National Instruments Reports Strong 8 Percent Sequential Increase in Q3 Revenue
Company Guides to Strong Sequential Q4 Revenue Growth
- Press Release
- Source: National Instruments
- On 4:10 pm EDT, Tuesday October 27, 2009
AUSTIN, Texas, Oct. 27, 2009 /PRNewswire-FirstCall/ -- National Instruments (Nasdaq: NATI - News) reported quarterly revenue for Q3 2009 of $165 million, which represents an 8 percent sequential increase and is above the midpoint of the company's Q3 guidance given on Sept. 9. Orders were also strong sequentially, resulting in the company's end of quarter backlog increasing by $5 million in Q3. Net income for Q3 was $10 million, with fully diluted earnings per share (EPS) of $0.13. Non-GAAP net income was $15.4 million, with non-GAAP fully diluted EPS of $0.20.
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| NATI | 28.70 | +0.08 |
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.
"I am optimistic that National Instruments will emerge in a stronger leadership position because of our long-term focus through the recession," said Dr. James Truchard, NI president and CEO. "I believe our continued investment in innovation and new product development has further differentiated National Instruments from other players in the markets we serve, expanding our opportunity to grow as did our investment in the 2001 recession."
With Q3 2008 representing the highest revenue quarter in company history, NI had its toughest revenue compare in Q3 2009, and revenue was down 23 percent from a year-over-year perspective. In Q3 2009, NI virtual instrumentation and graphical system design products, which constitute the majority of the company's product portfolio, experienced a 23 percent year-over-year revenue decline. NI instrument control product sales, which represent approximately 7 percent of NI revenue, were down 28 percent year-over-year, and up sequentially by more than 20 percent, after four quarters of sequential decline. The strong sequential increase in NI instrument control revenue indicates that the overall test and measurement industry may have bottomed out in Q2 and begun a sequential recovery in Q3. Product revenue was $152 million, down 24 percent from Q3 2008, and software maintenance revenue was $13 million, down 9 percent year-over-year.
"We are pleased with how our business progressed in Q3, and it appears that the demand environment has improved meaningfully," said Alex Davern, NI CFO. "With that said, we remain cognizant that the industrial economy remains well below prior levels, and we will continue to focus on gaining market share and driving profit recovery."
Geographically, the company saw the effects of the slowdown worldwide. Revenue in U.S. dollar terms for Q3 2009 compared to Q3 2008 was down 22 percent in the Americas, down 30 percent in Europe and down 16 percent in Asia, equaling an overall revenue decline of 23 percent. In local currency terms, revenue was down 20 percent in Europe and down 13 percent in Asia, for an overall local currency decline of 19 percent year-over-year.
Total operating expenses for the quarter were down $20 million year-over-year, illustrating the strong fiscal discipline that has been exercised throughout the organization in response to the severe downturn in the global industrial economy. Included in Q3 operating expenses is a $2 million reduction of the company's accrual for litigation costs which resulted in a non-cash increase to income. At the NI investor conference at NIWeek in August, the company laid out its spending plans relative to various growth scenarios for 2010 and 2011. NI intends to drive operating leverage until the company's revenues recover to the record levels seen in 2008.
As of Sept. 30, total headcount was 5,169, a 3 percent year-over-year increase and an increase of 34 positions since June 30, 2009. The primary focus for headcount additions has been in R&D and field sales. These areas increased by 49 in Q3, while headcount in the rest of the company fell by 15 in Q3.
Cash flow from operations continued to be strong at $90 million for the first nine months of the year. As of Sept. 30, 2009, NI had $276 million in net cash and short-term investments, up $26 million from June 30, 2009. During Q3 2009, the company paid $9 million in dividends and used $3.3 million to repurchase 131,000 shares of its common stock at an average price of $25.09 per share. National Instruments announced that its Board of Directors declared a dividend of $0.12 per share on its common stock payable on Nov 30, 2009, to shareholders of record on Nov 9, 2009.
Q3 2009 Highlights
- Quarterly revenue of $165 million, up 8 percent sequentially
- Net income of $10 million
- Non-GAAP net income of $15.4 million
- Cash and short-term investments of $276 million
- Total operating expenses for the quarter down $20 million year-over-year
- New product releases, including, LabVIEW 2009, X Series data acquisition, and NI wireless sensor networks
- Record attendance at NIWeek 2009
Outlook and Specific Guidance for Q4 2009
After reaching a record low in Q1 2009, the quarterly average of the global Purchasing Managers Index (PMI) improved to 52 in Q3 indicating that the industrial economy expanded sequentially in Q3. However, the dramatic year-over-year decline in the global industrial economy over the last year and the current high levels of excess capacity suggest that it may take a considerable period of economic expansion for the industrial economy to recover fully to the levels seen a year ago.
