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UNITED STATES  
SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C. 20549  

FORM 10-Q  
☒    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  
  
For the quarterly period ended: June 30, 2020 or  
  
☐  Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  
  
For the transition period from ________________ to ________________    
Commission file number:  0-25426  
    https://cdn.kscope.io/93e0a04aa362935f1d68bcbcb16953df-nati-20200630_g1.jpg
NATIONAL INSTRUMENTS CORPORATION  
(Exact name of registrant as specified in its charter)  
Delaware74-1871327
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
  
11500 North MoPac Expressway 
Austin,78759
Texas
(Address of principal executive offices) (Zip Code)
 
Registrant's telephone number, including area code:  (512) 683-0100  
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of exchange on which registered
Common Stock, $0.01 par valueNATINasdaq Stock Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.    
Large accelerated filer ☒
Accelerated filer
☐
Non-accelerated filer ☐
Smaller reporting company
☐
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. ☐ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  
ClassOutstanding at July 30, 2020
Common Stock, $0.01 par value131,436,108
1

NATIONAL INSTRUMENTS CORPORATION
INDEX  
Page No.
  
 
  
 
June 30, 2020 (unaudited) and December 31, 2019
  
 
(unaudited) for the three and six months ended June 30, 2020 and 2019
  
 
(unaudited) for the three and six months ended June 30, 2020 and 2019
  
 
(unaudited) for the six months ended June 30, 2020 and 2019
(unaudited) for the three and six months ended June 30, 2020 and 2019
  

  
  
  
  
  
 
  
  
  
  
  

2

PART I - FINANCIAL INFORMATION  

ITEM 1. Financial Statements
NATIONAL INSTRUMENTS CORPORATION  
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 30,December 31,
20202019
Assets(unaudited) 
Current assets:  
Cash and cash equivalents$471,205  $194,616  
Short-term investments137,104  237,983  
Accounts receivable, net211,766  248,872  
Inventories, net209,928  200,410  
Prepaid expenses and other current assets65,817  65,477  
Total current assets1,095,820  947,358  
Property and equipment, net247,548  243,717  
Goodwill255,153  262,242  
Intangible assets, net68,975  84,083  
Operating lease right-of-use assets63,895  70,407  
Restricted cash70,000  —  
Other long-term assets48,424  44,082  
Total assets$1,849,815  $1,651,889  
Liabilities and stockholders' equity  
Current liabilities:  
Accounts payable and accrued expenses$53,247  $52,192  
Accrued compensation44,431  47,732  
Deferred revenue - current113,785  131,445  
Operating lease liabilities - current13,583  13,431  
Other taxes payable39,477  40,607  
Debt, current3,500  —  
Other current liabilities66,818  20,716  
Total current liabilities334,841  306,123  
Deferred income taxes16,258  14,065  
Income tax payable - non-current61,628  69,151  
Liability for uncertain tax positions6,808  6,652  
Deferred revenue - non-current32,468  33,480  
Operating lease liabilities - non-current34,655  40,650  
Debt, non-current85,020  —  
Other long-term liabilities8,498  5,418  
Total liabilities580,176  475,539  
Commitments and contingencies
Stockholders' equity:  
Preferred stock:  par value $0.01;  5,000,000 shares authorized; none issued and outstanding 
—  —  
Common stock:  par value $0.01;  360,000,000 shares authorized; 131,436,108 shares and 130,504,535 shares issued and outstanding, respectively 
1,314  1,305  
Additional paid-in capital993,058  953,578  
Retained earnings299,132  242,537  
Accumulated other comprehensive loss(23,865) (21,070) 
Total stockholders’ equity1,269,639  1,176,350  
Total liabilities and stockholders’ equity$1,849,815  $1,651,889  
The accompanying notes are an integral part of the financial statements. 

3

NATIONAL INSTRUMENTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)  
  
Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
    
Net sales:    
Product$266,261  $299,798  $540,239  $577,500  
Software maintenance35,068  34,433  70,470  67,805  
Total net sales301,329  334,231  610,709  645,305  
    
Cost of sales:    
Product83,795  81,741  165,866  155,929  
Software maintenance2,106  2,025  3,796  3,912  
Total cost of sales85,901  83,766  169,662  159,841  
    
Gross profit215,428  250,465  441,047  485,464  
    
Operating expenses:    
Sales and marketing105,419  120,868  221,165  238,419  
Research and development64,225  68,257  135,846  134,423  
General and administrative29,369  29,044  55,549  56,927  
Total operating expenses199,013  218,169  412,560  429,769  
Gain on sale of business—  —  159,753  —  
Operating income16,415  32,296  188,240  55,695  
    
Other (expense) income(1,143) 555  (583) 3,131  
Income before income taxes15,272  32,851  187,657  58,826  
Provision for income taxes4,383  4,159  44,113  6,914  
    
