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National Instruments Reports Record Revenue and Net Income for 2014

Company Delivered on Operating Leverage Target for 2014 and Increases Dividend

Q4 2014 Highlights

AUSTIN, Texas — (BUSINESS WIRE) — January 29, 2015 — NI (Nasdaq: NATI) today announced Q4 revenue of $333 million, up 11 percent year-over-year. The company’s total orders were up 13 percent for the quarter with orders under $20,000 up 5 percent year-over-year; orders between $20,000 and $100,000 up 13 percent year-over-year; and orders above $100,000 up 36 percent year-over-year. In Q4 2014, NI recognized $7 million in revenue from its largest customer, compared with $4 million recognized in Q4 2013.

GAAP net income for Q4 was $43 million, with fully diluted earnings per share (EPS) of $0.34, and non-GAAP net income was $51 million, with non-GAAP fully diluted EPS of $0.40. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $73 million, or $0.57 per share in the fourth quarter.

In Q4, GAAP gross margin was 75 percent and non-GAAP gross margin was 76 percent, up 10 basis points from Q4 2013. Total GAAP operating expenses were $194 million, up 4 percent year-over-year. Total non-GAAP operating expenses were $187 million, up 5 percent year-over-year.

GAAP operating margin was 17 percent in Q4, with GAAP operating income of $55 million, up 39 percent year-over-year. Non-GAAP operating margin was 20 percent in Q4, with non-GAAP operating income of $66 million, up 30 percent year-over-year.

The company’s non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles and acquisition transaction costs and restructuring charges. Reconciliations of the company’s GAAP and non-GAAP results are included as part of this news release.

“We have built and continue to run our company for long-term, sustainable growth,” said Dr. James Truchard, NI president, CEO and cofounder. “Over the course of several decades, we have successfully managed the business through various economic and currency cycles, and we are prepared to navigate the near-term disruptions resulting from currency fluctuations. Our differentiated platform continues to deliver on our strategy of reducing the costs of our customers’ systems, while growing our business in the markets we serve.”

Geographic revenue in U.S. dollar terms for Q4 2014 compared with Q4 2013 was up 5 percent in the Americas, up 8 percent in Europe, up 24 percent in East Asia and up 11 percent in Emerging Markets. In constant currency terms, revenue was up 10 percent in Europe, up 26 percent in East Asia and up 23 percent in Emerging Markets.

As of Dec. 31, NI had $471 million in cash and short-term investments, up $78 million for the year. The NI Board of Directors also approved an increase in the quarterly dividend from $0.15 per share to $0.19 per share on the company’s common stock payable on March 9, 2015, to stockholders of record on Feb. 17, 2015.

FY 2014 Highlights

Full-year 2014 revenue was $1.24 billion, up 6 percent year-over-year. GAAP net income for 2014 was $126 million, with fully diluted GAAP EPS of $0.99, and non-GAAP net income was $156 million, with fully diluted EPS of $1.22.

Guidance for Q1 2015

“2014 was a year of great progress for NI. We delivered a strong finish to the year with record revenue, record profit and record cash. Our employees executed well, and the strength of our differentiated platform continued to gain market share,” said Alex Davern, NI COO and CFO. “Though we are cautious given the macroeconomic environment, we remain focused on leveraging our previous investments to drive sustained revenue growth. We are confident in our ability to continue to make progress toward our non-GAAP operating margin target of 18 percent.”

The Company expects to see a significant headwind to our USD revenue growth due to the impact of the strengthening of the USD. Currently we expect this impact to reduce our YOY USD revenue growth by approximately 500 basis points in Q1, so that our constant currency growth would be 5 percentage points higher than our USD revenue growth. This estimate is based on current exchange rates and can change as exchange rates fluctuate over the rest of the quarter.

As a result, we currently expect revenue for Q1 to be in the range of $280 million to $310 million. At the midpoint this represents 4 percent YOY revenue growth in USD and approximately 9 percent YOY revenue growth in constant currency. We currently expect that GAAP fully diluted EPS will be in the range of $0.11 to $0.23 for Q1, with non-GAAP fully diluted EPS expected to be in the range of $0.17 to $0.29. Included in our guidance is an expected loss on foreign exchange of $3 million or $0.02 for Q1 as a result of revaluing our receivables at current exchange rates. If exchange rates stabilize at their current levels then we would not expect this impact to repeat in Q2.