For Q4, NI expects strong Q4 sequential revenue growth, with revenue expected to be between $190 million and $200 million. The company expects GAAP fully diluted EPS between $0.22 and $0.30, with non-GAAP fully diluted EPS expected to be between $0.30 and $0.38.
NI guidance assumes a non-GAAP effective tax rate of approximately 30 percent for Q4, which is significantly greater than the overall 2009 effective rate as the company now expects Q4 profit to be significantly greater than was anticipated earlier in the year. The increase in Q4 profit expectations results in a greater than anticipated concentration of the NI tax charge in Q4. For 2010, the company anticipates that its non-GAAP effective tax rate will be between 18 percent and 22 percent, and the company is using 20 percent for internal modeling.
In Q4, the GAAP to non-GAAP net adjustment is also expected to be elevated due to the high effective tax rate, and the adjustment is estimated to be $0.08 per share. In Q1 2010, the company anticipates that the GAAP to non-GAAP adjustment will return to a more normal level of approximately $0.06 per share.
Non-GAAP Results and Guidance Presentation
In addition to disclosing results determined in accordance with GAAP, NI discloses certain non-GAAP operating results and non-GAAP guidance that exclude certain charges. In this news release, the company has presented its net income and EPS for Q3 2009 and its guidance for Q4 2009 on a GAAP and non-GAAP basis. When presenting non-GAAP information, the company includes a reconciliation of the non-GAAP data to the GAAP data. 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 all 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.
Conference Call Information
Interested parties can listen to the Q3 2009 conference call today, Oct. 27, beginning at 4:00 p.m. CDT, at www.ni.com/call. Replay information is available by calling (888) 203-1112, confirmation code # 7611546, from Oct. 27 at 7:00 p.m. CDT through Nov. 2 at midnight CST.
Upcoming Events With the Financial Community
National Instruments will be participating in the following events with the financial community: a Non-Deal Roadshow with JPMorgan on Dec. 1 in Boston, Mass., the NASDAQ OMX 23rd Investor Program on Dec. 2 in London and the Credit Suisse Annual Technology Conference on Dec. 2 in Scottsdale, Ariz.
Forward-Looking Statements
This release contains "forward-looking statements," including statements related to emerging in a stronger leadership position as our business model has allowed us to continue to make strategic investments through the recession, our continued investment having further differentiated us from other players, creating a large opportunity for us to grow and gain market share in the recovery, overall test and measurement industry bottoming in Q2 and beginning a recovery in Q3, driving operating leverage until our revenues recover, that it may take a considerable amount of time for the industrial economy to recover fully, demand environment has improved meaningfully, focusing on gaining market share and driving profit recovery, our guidance for Q4 2009 with respect to revenue, GAAP and Non-GAAP EPS, the impact of stock based compensation and amortization of acquisition related intangibles and non-GAAP effective tax rate for Q4 2009 and 2010. These statements are subject to a number of risks and uncertainties, including the risk of further weakness or unexpected fluctuations in the global economy, delays in the release of new products, fluctuations in customer demand for NI products, our ability to continue to control our operating expenses, manufacturing inefficiencies and foreign exchange fluctuations. Actual results may differ materially from the expected results. The company directs readers to 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 10 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
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2009 2008
(unaudited)
----------- ----
Assets
Current assets:
Cash and cash equivalents $232,700 $229,400
Short-term investments 43,663 6,220
Accounts receivable, net 90,790 121,548
Inventories, net 88,726 107,358
Prepaid expenses and other current assets 40,721 43,062
Deferred income taxes, net 21,875 21,435
------ ------
Total current assets 518,475 529,023
Long-term investments 1,900 10,500
Property and equipment, net 150,532 154,477
Goodwill, net 64,960 64,561
Intangible assets, net 44,980 41,915
Other long-term assets 35,684 32,115
------ ------
Total assets $816,531 $832,591
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $25,432 $30,876
Accrued compensation 16,230 22,012
Deferred revenue 49,102 45,514
Accrued expenses and other liabilities 10,641 18,848
