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NI Reports Record Revenue for a Second Quarter, up 14 Percent YOY

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Company reaffirms guidance for full year 2022 and increases expectations for full year 2023

Q2 2022 Summary

  • Record GAAP revenue for a second quarter of $396 million, up 14 percent year over year

  • Record orders for a second quarter, up 20 percent year over year

  • Strong diluted GAAP EPS of $0.09 and diluted non-GAAP EPS of $0.36

  • Cash and cash equivalents of $111 million as of June 30, 2022

AUSTIN, Texas, July 28, 2022--(BUSINESS WIRE)--National Instruments Corporation (Nasdaq: NATI) today announced Q2 2022 revenue of $396 million, up 14 percent year over year, a record for a second quarter.

In Q2 2022, the total value of the company's orders was up 20 percent year over year. For Q2, year over year orders were up 33 percent in the Americas, up 16 percent in APAC, and up 7 percent in EMEA.

In Q2, GAAP gross margin was 68 percent and non-GAAP gross margin was 71 percent. Total GAAP operating expenses were $247 million and non-GAAP operating expenses were $218 million. GAAP operating income for Q2 was $21 million with non-GAAP operating income of $61 million. In Q2, GAAP operating margin was 5 percent with non-GAAP operating margin of 15 percent.

GAAP net income for Q2 was $12 million and non-GAAP net income was $48 million, with GAAP diluted EPS of $0.09 and non-GAAP diluted EPS of $0.36.

"NI has delivered strong performance over the last several quarters, driven by our highly differentiated technologies and offerings targeted at segments with powerful growth drivers, including electric and autonomous vehicles, wireless communication, and new space technology. We believe our focused strategy is leading to ongoing share gains," said Eric Starkloff, NI President and CEO. "Momentum continued in the second quarter with orders up 20 percent year over year and revenue up 14 percent year over year. These results bring us increased confidence in achieving revenue growth and earnings per share in line with current consensus estimates."

"We continue to see the benefits of the actions we have taken to increase scale into our business model. Despite the temporary headwinds to gross margin, we have improved diluted non-GAAP EPS by 15 percent year over year in the first half of 2022. Looking ahead, we will continue to sharpen our focus on making intentional investments for growth and on streamlining processes for greater efficiency," said Karen Rapp, NI CFO. "With many key initiatives underway, we are confident in our ability to deliver on our commitment to non-GAAP operating margin improvement. Even in a potential recessionary environment, we now expect to increase our non-GAAP operating margin by 300 basis points in 2023, followed by 100 basis points of additional improvement each year through 2025."

As of June 30, 2022, NI had $111 million in cash and cash equivalents. During the second quarter, NI paid $37 million in dividends and repurchased approximately 987,000 shares of our common stock at an average price of $39.06 per share. The NI Board of Directors approved a quarterly dividend of $0.28 per share payable on August 29, 2022, to stockholders of record on August 8, 2022.

NI's non-GAAP results exclude, as applicable, the impact of purchase accounting fair value adjustments, stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction and integration 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, tax effects related to businesses held for sale, gain on sale of businesses, and capitalization and amortization of internally developed software costs. Reconciliations of the NI's GAAP and non-GAAP results are included as part of this news release.

YTD 2022 Summary

  • Record GAAP revenue of $781 million, up 15 percent year over year

  • Record orders, up 22 percent year over year

  • Strong diluted GAAP EPS of $0.28, up 75 percent year over year and record diluted non-GAAP EPS of $0.77, up 15 percent year over year

Guidance

  • Q3 GAAP revenue to be in the range of $410 million to $440 million, up 16 percent year over year at the midpoint

  • GAAP diluted EPS to be in the range of $0.34 to $0.48 for Q3, up 105 percent year over year at the midpoint

  • Non-GAAP diluted EPS expected to be in the range of $0.46 to $0.60, up 26 percent year over year at the midpoint

Conference Call Information

Today, NI management will host a call with the investment community to discuss the company's financial performance in the second quarter. Investors can listen to the Q2 2022 earnings conference call beginning at 4:00 p.m. CT today. This event will be webcast in listen-only mode. Listeners may log on to the call at www.ni.com/investor-relations under the "Events and Presentations" section and select "Q2 2022 NATI Earnings Conference Call" to participate. The webcast will remain on the company site for 90 days.

Annual Investor Conference

As is our annual tradition, NI management will host an investor conference in September with more details to be shared in the coming weeks. Despite expectations for a weaker macro entering 2023, we believe we have several factors that will drive our performance – our exposure to key growth opportunities and secular cycles, the favorable gross margin impacts as supply chain pressures ease, the growing impact of recurring revenue, and the full year impact of our expense management focus. In fact, our current expectation is for strengthening revenue growth and non-GAAP operating margin growth well above our 100 bps commitment in 2023. We plan to walk through these elements to our model and discuss our 3 year strategic plan at this event.