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 12-month periods ending Dec. 31, 2014 and 2013, 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 adjustments, acquisition-related transaction costs and restructuring charges in managing its operations. Specifically, management uses non-GAAP measures to plan and forecast future periods; to establish operational goals; to compare with its business plan and individual operating budgets; to measure management performance for the purposes of executive compensation, including payments to be made under bonus plans; to assist the public in measuring the company’s performance relative to the company’s long-term public performance goals; to allocate resources; and, relative to the company’s historical financial performance, to enable comparability between periods. Management also considers such non-GAAP results to be an important supplemental measure of its performance.

This news release also discloses the company’s EBITDA and EBITDA diluted EPS for the three- and 12-month periods ending Dec. 31, 2014 and 2013. 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 and EBITDA diluted EPS to GAAP net income and GAAP diluted EPS is included with this news release.

Conference Call Information and Availability of Presentation Materials

Interested parties can listen to the Q4 2014 conference call today, Jan. 29, at 4:00 p.m. CT at ni.com/call. Replay information is available by calling (855) 859-2056, confirmation code #10295526, shortly after the call through Jan. 31 at 11:00 p.m. CT, or by visiting the company’s website at ni.com/call. You may also view certain presentation materials that we may refer to on the conference call at ni.com/nati.

Forward-Looking Statements

This release contains “forward-looking statements,” including statements regarding continuing to run our company for long-term, sustainable growth, that we are prepared to navigate the near-term disruptions resulting from currency fluctuations, that our differentiated platform continues to deliver on our strategy of reducing the costs of our customers’ systems, while growing our business in the markets we serve, the strength of our differentiated platform continued to gain market share, being cautious of the current macroeconomic challenges, remaining focused on leveraging previous investments to drive sustained revenue growth, being confident in our ability to continue to make progress towards our non-GAAP operating margin target of 18 percent, expecting gross margins to be up sequentially in Q1, our guidance for Q1 revenue and GAAP and Non-GAAP fully diluted EPS, expected loss on foreign exchange of $3 million or $0.02 for Q1 and that if exchange rates stabilize then we would not expect this impact to repeat in Q2. These statements are subject to a number of risks and uncertainties, including the risk of adverse changes or fluctuations in the global economy, foreign exchange fluctuations, component shortages, delays in the release of new products, fluctuations in customer demand for NI products including orders from NI’s largest customer, fluctuations in average order size and customer mix, the company’s ability to effectively manage its operating expenses, manufacturing inefficiencies and the level of capacity utilization, and the impact of any acquisitions by NI. Actual results may differ materially from the expected results.

The company directs readers to its Form 10-K for the fiscal year ended Dec. 31, 2013, and its Form 10-Q for the quarter ended September 30, 2014, and the other documents it files with the SEC for other risks associated with the company’s future performance.

About NI

Since 1976, NI ( www.ni.com) has made it possible for engineers and scientists to solve the world’s greatest engineering challenges with powerful, flexible technology solutions that accelerate productivity and drive rapid innovation. Customers from a wide variety of industries – from healthcare to automotive and from consumer electronics to particle physics – use NI’s integrated hardware and software platform to improve the world we live in. (NATI-F)

CompactRIO, 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, unaudited)
     
December 31, December 31,
2014   2013
 
Assets
Current assets:
Cash and cash equivalents $ 274,030 $ 230,263
Short-term investments 197,163 163,149
Accounts receivable, net 202,329 180,680
Inventories, net 173,052 172,109
Prepaid expenses and other current assets 70,075 49,001
Deferred income taxes, net   31,171       33,393
Total current assets 947,820 828,595
 
Property and equipment, net 264,086 260,568
Goodwill 144,325 146,520
Intangible assets, net 78,282 82,310
Other long-term assets   20,978     25,558
Total assets $ 1,455,491   $ 1,343,551
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 58,603 $ 56,614
Accrued compensation 33,774 25,189
Deferred revenue - current 105,964 96,117
Accrued expenses and other liabilities 14,714 17,627
Other taxes payable   34,602       29,808
Total current liabilities 247,657 225,355
 