Other taxes payable 13,827 13,481
------ ------
Total current liabilities 115,232 130,731
Deferred income taxes 23,599 25,157
Other long-term liabilities 12,274 12,265
------ ------
Total liabilities $151,105 $168,153
======== ========
Stockholders' equity:
Preferred stock - -
Common stock 777 772
Additional paid-in capital 328,196 300,352
Retained earnings 324,785 352,831
Accumulated other comprehensive income 11,668 10,483
------ ------
Total stockholders' equity 665,426 664,438
------- -------
Total liabilities and stockholders' equity $816,531 $832,591
======== ========
Condensed Consolidated Statements of Income
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited)
Net sales:
Product $152,106 $200,871 $435,348 $578,222
Software maintenance 12,929 14,167 39,649 40,208
------ ------ ------ ------
Total net sales 165,035 215,038 474,997 618,430
Cost of sales:
Product 40,476 52,957 119,234 152,487
Software maintenance 1,423 1,550 4,034 4,529
----- ----- ----- -----
Total cost of sales 41,899 54,507 123,268 157,016
------ ------ ------- -------
Gross profit 123,136 160,531 351,729 461,414
------- ------- ------- -------
Operating expenses:
Sales and marketing 65,126 78,392 199,089 230,638
Research and development 35,016 37,016 99,252 105,808
General and
administrative 14,312 17,177 44,844 51,122
Patent litigation (2,006) - (2,006) -
------ --- ------ ---
Total operating expenses 112,448 132,585 341,179 387,568
------- ------- ------- -------
Operating income 10,688 27,946 10,550 73,846
Other income (expense):
Interest income 339 1,374 1,335 5,025
Net foreign exchange
gain (loss) 940 (3,025) 1,301 (1,791)
Other income (expense),
net 482 80 979 13
--- --- --- ---
Income before income
taxes 12,449 26,375 14,165 77,093
Provision for (benefit
from) income taxes 2,518 3,216 (554) 11,584
Net income $9,931 $23,159 $14,719 $65,509
------ ------- ------- -------
Basic earnings per share $0.13 $0.29 $0.19 $0.83
----- ----- ----- -----
Diluted earnings per
share $0.13 $0.29 $0.19 $0.82
----- ----- ----- -----
Weighted average shares
outstanding -
Basic 77,653 78,834 77,497 78,701
Diluted 78,103 79,841 77,842 79,773
Dividends declared per
share $0.12 $0.11 $0.36 $0.33
National Instruments
Condensed Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended
September 30,
2009 2008
(unaudited) (unaudited)
---------- ----------
Cash flow from operating activities:
Net income $14,719 $65,509
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 28,536 27,901
Stock-based compensation 15,238 14,690
Provision for (benefit from) deferred
income taxes (6,802) 3,008
Tax expense (benefit from) stock
option plans 1,445 (1,243)
Changes in operating assets and
liabilities:
Accounts receivable 30,758 10,611
Inventories 18,632 (16,954)
Prepaid expenses and other assets 3,920 (12,895)
Accounts payable (5,444) (4,791)
Deferred revenue 3,588 5,985
Taxes and other liabilities (14,245) 14,138
------- ------
Net cash provided by operating
activities 90,345 105,959
------ -------
Cash flow from investing activities:
Capital expenditures (12,331) (21,115)
Capitalization of internally developed
software (10,611) (8,687)
Additions to other intangibles (4,009) (2,603)
Acquisition, net of cash received - (17,310)
Purchases of short-term and long-term
investments (38,876) (17,315)
Sales and maturities of short-term and
long-term investments 10,034 39,080
Purchases of foreign currency option
contracts - (2,784)
--- ------
Net cash (used by) provided by
investing activities (55,793) (30,734)
------- -------
Cash flow from financing activities:
Proceeds from issuance of common stock 16,351 26,628
Repurchase of common stock (18,200) (58,215)
Dividends paid (27,958) (26,055)
Tax expense (benefit from) stock
option plans (1,445) 1,243
------ -----
Net cash (used by) financing
activities (31,252) (56,399)
------- -------
Net change in cash and cash
equivalents 3,300 18,826
Cash and cash equivalents at beginning
of period 229,400 194,839
------- -------
Cash and cash equivalents at end of
period $232,700 $213,665
======== ========
Detail of GAAP charges related to stock-based compensation and
amortization of acquisition intangibles (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited)
Stock-based
compensation
Cost of sales $335 $295 $975 $810
Sales and
marketing 2,210 2,114 6,626 6,204
Research and
development 1,929 1,867 5,349 5,160
General and
administrative 728 800 2,288 2,351
--- --- ----- -----
Provision for
income taxes (409) (1,364) (5,288) (3,588)
---- ------ ------ ------
Total $4,793 $3,712 $9,950 $10,937
------ ------ ------ -------
Amortization of
acquisition
intangibles
Cost of sales $853 $937 $2,593 $2,725
Sales and
marketing 125 139 377 435
Research and
development - - - 14
