National Instruments Reports Q3 2016 Revenue of $306 Million

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)

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National Instruments
Condensed Consolidated Balance Sheets
(in thousands)
       
September 30, December 31,
2016 2015
 
Assets
Current assets:
Cash and cash equivalents $ 300,652 $ 251,129
Short-term investments 52,277 81,789
Accounts receivable, net 206,171 216,244
Inventories, net 196,391 185,197
Prepaid expenses and other current assets   55,281     65,381  
Total current assets 810,772 799,740
 
Property and equipment, net 261,859 257,853
Goodwill 261,372 257,718
Intangible assets, net 110,161 108,196
Other long-term assets   28,729     30,349  
Total assets $ 1,472,893   $ 1,453,856  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 53,192 $ 50,970
Accrued compensation 31,615 27,956
Deferred revenue - current 113,645 112,283
Accrued expenses and other liabilities 23,940 11,756
Other taxes payable   33,461     37,250  
Total current liabilities 255,853 240,215
 
Long-term debt 25,000 37,000
Deferred income taxes 37,787 44,673
Liability for uncertain tax positions 10,037 11,974
Deferred revenue - long-term 28,148 27,708
Other long-term liabilities   8,657     10,565  
Total liabilities   365,482     372,135  
 
Stockholders' equity:
Preferred stock - -
Common stock 1,289 1,275
Additional paid-in capital 758,411 717,705
Retained earnings 372,893 400,831
Accumulated other comprehensive loss   (25,182 )   (38,090 )
Total stockholders' equity   1,107,411     1,081,721  
Total liabilities and stockholders' equity $ 1,472,893   $ 1,453,856  
 
 
National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data, unaudited)
             
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016     2015
 
Net sales:
Product $ 278,521 $ 271,683 $ 816,486 $ 807,064
Software maintenance   27,843     28,129   83,161     84,053  
Total net sales 306,364 299,812 899,647 891,117
 
Cost of sales:
Product 74,734 75,144 225,261 225,646
Software maintenance   1,998     2,022   5,126     4,531  
Total cost of sales 76,732 77,166 230,387 230,177
       
Gross profit   229,632     222,646   669,260     660,940  
 
Operating expenses:
Sales and marketing 116,662 114,507 346,230 335,916
Research and development 59,066 52,533 178,244 168,462
General and administrative   24,537     23,255   74,308     69,391  
Total operating expenses   200,265     190,295   598,782     573,769  
 
Operating income 29,367 32,351 70,478 87,171
 
Other income (expense):
Interest income 276 396 787 1,089
Net foreign exchange (loss) gain (760 ) 286 (1,471 ) (1,965 )
Other (expense) income, net   301     133   (2,052 )   787  
 
Income before income taxes 29,184 33,166 67,742 87,082
 
Provision for income taxes   4,695     9,988   14,155     23,958  
 
Net income $ 24,489   $ 23,178 $ 53,587   $ 63,124  
 
Basic earnings per share $ 0.19   $ 0.18 $ 0.42   $ 0.49  
Diluted earnings per share $ 0.19   $ 0.18 $ 0.42   $ 0.49  
 
Weighted average shares outstanding -
basic 128,815 127,935 128,233 128,219
diluted 129,047 128,229 128,738 128,856
 
Dividends declared per share $ 0.20 $ 0.19 $ 0.60 $ 0.57
 
 
National Instruments
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
   
Nine Months Ended September 30,
2016     2015
 
Cash flow from operating activities:
Net income $ 53,587 $ 63,124
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 55,164 55,157
Stock-based compensation 19,635 19,151
Tax expense/(benefit) expense from deferred income taxes (7,321 ) (7,404 )
Tax benefit from stock option plans (439 ) (944 )
Net change in operating assets and liabilities   32,454     (8,603 )
Net cash provided by operating activities   153,080     120,481  
 
Cash flow from investing activities:
Capital expenditures (34,408 ) (28,102 )
Capitalization of internally developed software (24,048 ) (22,639 )
Additions to other intangibles (1,969 ) (2,240 )
Acquisitions, net of cash received (549 ) (28,629 )
Purchases of short-term investments (9,054 ) (29,649 )
Sales and maturities of short-term investments   38,566     44,752  
Net cash used by investing activities   (31,462 )   (66,507 )
 