Deferred income taxes 47,406 44,620
Liability for uncertain tax positions 10,127 23,572
Deferred revenue - long-term 26,452 21,389
Other long-term liabilities   6,353     5,531
Total liabilities   337,995     320,467
 
Stockholders' equity:
Preferred stock - -
Common stock 1,278 1,257
Additional paid-in capital 662,889 604,330
Retained earnings 464,993 414,947
Accumulated other comprehensive (loss) income   (11,664 )   2,550
Total stockholders' equity   1,117,496     1,023,084
Total liabilities and stockholders' equity $ 1,455,491   $ 1,343,551
 
 

National Instruments

Condensed Consolidated Statements of Income
(in thousands, except per share data, unaudited)
         
Three Months Ended Year Ended
December 31, December 31,
2014 2013 2014 2013
 
Net sales:
Product $ 305,176 $ 280,523 $ 1,143,000 $ 1,091,186
Software maintenance   27,600     20,283     100,862     81,372  
Total net sales 332,776 300,806 1,243,862 1,172,558
 
Cost of sales:
Product 83,094 74,900 312,623 299,854
Software maintenance   1,066     1,082     5,509     5,389  
Total cost of sales 84,160 75,982 318,132 305,243
       
Gross profit   248,616     224,824     925,730     867,315  
 
Operating expenses:
Sales and marketing 113,819 109,916 461,845 447,800
Research and development 57,351 54,276 227,433 234,796
General and administrative 22,411 21,055 91,265 87,418
Acquisition related adjustment   -     -     -     (1,316 )
Total operating expenses   193,581     185,247     780,543     768,698  
 
Operating income 55,035 39,577 145,187 98,617
 
Other income (expense):
Interest income 340 184 1,133 679
Net foreign exchange loss (1,245 ) (521 ) (2,250 ) (2,578 )
Other (loss) income, net   (352 )   (278 )   (69 )   450  
 
Income before income taxes 53,778 38,962 144,001 97,168
 
Provision for income taxes   10,393     7,234     17,668     16,655  
 
Net income $ 43,385   $ 31,728   $ 126,333   $ 80,513  
 
Basic earnings per share $ 0.34   $ 0.25   $ 0.99   $ 0.65  
Diluted earnings per share $ 0.34   $ 0.25   $ 0.99   $ 0.64  
 
Weighted average shares outstanding -
basic 127,755 125,489 127,030 124,558
diluted 128,233 126,217 127,799 125,571
 
Dividends declared per share $ 0.15 $ 0.14 $ 0.60 $ 0.56
 
 
National Instruments
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
   
Year Ended December 31,
2014   2013
Cash flow from operating activities:
Net income $ 126,333 $ 80,513
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 70,206 67,974
Stock-based compensation 25,759 28,992
Tax expense/(benefit) from deferred income taxes 5,886 (4,353 )
Tax benefit from stock option plans (1,242 ) (2,407 )
Changes in operating assets and liabilities:
Accounts receivable (21,649 ) 6,820
Inventories (943 ) (1,563 )
Prepaid expenses and other assets (25,046 ) (1,767 )
Accounts payable 1,989 (8,604 )
Deferred revenue 14,910 6,346
Taxes and other liabilities   (1,097 )   (2,472 )
Net cash provided by operating activities   195,106     169,479  
 
Cash flow from investing activities:
Capital expenditures (44,944 ) (47,796 )
Capitalization of internally developed software (25,781 ) (14,883 )
Additions to other intangibles (2,834 ) (5,182 )
Purchases of short-term investments (123,849 ) (70,354 )
Sales and maturities of short-term investments   89,835     80,371  
Net cash used in investing activities   (107,573 )   (57,844 )
 
Cash flow from financing activities:
Proceeds from issuance of common stock 31,277 39,319
AWR earnout payment - (15,318 )
Dividends paid (76,285 ) (69,776 )
Tax benefit from stock option plans   1,242     2,407  
Net cash used in financing activities   (43,766 )   (43,368 )
 
