2,448

Acquisition transaction costs and restructuring charges
 

 
1,784

 

 
1,813

Amortization of internally developed software costs
 
6,954

 
6,412

 
20,073

 
18,736

Non-GAAP gross profit
$
263,218

$
266,853

$
765,176

$
778,747

Non-GAAP gross margin
 
77.3%
 
77.1%
 
77.6%
 
78.0%
 
 
 
 
 
 
 
 
 
Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
 
 
 
 
Operating expenses, as reported
$
189,349

$
211,102

$
619,118

$
642,277

Stock-based compensation
 
(12,488
)
 
(8,712
)
 
(35,467
)
 
(25,077
)
Amortization of acquisition intangibles
 
(520
)
 
(538
)
 
(1,569
)
 
(1,664
)
Acquisition transaction costs and restructuring charges
 
(4,235
)
 
(4,741
)
 
(11,714
)
 
(11,686
)
Capitalization of internally developed software costs
 
2,682

 
1,808

 
7,179

 
13,152

Gain on sale of assets and other
 
19,842

 

 
19,842

 

Non-GAAP operating expenses
$
194,630

$
198,919

$
597,389

$
617,002

 
 
 
 
 
 
 
 
 
Reconciliation of Operating Income to Non-GAAP Operating Income
 
 
 
 
Operating income, as reported
$
65,178

$
46,010

$
120,873

$
111,058

Stock-based compensation
 
13,392

 
9,556

 
38,054

 
27,492

Amortization of acquisition intangibles
 
1,353

 
1,239

 
4,094

 
4,112

Acquisition transaction costs and restructuring charges
 
4,235

 
6,525

 
11,714

 
13,499

Net amortization of internally developed software costs
 
4,272

 
4,604

 
12,894

 
5,584

Gain on sale of assets and other
 
(19,842
)
 

 
(19,842
)
 

Non-GAAP operating income
$
68,588

$
67,934

$
167,787

$
161,745

Non-GAAP operating margin
 
20.1%
 
19.6%
 
17.0%
 
16.2%
 
 
 
 
 
 
 
 
 
Reconciliation of Income before income taxes to Non-GAAP Income before income taxes
 
 
 
 
Income before income taxes, as reported
$
67,427

$
48,375

$
126,252

$
112,990

Stock-based compensation
 
13,392

 
9,556

 
38,054

 
27,492

Amortization of acquisition intangibles
 
1,477

 
1,239

 
4,379

 
4,112

Acquisition transaction costs and restructuring charges
 
4,235

 
6,525

 
11,714

 
14,208

Net amortization of internally developed software costs
 
4,272

 
4,604

 
12,894

 
5,584

Gain on sale of assets and other
 
(19,842
)
 

 
(19,842
)
 

Non-GAAP income before income taxes
$
70,961

$
70,299

$
173,451

$
164,386

 
 
 
 
 
 
 
 
 
Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes
 
 
 
 
Provision for income taxes, as reported
$
15,783

$
5,181

$
22,697

$
14,474

Stock-based compensation
 
2,128

 
1,455

 
7,904

 
6,115

Amortization of acquisition intangibles
 
190

 
149

 
576

 
518

Acquisition transaction costs and restructuring charges
 
1,117

 
1,800

 
2,967

 
3,983

Net amortization of internally developed software costs
 
897

 
967

 
2,708

 
1,173

Gain on sale of assets and other
 
(4,207
)
 

 
(4,207
)
 

Tax reform charge
 
(2,774
)
 
1,146

 
(2,774
)
 
1,146

Non-GAAP provision for income taxes
$
13,134

$
10,698

$
29,871

$
27,409

 
 
 
 
 
 
 
 
 






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
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net income, as reported
$
51,644
$
43,194
$
103,555
$
98,516
Adjustments to reconcile net income to non-GAAP net income:
 
 
 

 
 
 
 
  Stock-based compensation, net of tax effect
 
11,264
 
8,101
 
30,150
 
21,377
  Amortization of acquisition intangibles, net of tax effect
 
1,287
 
1,090
 
3,803
 
3,594
  Acquisition transaction costs and restructuring charges, net of tax effect
 