Net income$10,889  $28,692  $143,544  $51,912  
    
Basic earnings per share$0.08  $0.22  $1.10  $0.39  
    
Weighted average shares outstanding - basic131,014  132,062  130,813  132,156  
    
Diluted earnings per share$0.08  $0.22  $1.09  $0.39  
    
Weighted average shares outstanding - diluted131,602  132,973  131,499  133,172  
    
Dividends declared per share$0.26  $0.25  $0.52  $0.50  
The accompanying notes are an integral part of these financial statements. 
4

NATIONAL INSTRUMENTS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)  
Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
    
Net income$10,889  $28,692  $143,544  $51,912  
Other comprehensive income (loss), before tax and net of reclassification adjustments:    
Foreign currency translation adjustment3,938  2,265  (1,975) (802) 
Unrealized gain (loss) on securities available-for-sale
2,634  738  (154) 1,913  
Unrealized loss on derivative instruments(74) (1,480) (598) (268) 
Other comprehensive income (loss), before tax6,498  1,523  (2,727) 843  
Tax (benefit) expense related to items of other comprehensive income(56) (268) 68  (58) 
Other comprehensive income (loss), net of tax6,554  1,791  (2,795) 901  
Comprehensive income$17,443  $30,483  $140,749  $52,813  
The accompanying notes are an integral part of these financial statements.

5

NATIONAL INSTRUMENTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)  
Six Months Ended
June 30,
20202019
Cash flow from operating activities:  
Net income$143,544  $51,912  
Adjustments to reconcile net income to net cash provided by operating activities:  
Disposal gain on sale of business(159,753) —  
Depreciation and amortization38,341  35,984  
Stock-based compensation27,335  24,662  
Deferred income taxes2,711  2,268  
Changes in operating assets and liabilities49,320  (26,189) 
Net cash provided by operating activities101,498  88,637  
  
Cash flow from investing activities:  
Capital expenditures(25,362) (26,048) 
Proceeds from sale of business, net of cash divested160,266  —  
Capitalization of internally developed software(3,108) (4,497) 
Additions to other intangibles(630) (487) 
Acquisitions of equity-method investments—  (9,784) 
Purchases of short-term investments(206,330) (91,777) 
Sales and maturities of short-term investments306,955  117,108  
Net cash provided by (used in) investing activities231,791  (15,485) 
  
Cash flow from financing activities:  
Proceeds from revolving line of credit20,000  —  
Proceeds from term loan70,000  —  
Debt issuance costs(1,480) —  
Proceeds from issuance of common stock17,252  17,645  
Repurchase of common stock(23,680) (92,375) 
Dividends paid(68,156) (66,067) 
Net cash provided by (used in) financing activities13,936  (140,797) 
  
Effect of exchange rate changes on cash(636) 20  
  
Net change in cash, cash equivalents and restricted cash346,589  (67,625) 
Cash, cash equivalents and restricted cash at beginning of period194,616  259,386  
Cash, cash equivalents and restricted cash at end of period$541,205  $191,761  
 
The accompanying notes are an integral part of these financial statements.   

6


NATIONAL INSTRUMENTS CORPORATION  
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
June 30, 2020
(Unaudited)
Common Stock SharesCommon Stock AmountAdditional-Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income/(Loss)Total Stockholders' Equity
Balance at March 31, 2020130,595,203  $1,306  $973,354  $335,876  $(30,419) $1,280,117  
Net income—  —  —  10,889  —  10,889  
Other comprehensive gain, net of tax—  —  —  —  6,554  6,554  
Issuance of common stock under employee plans, including tax benefits1,344,231  13  8,248  —  —  8,261  
Stock-based compensation—  —  15,130  —  —  15,130  
Repurchase of common stock(503,326) (5) (3,674) (13,474) —  (17,153) 
Dividends paid (1)—  —  —  (34,159) —  (34,159) 
Balance at June 30, 2020131,436,108  1,314  993,058  299,132  (23,865) 1,269,639  
Common Stock SharesCommon Stock AmountAdditional-Paid in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
Balance at December 31, 2019130,504,535  1,305  953,578  242,537  (21,070) 1,176,350  
Net income—  —  —  143,544  —  143,544  
Other comprehensive loss, net of tax—  —  —  —  (2,795) (2,795) 
Issuance of common stock under employee plans, including tax benefits1,599,772  16  17,236  —  —  17,252  
Stock-based compensation—  —  27,124  —  —  27,124  
Repurchase of common stock(668,199) (7) (4,880) (18,793) —  (23,680) 
Dividends paid (1)—  —  —  (68,156) —  (68,156) 
Balance at June 30, 2020131,436,108  $1,314  $993,058  $299,132  $(23,865) $1,269,639  
(1) Cash dividends declared per share of common stock were $0.26 for the three months ended June 30, 2020, and $0.52 for the six months ended June 30, 2020.
 