Net change in cash and cash equivalents 43,767 68,267
Cash and cash equivalents at beginning of period   230,263     161,996  
Cash and cash equivalents at end of period $ 274,030   $ 230,263  
 
 
National Instruments
Detail of GAAP charges related to revenue, stock-based compensation, amortization of acquisition intangibles and acquisition transaction costs and restructuring charges
(in thousands, unaudited)
         
Three Months Ended Year Ended
December 31, December 31,
 
2014 2013 2014 2013
Stock-based compensation
Cost of sales $ 447 $ 439 $ 1,711 $ 1,658
Sales and marketing 2,597 2,882 10,931 11,789
Research and development 2,428 2,728 9,649 11,864
General and administrative 810 890 3,467 3,624
Provision for income taxes   (1,497 )   (3,216 )   (7,414 )   (9,801 )
Total $ 4,785   $ 3,723   $ 18,344   $ 19,134  
 
 
Amortization of acquisition intangibles
Cost of sales $ 2,660 $ 2,673 $ 10,651 $ 10,718
Sales and marketing 433 482 1,784 1,988
Research and development 369 405 1,567 2,043
Other income, net 165 185 672 751
Provision for income taxes   (1,199 )   (1,231 )   (4,846 )   (5,081 )
Total $ 2,428   $ 2,514   $ 9,828   $ 10,419  
 
Acquisition related transaction costs and restructuring charges
Cost of sales $ 742 $ 21 $ 1,289 $ 28
Sales and marketing 37 189 189 595
Research and development 178 410 442 1,101
General and administrative 96 80 241 326
Acquisition related adjustment - - - (1,316 )
Provision for income taxes   (286 )   (133 )   (674 )   (545 )
Total $ 767   $ 567   $ 1,487   $ 189  
   
 
National Instruments
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, unaudited)
     
Three Months Ended Year Ended
December 31, December 31,
2014 2013 2014 2013
Reconciliation of Gross Profit to Non-GAAP Gross Profit
Gross profit, as reported $ 248,616 $ 224,824 $ 925,730 $ 867,315
Stock-based compensation 447 439 1,711 1,658
Amortization of acquisition intangibles 2,660 2,673 10,651 10,718
Acquisition transaction costs and restructuring charges   742     21     1,289     28  
Non-GAAP gross profit $ 252,465   $ 227,957   $ 939,381   $ 879,719  
Non-GAAP gross margin 76 % 76 % 76 % 75 %
 
Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
Operating expenses, as reported $ 193,581 $ 185,247 $ 780,543 $ 768,698
Stock-based compensation (5,835 ) (6,500 ) (24,047 ) (27,277 )
Amortization of acquisition intangibles (802 ) (887 ) (3,351 ) (4,031 )
Acquisition related adjustment - - - 1,316
Acquisition transaction costs and restructuring charges   (311 )   (679 )   (872 )   (2,022 )
Non-GAAP operating expenses $ 186,633   $ 177,181   $ 752,273   $ 736,684  
 
Reconciliation of Operating Income to Non-GAAP Operating Income
Operating income, as reported $ 55,035 $ 39,577 $ 145,187 $ 98,617
Stock-based compensation 6,282 6,939 25,758 28,935
Amortization of acquisition intangibles 3,462 3,560 14,002 14,749
Acquisition related adjustment - - - (1,316 )
Acquisition transaction costs and restructuring charges   1,053     700     2,161     2,050  
Non-GAAP operating income $ 65,832   $ 50,776   $ 187,108   $ 143,035  
Non-GAAP operating margin 20 % 17 % 15 % 12 %
 
Reconciliation of Income before income taxes to Non-GAAP Income before income taxes
Income before income taxes, as reported $ 53,778 $ 38,962 $ 144,001 $ 97,168
Stock-based compensation 6,282 6,939 25,758 28,935
Amortization of acquisition intangibles 3,627 3,745 14,674 15,500
Acquisition related adjustment - - - (1,316 )
Acquisition transaction costs and restructuring charges   1,053     700     2,161     2,050  
Non-GAAP income before income taxes $ 64,740   $ 50,346   $ 186,594   $ 142,337  
 
Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes
Provision for income taxes, as reported $ 10,393 $ 7,234 $ 17,668 $ 16,655
Stock-based compensation 1,497 3,216 7,414 9,801
Amortization of acquisition intangibles 1,199 1,231 4,846 5,081
Acquisition transaction costs and restructuring charges   286     133     674     545  
Non-GAAP provision for income taxes $ 13,375   $ 11,814   $ 30,602   $ 32,082  
 
 

National Instruments

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 Year Ended
December 31, December 31,
2014 2013 2014 2013
 
Net income, as reported $ 43,385 $ 31,728 $ 126,333 $ 80,513
Adjustments to reconcile net income to non-GAAP net income:
Stock-based compensation, net of tax effect 4,785 3,723 18,344 19,134
Amortization of acquisition intangibles, net of tax effect 2,428 2,514 9,828 10,419
Acquisition related adjustment - - - (1,316 )
Acquisition transaction costs and restructuring charges, net of tax effect   767   567   1,487   1,505  
Non-GAAP net income $ 51,365 $ 38,532 $ 155,992 $ 110,255  
 
Basic EPS, as reported $ 0.34 $ 0.25 $ 0.99 $ 0.65
Adjustment to reconcile basic EPS to non-GAAP basic EPS
Impact of stock-based compensation, net of tax effect 0.04 0.03 0.15 0.16
Impact of amortization of acquisition intangibles, net of tax effect 0.02 0.02 0.08 0.08
Acquisition related adjustment - - - (0.01 )
Impact of acquisition transaction costs and restructuring charges, net of tax effect   -   0.01   0.01   0.01  
Non-GAAP basic EPS $ 0.40 $ 0.31 $ 1.23 $ 0.89  
 
 
Diluted EPS, as reported $ 0.34 $ 0.25 $ 0.99 $ 0.64
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS
Impact of stock-based compensation, net of tax effect 0.04 0.03 0.14 0.16
Impact of amortization of acquisition intangibles, net of tax effect 0.02 0.02 0.08 0.08
Acquisition related adjustment - - - (0.01 )
Impact of acquisition transaction costs and restructuring charges, net of tax effect   -   0.01   0.01   0.01  
Non-GAAP diluted EPS $ 0.40 $ 0.31 $ 1.22 $ 0.88  
 
Weighted average shares outstanding -
Basic   127,755   125,489   127,030   124,558  
Diluted   128,233   126,217   127,799   125,571  
 
 
National Instruments
Reconciliation of Net Income and Diluted EPS to EBITDA and EBITDA Diluted EPS
(in thousands, except per share data, unaudited)
         
Three Months Ended Year Ended
December 31, December 31,
2014 2013 2014 2013
Net income, as reported $ 43,385 $ 31,728 $ 126,333 $ 80,513
Adjustments to reconcile net income to EBITDA:
Interest income (340 ) (184 ) (1,133 ) (679 )
Tax expense 10,393 7,234 17,668 16,655
Depreciation and amortization   19,195     17,077     70,206     67,974  
EBITDA $ 72,633   $ 55,855   $ 213,074   $ 164,463  
 
Diluted EPS, as reported $ 0.34 $ 0.25 $ 0.99 $ 0.64
Adjustment to reconcile diluted EPS to EBITDA
Interest income - - (0.01 ) -
Taxes 0.08 0.05 0.14 0.13
Depreciation and amortization   0.15     0.14     0.55     0.54  
EBITDA diluted EPS $ 0.57   $ 0.44   $ 1.67   $ 1.31  
       
Weighted average shares outstanding - Diluted   128,233     126,217     127,799     125,571  
 
 
Reconciliation of GAAP to Non-GAAP EPS Guidance
(unaudited)
    Three months ended
March 31, 2015
 
Low High
GAAP Fully Diluted EPS, guidance $

0.11

$

0.23

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

Impact of stock-based compensation, net of tax effect 0.04 0.04
Impact of amortization of acquisition intangibles, net of tax effect 0.02 0.02
   
Non-GAAP diluted EPS, guidance $

0.17

$

0.29


Contact:

National Instruments
Marissa Vidaurri, 512-683-5215
Investor Relations
Email Contact