3,118
 
4,725
 
8,747
 
10,225
  Net amortization of internally developed software costs, net of tax effect
 
3,375
 
3,637
 
10,186
 
4,411
  Gain on sale of assets and other(1), net of tax effect
 
(15,635)
 
 
(15,635)
 
  Tax reform charge
 
2,774
 
(1,146)
 
2,774
 
(1,146)
Non-GAAP net income
$
57,827
$
59,601
$
143,580
$
136,977
 
Basic EPS, as reported
$
0.39
$
0.33
 $
0.79
 $
0.75
Adjustment to reconcile basic EPS to non-GAAP basic EPS:
 
 
 
 
 
 
 
 
  Impact of stock-based compensation, net of tax effect
 
0.08
 
0.06
 
0.22
 
0.16
  Impact of amortization of acquisition intangibles, net of tax effect
 
0.01
 
 
0.03
 
0.03
  Impact of acquisition transaction costs and restructuring charges, net of tax effect
 
0.03
 
0.04
 
0.07
 
0.08
  Impact of net amortization of internally developed software costs, net of tax effect
 
0.03
 
0.03
 
0.08
 
0.03
  Impact of gain on sale of assets and other(1), net of tax effect
 
(0.12)
 
 
(0.12)
 
  Impact of tax reform charge
 
0.02
 
(0.01)
 
0.02
 
(0.01)
Non-GAAP basic EPS
$
0.44
$
0.45
 $
1.09
$
1.04
 
 

 

 

 

Diluted EPS, as reported
$
0.39
$
0.32
 $
0.78
 $
0.74
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS
 
 
 
 
 
 
 
 
  Impact of stock-based compensation, net of tax effect
 
0.08
 
0.06
 
0.22
 
0.16
  Impact of amortization of acquisition intangibles, net of tax effect
 
0.01
 
0.01
 
0.03
 
0.03
  Impact of acquisition transaction costs and restructuring charges, net of tax effect
 
0.03
 
0.04
 
0.07
 
0.08
  Impact of net amortization of internally developed software costs, net of tax effect
 
0.03
 
0.03
 
0.08
 
0.03
   Impact of gain on sale of assets and other(1), net of tax effect
 
(0.12)
 
 
(0.12)
 
   Impact of tax reform charge
 
0.02
 
(0.01)
 
0.02
 
(0.01)
Non-GAAP diluted EPS
$
0.44
$
0.45
 $
1.08
$
1.03
(1): During the third quarter of 2019, the company recognized a gain of $27 million related to the sale of an office building, presented within "Gain on sale of assets". The company also recognized a charitable contribution expense of $7 million related to an infrequent donation using a portion of the proceeds from the sale of the building, presented within "General and administrative".
 
 

 

 

 

Weighted average shares outstanding -
 

 
 
 
 
 
 
Basic
 
131,385
 
132,357
 
131,896
 
131,792
Diluted
 
131,889
 
133,197
 
132,890
 
133,067





National Instruments
Reconciliation of Net Income to EBITDA
(in thousands, unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
Net income, as reported
$
51,644

$
43,194

$
103,555

$
98,516

Adjustments to reconcile net income to EBITDA:
 
 

 
 

 
 

 
 

     Interest income, net
 
(1,923
)
 
(1,525
)
 
(6,155
)
 
(3,705
)
     Tax expense
 
15,783

 
5,181

 
22,697

 
14,474

     Depreciation and amortization
 
18,562

 
18,637

 
54,546

 
53,735

EBITDA
$
84,066

$
65,487

$
174,643

$
163,020

Weighted average shares outstanding - Diluted
 
131,889

 
133,197

 
132,890

 
133,067

 
 
 
 
 
 
 
 
 


Reconciliation of GAAP to Non-GAAP EPS Guidance
(unaudited)
 
Three Months Ended
 
December 31, 2019
 
 
 
 
 
 
 
Low
 
High
GAAP Diluted EPS, guidance
$
0.25

$
0.39

Adjustment to reconcile diluted EPS to non-GAAP diluted EPS:
 
 

 
 