The accompanying notes are an integral part of these financial statements. 
7


June 30, 2019
(Unaudited)
Common Stock SharesCommon Stock AmountAdditional-Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income/(Loss)Total Stockholders' Equity
Balance at March 31, 2019131,866,173  $1,319  $910,602  $307,153  $(17,821) $1,201,253  
Net income—  —  —  28,692  —  28,692  
Other comprehensive income, net of tax—  —  —  —  1,791  1,791  
Issuance of common stock under employee plans, including tax benefits1,133,102  11  8,420  —  —  8,431  
Stock-based compensation—  —  13,335  —  —  13,335  
Repurchase of common stock(1,114,500) (11) (7,556) (38,404) —  (45,971) 
Dividends paid (1)—  —  —  (32,957) —  (32,957) 
Balance at June 30, 2019131,884,775  1,319  924,801  264,484  (16,030) 1,174,574  
Common Stock SharesCommon Stock AmountAdditional-Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income/(Loss)Total Stockholders' Equity
Balance at December 31, 2018132,655,941  1,327  897,544  356,418  (16,931) 1,238,358  
Net income—  —  —  51,912  —  51,912  
Other comprehensive income, net of tax—  —  —  —  901  901  
Issuance of common stock under employee plans, including tax benefits1,378,432  14  17,631  —  —  17,645  
Stock-based compensation—  —  24,200  —  —  24,200  
Repurchase of common stock(2,149,598) (22) (14,574) (77,779) —  (92,375) 
Dividends paid (1)—  —  —  (66,067) —  (66,067) 
Balance at June 30, 2019131,884,775  $1,319  $924,801  $264,484  $(16,030) $1,174,574  
(1) Cash dividends declared per share of common stock were $0.25 for the three months ended June 30, 2019, and $0.50 for the six months ended June 30, 2019.

The accompanying notes are an integral part of these financial statements.
8




NATIONAL INSTRUMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
  
Note 1 – Basis of presentation  
  
The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 31, 2019, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 20, 2020 (the "Form 10-K"). In our opinion, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring items) considered necessary to present fairly our financial position at June 30, 2020 and December 31, 2019, the results of our operations and comprehensive income for three and six months ended June 30, 2020 and 2019, our cash flows for the six months ended June 30, 2020 and 2019 and our statement of stockholders' equity for the three and six months ended June 30, 2020 and 2019. Our operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

Reclassifications

As discussed below, certain prior period amounts have been reclassified to conform to the current period presentation. The reclassifications had no impact on our previously reported net income or cash flows:

•We previously included net sales attributable to our operations in India within the EMEIA region in Note 2 - Revenue of Notes to Consolidated Financial Statements. In the second quarter of 2020, we began including these amounts within the APAC (Australia, India, New Zealand, Southeast Asia, China, South Korea and Japan) geographic region, to reflect recent changes within our organizational structure. We have recast historical comparative information to conform to the June 30, 2020 presentation. Refer to Note 2 - Revenue of Notes to Consolidated Financial Statements for our revenue disaggregated by geographic region which now include the Americas (United States, Canada and Latin America), EMEA (Europe, Middle East, and Africa) and APAC.

•We previously presented “Interest income”, "Net foreign exchange gain (loss)", and "Other income (loss)" separately on the consolidated statements of income. In the second quarter of 2020, we began presenting these amounts within “Other (expense) income” in the consolidated statements of income for all periods presented. Refer to "Other (expense) income" in Note 1 - Basis of Presentation of Notes to Consolidated Financial Statements for additional information on the amounts that comprise "Other (expense) income".


Recently Adopted Accounting Pronouncements

Current Expected Credit Losses ("CECL")

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The ASU replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. We adopted the new standard on January 1, 2020 and the impact of the adoption was not material to our consolidated financial statements as credit losses are not expected to be significant based on historical collection trends, the financial condition of payment partners, and external market factors. We will continue to actively monitor the impact of the recent coronavirus (COVID-19) pandemic on expected credit losses.


9

Implementation Costs Incurred in a Cloud Computing Arrangement

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which clarifies the accounting for implementation costs in cloud computing arrangements. The new standard aligns the treatment of implementation costs incurred by customers in cloud computing arrangements that are service contracts with the treatment of similar costs incurred to develop or obtain internal-use software. Under the new standard, implementation costs are deferred and presented in the same financial statement caption on the condensed consolidated balance sheet as a prepayment of related arrangement fees. The deferred costs are recognized over the term of the arrangement in the same financial statement caption in the condensed consolidated income statement as the related fees of the arrangement. We adopted the new standard on January 1, 2020. The new standard did not have a material impact on our consolidated financial statements and related disclosures.

Fair Value Measurements

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies the disclosure requirements on fair value measurements. We adopted the new standard on January 1, 2020. The new standard did not have a material impact on our consolidated financial statements and related disclosures.

Income Taxes