General and
administrative - - - -
--- --- --- ---
Provision for
income taxes (277) (285) (834) (846)
---- ----- ----- -----
Total $701 $791 $2,136 $2,328
---- ---- ------ ------
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 Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Gross profit,
as reported $123,136 $160,531 $351,729 $461,414
Stock-based
compensation 335 295 975 810
Amortization of
acquisition
intangibles 853 937 2,593 2,725
--- --- ----- -----
Non-GAAP gross
profit $124,324 $161,763 $355,297 $464,949
======== ======== ======== ========
Reconciliation of Operating Expense to Non-GAAP Operating Expenses
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Operating
expense, as
reported $112,448 $132,585 $341,179 $387,568
Stock-based
compensation (4,867) (4,781) (14,263) (13,715)
Amortization of
acquisition
intangibles (125) (139) (377) (449)
---- ---- ---- ----
Non-GAAP operating
expenses $107,456 $127,665 $326,539 $373,404
======== ======== ======== ========
Reconciliation of Operating Income to Non-GAAP Operating Income
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Operating
income, as
reported $10,688 $27,946 $10,550 $73,846
Stock-based
compensation 5,202 5,076 15,238 14,525
Amortization of
acquisition
intangibles 978 1,076 2,970 3,174
--- ----- ----- -----
Non-GAAP operating
income $16,868 $34,098 $28,758 $91,545
======= ======= ======= =======
Reconciliation of Income before income taxes to Non-GAAP Income before
income taxes
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Income before
income taxes,
as reported $12,449 $26,375 $14,165 $77,093
Stock-based
compensation 5,202 5,076 15,238 14,525
Amortization of
acquisition
intangibles 978 1,076 2,970 3,174
--- ----- ----- -----
Non-GAAP income
before income
taxes $18,629 $32,527 $32,373 $94,792
======= ======= ======= =======
Reconciliation of Provision for Income Taxes to Non-GAAP Provision for
Income Taxes
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Provision for
income taxes,
as reported $2,518 $3,216 $(554) $11,584
Stock-based
compensation 409 1,364 5,288 3,588
Amortization of
acquisition
intangibles 277 285 834 846
--- --- --- ---
Non-GAAP
provision for
income taxes $3,204 $4,865 $5,568 $16,018
====== ====== ====== =======
Reconciliation of Net Income and Diluted EPS to Non-GAAP Net
Income and Non-GAAP Diluted EPS
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Net income, as
reported $9,931 $23,159 $14,719 $65,509
Adjustments to
reconcile net income
to non-GAAP net income:
Stock-based
compensation, net
of tax effect 4,793 3,712 9,950 10,937
Amortization of
acquisition
intangibles, net
of tax effect 701 791 2,136 2,328
--- --- ----- -----
Non-GAAP net income $15,425 $27,662 $26,805 $78,774
======= ======= ======= =======
Basic EPS, as
reported $0.13 $0.29 $0.19 $0.83
Adjustment to
reconcile basic
EPS to non-GAAP basic EPS:
Impact of stock-based
compensation, net
of tax effect $0.06 $0.05 $0.13 $0.14
Impact of
amortization of
acquisition
intangibles, net of
tax effect $0.01 $0.01 $0.03 $0.03
----- ----- ----- -----
Non-GAAP basic EPS $0.20 $0.35 $0.35 $1.00
===== ===== ===== =====
Diluted EPS, as
reported $0.13 $0.29 $0.19 $0.82
Adjustment to
reconcile diluted
EPS to non-GAAP
diluted EPS:
Impact of
stock-based
compensation, net
of tax effect $0.06 $0.05 $0.13 $0.14
Impact of
amortization of
acquisition
intangibles, net of
tax effect $0.01 $0.01 $0.03 $0.03
----- ----- ----- -----
Non-GAAP diluted EPS $0.20 $0.35 $0.35 $0.99
===== ===== ===== =====
Weighted average
shares outstanding -
Basic 77,653 78,834 77,497 78,701
------ ------ ------ ------
Diluted 78,103 79,841 77,842 79,773
------ ------ ------ ------
Reconciliation of Estimated GAAP Fully Diluted EPS to Non-GAAP
Fully Diluted EPS
Three months ended
December 31, 2009
Low High
GAAP Fully Diluted EPS, estimated $0.22 $0.30
Adjustment to reconcile
diluted EPS to non-GAAP
diluted EPS:
Impact of stock-based
compensation, net of tax effect 0.07 0.07
Impact of amortization of
acquisition intangibles, net
of tax effect 0.01 0.01
---- ----
Non-GAAP diluted EPS, estimated $0.30 $0.38
===== =====
National Instruments
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share data)
(unaudited)
Reconciliation of estimated effective tax rates
Three Months Ended
December 31,
2009
----
GAAP forecasted effective tax rate 36%
Stock-based compensation and
amortization of acquisition intangibles -6%
---
Non-GAAP forecasted effective tax rate 30%
===
Estimated Year
2010
Low High
GAAP forecasted effective tax rate 16% 20%
Stock-based compensation and
amortization of acquisition intangibles 2% 2%
--- ---
Non-GAAP forecasted effective tax rate 18% 22%
=== ===
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