Impact of stock-based compensation, net of tax effect
 
0.09

 
0.09

Impact of amortization of acquisition intangibles, net of tax effect
 
0.01

 
0.01

Impact of acquisition transaction costs, restructuring charges, and other, net of tax effect
 
0.04

 
0.04

Impact of net amortization of software development costs, net of tax effect
 
0.04

 
0.04

Non-GAAP Diluted EPS, guidance
$
0.43

$
0.57









Exhibit


Contact: Marissa Vidaurri        
Head of Investor Relations
(512) 683-5215

National Instruments Announces Plan for CEO Transition
Austin, Texas - October 29, 2019 - NI (Nasdaq: NATI) today announced that Alex Davern will step down as Chief Executive Officer of NI, effective January 31, 2020. The NI Board of Directors has appointed current President and COO, Eric Starkloff, as NI President and CEO, effective February 1, 2020. Davern will take up a teaching position at the University of Texas McCombs School of Business starting in the Fall of 2020. Davern will remain on staff at NI as strategic advisor to the CEO through May and will continue to serve on the NI Board of Directors.
Board Chairman Michael McGrath said, "The board appointed Alex as CEO in 2016 to lead the transition from our founder, Dr. James Truchard. Over the past three years, he led NI and shaped a new core strategic vision, expanded our strategy to provide more complete systems for our customers, aligned the company to focus on growth industries and delivered record results. The board’s intention, after a successful transition from the founder, was to appoint the next CEO to lead the company to achieve this new vision. After considering alternatives, we unanimously selected Eric as our next CEO to lead NI into a very promising future. Alex will leave NI stronger, with experienced leaders and a clear strategy. We are excited to have Eric as our new leader as he has proven to the board that he is the most qualified person to take NI to the next level."
Davern, CEO said, "I have thoroughly enjoyed being part of NI’s incredible success since joining in 1994, one year before the IPO, and I am confident the company is well positioned to deliver on its growth strategy. I am proud of the progress our employees made in significantly improving our operating results and we have developed a team of highly experienced leaders. I have worked with Eric for many years and have great confidence that as CEO, he will continue to take NI forward to realize the company’s long-term potential."
Starkloff, President and COO said, "It has been an honor to work alongside Alex for the past 22 years and I want to thank him for his mentorship and his significant contributions to NI. I am confident in our strategy and our team, and I believe we are in a position of strength to deliver on our goals.  I look forward to taking on the responsibility of CEO, as we connect our deep engineering experience and software-connected systems with our incredible customers who are taking on the complex challenges shaping humanity."
This leadership transition will be discussed during the Q3 2019 earnings call today at 4:00 p.m. CST.

Forward-Looking Statements
This release contains "forward-looking statements" including statements regarding remaining as strategic advisor to the CEO through May, continuing to serve on the NI Board of Directors, leading NI into a very promising future, leaving NI stronger, with experienced leaders and a clear strategy, being excited to have Eric as our new leader as he is the most qualified person to take NI to the next level, being confident the company is well positioned to deliver on its growth strategy, having great confidence that as CEO, he will continue to take NI forward to realize the company’s long-term potential, being confident in our strategy and our team, belief that we are in a position of strength to deliver on our goals, and looking forward to taking on the responsibility of CEO as we connect our deep engineering experience and software-connected systems with our incredible customers who are taking on the complex challenges shaping humanity. These statements are subject to a number of risks and uncertainties, including the risk of adverse changes or fluctuations in the global economy, further adverse fluctuations in our industry, 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, and adverse effects of price changes or effective tax rates. Actual results may differ materially from the expected results.






The company directs readers to its Form 10-K for the year ended Dec. 31, 2018, its Form 10-Q for the quarter ended June 30, 2019 and the other documents it files with the SEC for other risks associated with the company’s future performance.

About NI
NI (ni.com) develops high-performance automated test and automated measurement systems to help you solve your engineering challenges now and into the future. Our open, software-defined platform uses modular hardware and an expansive ecosystem to help you turn powerful possibilities into real solutions. (NATI-F)

LabVIEW, National Instruments, NI, ni.com and are trademarks of National Instruments. Other product and company names listed are trademarks or trade names of their respective companies.