Cash flow from financing activities:
Proceeds from revolving line of credit 15,000 42,000
Principal payments on revolving line of credit (27,000 ) (17,000 )
Proceeds from issuance of common stock 22,157 21,252
Repurchase of common stock (5,635 ) (72,559 )
Dividends paid (77,056 ) (73,406 )
Tax benefit from stock option plans   439     944  
Net cash used by financing activities   (72,095 )   (98,769 )
 
Net change in cash and cash equivalents 49,523 (44,795 )
Cash and cash equivalents at beginning of period   251,129     274,030  
Cash and cash equivalents at end of period $ 300,652   $ 229,235  
 
 
The following tables provide details with respect to the amount of GAAP charges related to stock-based compensation, amortization of acquisition intangibles, acquisition related transaction costs, restructuring charges, foreign exchange loss on acquisitions and taxes levied on the transfer of acquired intellectual property that were recorded in the line items indicated below (unaudited)
                 
Three Months Ended Nine Months Ended
September 30, June 30,
 
2016 2015 2016 2015
Stock-based compensation
Cost of sales $ 556 $ 499 $ 1,643 $ 1,427
Sales and marketing 2,635 2,854 8,422 8,303
Research and development 2,027 2,132 6,745 6,764
General and administrative   921     921     2,764     2,656  
Provision for income taxes   (2,092 )   (1,933 )   (6,202 )   (5,420 )
Total $ 4,047   $ 4,473   $ 13,372   $ 13,730  
 
Amortization of acquisition intangibles
Cost of sales $ 1,599 $ 2,643 $ 7,621 $ 7,858
Sales and marketing 502 423 2,141 1,299
Research and development 276 322 815 983
Other income, net   -     145     -     448  
Provision for income taxes   854     (1,152 )   1,312     (3,469 )
Total $ 3,231   $ 2,381   $ 11,889   $ 7,119  
 
Acquisition transaction costs, restructuring charges, and other
Cost of sales $ 74 $ 169 $ 253 $ 974
Sales and marketing 42 - 141 -
Research and development 236 - 648 -
General and administrative 97 238 317 442
Foreign exchange gain (loss) 1 - - 94 -
Other income (loss), net 2   -     -     2,475     -  
Provision for income taxes   (156 )   (59 )   (1,358 )   (390 )
Total $ 293   $ 348   $ 2,570   $ 1,026  
 
(1) Foreign exchange losses on acquisitions were $94 and $0 for the nine month periods ended September 30, 2016 and 2015, respectively
(2) Taxes levied on the transfer of acquired intellectual property were $2,475 and $0 for the nine month periods ended September 30, 2016 and 2015, respectively
 
 
National Instruments
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, unaudited)
                 
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
 
Reconciliation of Gross Profit to Non-GAAP Gross Profit
Gross profit, as reported $ 229,632 $ 222,646 $ 669,260 $ 660,940
Stock-based compensation 556 499 1,643 1,427
Amortization of acquisition intangibles 1,599 2,643 7,621 7,858
Acquisition transaction costs and restructuring charges   74     169     253     974  
Non-GAAP gross profit $ 231,861   $ 225,957   $ 678,777   $ 671,199  
Non-GAAP gross margin 75.7 % 75.4 % 75.4 % 75.3 %
 
Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
Operating expenses, as reported $ 200,265 $ 190,295 $ 598,782 $ 573,769
Stock-based compensation (5,583 ) (5,907 ) (17,931 ) (17,723 )
Amortization of acquisition intangibles (778 ) (745 ) (2,956 ) (2,282 )
Acquisition transaction costs and restructuring charges   (375 )   (238 )   (1,106 )   (442 )
Non-GAAP operating expenses $ 193,529   $ 183,405   $ 576,789   $ 553,322  
 
Reconciliation of Operating Income to Non-GAAP Operating Income
Operating income, as reported $ 29,367 $ 32,351 $ 70,478 $ 87,171
Stock-based compensation 6,139 6,406 19,574 19,150
Amortization of acquisition intangibles 2,377 3,388 10,577 10,140
Acquisition transaction costs and restructuring charges   449     407     1,359     1,416  
Non-GAAP operating income $ 38,332   $ 42,552   $ 101,988   $ 117,877  
Non-GAAP operating margin 12.5 % 14.2 % 11.3 % 13.2 %
 