Non-GAAP Presentation

To supplement NI’s financial statements presented on a GAAP basis, NI has provided non-GAAP financial information, including non-GAAP revenue or net sales, gross profit, gross margin, operating expenses, operating income, operating margin, provision for income taxes, net income, net margin and diluted EPS and non-GAAP guidance for diluted EPS. A reconciliation of the adjustments to GAAP results is included in the tables below. The company is not able to provide guidance on its GAAP tax rate or a related reconciliation without unreasonable efforts since its future GAAP tax rate depends on its future stock price and related information that is not currently available. Additionally, certain non-GAAP financial measures presented on a forward-looking basis, such as non-GAAP operating margin, were not reconciled to the comparable GAAP financial measures because the reconciliation could not be performed without unreasonable efforts due to the unpredictability of the amounts and timing of events affecting the items we exclude from non-GAAP measures. Non-GAAP financial information is not meant as a substitute for GAAP results, but is included because management believes such information is useful to our investors for informational and comparative purposes. In addition, certain non-GAAP financial information is used internally by management to evaluate and manage the company. The non-GAAP financial information used by NI may differ from that used by other companies. These non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP.

Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 including without limitation those statements about our expectations of accelerating growth and progress to meet or exceed our financial targets and long-term financial model, our ability to grow faster than the overall market, our continued momentum across regions and business units, our opportunities to drive growth, profitability and efficiency in our business, confidence in our strategy and the strategic changes made to our business, including the transition to subscription-based licensing model for software offerings, our ability to successfully integrate acquisitions and execute our growth strategy, our ability to turn backlog to revenue, our ability to drive customer demand through focus on high growth opportunities, the impacts of war in Europe, supply chain constraints and software licensing model transition on our financial results, and our guidance and expectations for our Q3 2022 revenue, diluted EPS and non-GAAP diluted EPS, and future operating expenses, backlog, lead times, gross margin, operating margin and tax rate. These statements are subject to a number of risks and uncertainties, and actual results may differ materially from any future results expressed or implied by the forward-looking statements. Risks and uncertainties include without limitation: the global shortage of key components; effect of the global economic and geopolitical conditions; our international operations and foreign economies; adverse public health matters, including epidemics and pandemics such as the COVID-19 pandemic; our ability to effectively manage our partners and distribution channels; interruptions in our technology systems or cyber-attacks on our systems; the dependency of our product revenue on certain industries and the risk of contractions in such industries; concentration of credit risk and uncertain conditions in the global financial markets; our ability to compete in markets that are highly competitive; our ability to release successful new products or achieve expected returns; the risk that our manufacturing capacity and a substantial majority of our warehousing and distribution capacity are located outside of the U.S.; our dependence on key suppliers and distributors; longer delivery lead times from our suppliers; risk of product liability claims; dependence on our proprietary rights and risks of intellectual property litigation; the continued service of key management, technical personnel and operational employees; our ability to comply with environmental laws and associated costs; our ability to maintain our website; the risks of bugs, vulnerabilities, errors or design flaws in our products; our restructuring activities; our exposure to large orders; our shift to more system orders; our ability to effectively manage our operating expenses and meet budget; fluctuations in our quarterly results due to factors outside of our control; our outstanding debt; seasonal variation in our revenues; our ability to comply with laws and regulations; changes in tax rates and exposure to additional tax liabilities; our ability to make certain acquisitions or dispositions, integrate the companies we acquire or separate the companies we sold and/or enter into strategic relationships; risks related to currency fluctuations; and provisions in charter documents and Delaware law that delay or prevent our acquisition. In addition, our ability to declare and/or pay declared dividends is subject to compliance with the terms of our existing credit agreement. The company directs readers to its Form 10-K for the year ended December 31, 2021, and the other documents it files with the SEC for other risks associated with the company’s future performance. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in our forward-looking statements. All information in this release is as of the date above. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

About NI

At NI, we bring together people, ideas and technology so forward thinkers and creative problem solvers can take on humanity’s biggest challenges. From data and automation to research and validation, we provide the tailored, software-connected systems engineers and enterprises need to Engineer Ambitiously™ every day.

National Instruments, NI and ni.com and Engineer Ambitiously are trademarks of National Instruments Corporation. Other product and company names listed are trademarks or trade names of their respective companies. (NATI-F)

National Instruments

Condensed Consolidated Balance Sheets

(in thousands)

June 30,

December 31,

2022

2021

(unaudited)