Reconciliation of Income before income taxes to Non-GAAP Income before income taxes
Income before income taxes, as reported $ 29,184 $ 33,166 $ 67,742 $ 87,082
Stock-based compensation 6,139 6,406 19,574 19,150
Amortization of acquisition intangibles 2,377 3,533 10,577 10,588
Acquisition transaction costs and restructuring charges 449 407 1,359 1,416
Foreign exchange loss on acquisitions - - 94 -
Taxes levied on transfer of acquired intellectual property   -     -     2,474     -  
Non-GAAP income before income taxes $ 38,149   $ 43,512   $ 101,820   $ 118,236  
 
Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes
Provision for income taxes, as reported $ 4,695 $ 9,988 $ 14,155 $ 23,958
Stock-based compensation 2,092 1,933 6,202 5,420
Amortization of acquisition intangibles (854 ) 1,152 (1,312 ) 3,469
Acquisition transaction costs, restructuring charges, and other   156     59     1,358     390  
Non-GAAP provision for income taxes $ 6,089   $ 13,132   $ 20,403   $ 33,237  
 
 
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,
2016 2015 2016 2015
 
Net income, as reported $ 24,489 $ 23,178 $ 53,587 $ 63,124
Adjustments to reconcile net income to non-GAAP net income:
Stock-based compensation, net of tax effect 4,047 4,473 13,372 13,730
Amortization of acquisition intangibles, net of tax effect 3,231 2,381 11,889 7,119
Acquisition transaction costs, restructuring, and other, net of tax effect   293   348   2,570   1,026
Non-GAAP net income $ 32,060 $ 30,380 $ 81,418 $ 84,999
 
Basic EPS, as reported $ 0.19 $ 0.18 $ 0.42 $ 0.49

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

Impact of stock-based compensation, net of tax effect 0.03 0.04 0.10 0.11
Impact of amortization of acquisition intangibles, net of tax effect 0.03 0.02 0.09 0.06
Impact of acquisition transaction costs, restructuring, and other, net of tax effect   -   -   0.02   -
Non-GAAP basic EPS $ 0.25 $ 0.24 $ 0.63 $ 0.66
 
 
Diluted EPS, as reported $ 0.19 $ 0.18 $ 0.42 $ 0.49
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS
Impact of stock-based compensation, net of tax effect 0.03 0.04 0.10 0.11
Impact of amortization of acquisition intangibles, net of tax effect 0.03 0.02 0.09 0.06
Impact of acquisition transaction costs, restructuring, and other, net of tax effect   -   -   0.02   -
Non-GAAP diluted EPS $ 0.25 $ 0.24 $ 0.63 $ 0.66
 
Weighted average shares outstanding -
Basic   128,815   127,935   128,233   128,219
Diluted   129,047   128,229   128,738   128,856
 
 
National Instruments
Reconciliation of Net Income to EBITDA
(in thousands, unaudited)
                 
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Net income, as reported $ 24,489 $ 23,178 $ 53,587 $ 63,124
Adjustments to reconcile net income to EBITDA:
Interest income (53 ) (396 ) (194 ) (1,089 )
Tax expense 4,695 9,988 14,155 23,958
Depreciation and amortization   16,947     18,655     55,164     55,157  
EBITDA $ 46,078   $ 51,425   $ 122,712   $ 141,150  
Weighted average shares outstanding - Diluted   129,047     128,229     128,738     128,856  
 
 
Reconciliation of GAAP to Non-GAAP EPS Guidance
(unaudited)
Three months ended
December 31, 2016
 
Low High
GAAP Fully Diluted EPS, guidance $ 0.24 $ 0.36

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 and acquisition accounting adjustments, net of tax effect   0.04     0.04  
Non-GAAP diluted EPS, guidance $ 0.32   $ 0.44  
 
 
National Instruments
Reconciliation of GAAP Revenue Growth to Core Revenue Growth
(unaudited)
   
Three Months Ended,
September 30,
2016
YoY GAAP revenue growth, as reported $ 2 %
Effect of excluding our current largest customer   -1 %
YoY GAAP revenue growth, excluding our largest customer   1 %
Effect of excluding the impact of foreign currency exchange   3 %
YoY Core revenue growth $ 4 %
 
 
National Instruments
Reconciliation of GAAP Revenue Growth Guidance to Core Revenue Growth Guidance
(unaudited)
 
Three Months Ended
December 31,
2016
Estimated YoY GAAP revenue growth, as reported $ 1 %
Estimated effect of excluding our current largest customer   2 %
Estimated YoY GAAP revenue growth, excluding our largest customer   3 %
Estimated effect of excluding the impact of foreign currency exchange   2 %
Estimated YoY Core revenue growth $ 5 %

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