Assets

Cash and cash equivalents

$

110,873

$

211,106

Accounts receivable, net

356,077

341,275

Inventories, net

343,627

289,243

Prepaid expenses and other current assets

122,361

89,925

Total current assets

932,938

931,549

Property and equipment, net

258,155

253,668

Goodwill

603,793

575,992

Intangible assets, net

237,059

220,418

Operating lease right-of-use assets

64,476

58,641

Other long-term assets

71,435

74,717

Total assets

$

2,167,856

$

2,114,985

Liabilities and Stockholders' Equity

Accounts payable and accrued expenses

$

91,227

$

83,218

Accrued compensation

50,199

111,261

Deferred revenue - current

122,029

137,818

Operating lease liabilities - current

14,813

13,137

Other taxes payable

51,958

59,109

Other current liabilities

44,148

40,671

Total current liabilities

374,374

445,214

Deferred income taxes

16,575

14,249

Income tax payable - non-current

40,646

54,195

Deferred revenue - non-current

42,943

32,822

Operating lease liabilities - non-current

34,520

30,468

Debt - non-current

475,000

300,000

Other long-term liabilities

15,291

14,340

Total liabilities

$

999,349

$

891,288

Stockholders' equity:

Common stock

1,323

1,323

Additional paid-in capital

1,173,131

1,129,647

Retained earnings

21,533

112,858

Accumulated other comprehensive loss

(27,480

)

(20,131

)

Total stockholders' equity

1,168,507

1,223,697

Total liabilities and stockholders' equity

$

2,167,856

$

2,114,985

National Instruments

Condensed Consolidated Statements of Income

(in thousands, except per share data, unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021

Net sales:

Product

$

354,805

$

306,490

$

698,489

$

601,583

Software maintenance

40,710

40,206

82,281

80,295

Total net sales

395,515

346,696

780,770

681,878

Cost of sales:

Product

123,307

95,722

238,332

187,379

Software maintenance

4,167

3,516

8,370

7,273

Total cost of sales

127,474

99,238

246,702

194,652

Gross profit

268,041

247,458

534,068

487,226

67.8%

71.4%

68.4%

71.5%

Operating expenses:

Sales and marketing

124,908

111,199

245,064

227,983

Research and development

85,589

81,434

167,750

161,520

General and administrative

36,772

30,277

69,949

63,636

Total operating expenses

247,269

222,910

482,763

453,139

Operating income

20,772

24,548

51,305

34,087

Other expense

(3,505

)

(2,963

)

(3,473

)

(8,031

)

Income before income taxes

17,267

21,585

47,832

26,056

Provision for income taxes

4,833

4,279

10,162

4,254

Net income

$

12,434

$

17,306

$

37,670

$

21,802

Basic earnings per share

$

0.09

$

0.13

$

0.29

$

0.17

Diluted earnings per share

$

0.09

$

0.13

$

0.28

$

0.16

Weighted average shares outstanding -

Basic

131,973

132,498

132,039

131,996

Diluted

132,708

133,539

132,948

133,157

Dividends declared per share

$

0.28

$

0.27

$

0.56

$

0.54

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

Six Months Ended June 30,

2022

2021

Cash flow from operating activities:

Net income

$

37,670

$

21,802

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

45,742

50,024

Stock-based compensation

40,804

37,208

Loss from equity-method investees

(131

)

5,360

Deferred income taxes

943

1,301

Net change in operating assets and liabilities

(169,930

)

(63,372

)

Net cash (used in) provided by operating activities

(44,902

)

52,323

Cash flow from investing activities:

Acquisitions, net of cash received

(72,802

)

(19,784

)

Capital expenditures

(24,509

)

(17,411

)

Capitalization of internally developed software

(187

)

(721

)

Additions to other intangibles

(2,478

)

(1,519

)

Acquisitions of equity-method investments

(12,551

)

Sales and maturities of short-term investments

45,671

Net cash used in investing activities

(99,976

)

(6,315

)

Cash flow from financing activities:

Proceeds from revolving loan facility

175,000

100,000

Payments on term loan

(98,750

)

Debt issuance costs

(1,993

)

Proceeds from issuance of common stock

17,859

17,239

Repurchase of common stock

(70,000

)

Dividends paid

(74,034

)

(71,428

)

Net cash used in financing activities

48,825

(54,932

)

Impact of changes in exchange rates on cash

(4,180

)

(887

)

Net change in cash and cash equivalents

(100,233

)

(9,811

)

Cash and cash equivalents at beginning of period

211,106

260,232

Cash and cash equivalents at end of period

$

110,873

$

250,421

The following tables provide details with respect to the amount of GAAP charges related to stock-based compensation, amortization of acquisition-related intangibles and fair value adjustments, acquisition-related transaction and integration costs, capitalization and amortization of internally developed software costs, restructuring charges, gains on sale of business/assets, and other that were recorded in the line items indicated below (unaudited) (in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021

Stock-based compensation

Cost of sales

$

1,253

$

1,191

$

2,475

$

2,305

Sales and marketing

7,202

6,922

14,291

12,617

Research and development

6,271

6,180

12,359

11,893

General and administrative

5,951

5,854

11,680

10,520

Provision for income taxes

(1,993

)

(3,916

)

(4,648

)

(7,241

)

Total

$

18,684

$

16,231

$

36,157

$

30,094

Amortization of acquisition-related intangibles and fair value adjustments

Net sales

$

371

$

738

$

742

...