National Instruments Reports Record Quarterly Revenue

AUSTIN, Texas – July 29, 2008 – National Instruments (Nasdaq: NATI) reported record quarterly revenue of $210.5 million, up 17 percent year-over-year, in the second quarter of 2008. This was at the high end of NI’s guidance of between $198 million and $21


National Instruments Reports Record Quarterly Revenue
System-Level Orders Drive Q2 Revenue of $210 Million, Up 17 Percent Year-Over-Year


AUSTIN, Texas – July 29, 2008 – National Instruments (Nasdaq: NATI) reported record quarterly revenue of $210.5 million, up 17 percent year-over-year, in the second quarter of 2008. This was at the high end of NI’s guidance of between $198 million and $210 million. For the first half of 2008, the company reported revenue growth of 15 percent as compared to the first half of 2007.

Net income for Q2 2008 was $24.7 million, up 19 percent from Q2 last year, representing diluted earnings per share (EPS) of $0.31. Net margin was 12 percent in line with Q2 last year. Non-GAAP net income was $29.1 million, up 17 percent from Q2 last year, with fully diluted EPS of $0.37. Non-GAAP net margin was 14 percent in line with Q2 last year. 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.

“Our R&D investment in system-level platforms like PXI and CompactRIO helped drive the accelerated growth of our large orders in Q2, leading to record revenue and 17 percent revenue growth,” said Dr. James Truchard, NI president and CEO. “Our expanding product portfolio combined with our commitment to grow the field sales force should help us continue to expand into new application areas.”

NI virtual instrumentation and graphical system design products, which represent more than 90 percent of the company’s product portfolio, had 19 percent year-over-year revenue growth in Q2 2008. The performance of these products relative to the global PMI improved in Q2 and has been steadily improving over the last seven quarters. This underscores the company’s strategy of strong investment in R&D and field sales force expansion to drive new product success.


“I am pleased with the continued double-digit revenue growth of the company despite the significant weakening of the global industrial economy,” said Alex Davern, NI CFO. “Our strong competitive position and long-term investment strategy have allowed us to take the current industrial slowdown in stride as we continue to expand our sales force to benefit from the eventual recovery in the industrial economy. Our confidence in our ability to continue to drive good systems growth is reflected in our guidance for Q3 and Q4.


National Instruments Reports Record Quarterly Revenue




July 29, 2008
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Geographically, revenue in U.S. dollar terms for Q2 2008 compared to Q2 2007 was up 6 percent in the Americas, up 29 percent in Europe and up 25 percent in Asia, equaling overall growth of 17 percent. In local currency terms, revenue was up 10 percent in Europe and 19 percent in Asia.

During the quarter, the company capitalized $6.1 million of software development costs and amortized $2.5 million to cost of goods sold. For the first six months of the year, NI capitalized $7.6 million of software development costs and amortized $5.0 million to cost of goods sold. For the first six months of last year, the company capitalized $6 million of software development costs and amortized $4.3 million to cost of goods sold.


As of June 30, 2008, the company had $248 million in net cash and short-term investments, up $11 million from March 30, 2008. During the quarter, the company used $8.7 million for the payment of dividends and $8.6 million to repurchase 269,950 shares of its common stock at an average price of $31.72 per share. The NI Board of Directors declared a dividend of $0.11 per share on its common stock payable on Sept. 2, 2008, to shareholders of record on Aug. 11, 2008.

Q2 2008 Highlights
·        Record quarterly revenue of $210.5 million, up 17.3 percent year-over-year
·        Net income of $24.7  million, up 19 percent year-over-year
·        Non-GAAP net income of $29.1 million, up 17 percent year-over-year
·        Record revenue for USB data acquisition, industrial communications, modular instruments and the PXI platform
·        Strong growth of NI CompactRIO hardware and NI software and services
·        Cash and short-term investments of $248 million

Guidance for Q3 and Q4 2008


For Q3 2008, NI currently expects revenue to be in the range of $208 million to $218 million. This is equivalent to year-over-year revenue growth of between 13 percent and 18 percent. The company currently expects that GAAP fully diluted EPS will be in the range of $0.25 to $0.33 per share for Q3, with non-GAAP fully diluted EPS expected to be in the range of $0.31 to $0.39 per share.


For Q4, NI currently expects revenue to be in the range of $231 million to $245 million. This is equivalent to year-over-year revenue growth of between 13 percent and 20 percent. The company currently expects that GAAP fully diluted EPS will be in the range of $0.38 to $0.47 per share for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.44 to $0.53 per share.


In Q3 and Q4 2008, the company expects the impact of stock-based compensation and the impact of the amortization of acquisition-related intangibles, including the recent acquisition of microLEX, to be $0.06 per share. A reconciliation of the company’s Q3 and Q4 2008 guidance on a GAAP basis to its guidance on a non-GAAP basis is included as part of this news release.


National Instruments Reports Record Quarterly Revenue
July 29, 2008
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Non-GAAP Earnings Presentation and Non-GAAP Earnings Guidance


In addition to disclosing results determined in accordance with GAAP, NI discloses certain non-GAAP operating results that exclude certain charges. In this news release, the company has presented its gross profit, operating margin, net income and diluted EPS results for Q2 2008 and Q2 2007 and its guidance for Q3 2008 and Q4 2008, in each case on a GAAP and non-GAAP basis. When presenting non-GAAP results, the company includes a reconciliation of the non-GAAP results to the results under GAAP.


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. The economic substance behind management’s decision to use such non-GAAP measures relates to these charges being non-cash in nature and being a useful measure of the potential future performance of the company’s business.


In line with common industry practice and to help enable comparability with other technology companies, the company’s non-GAAP presentation excludes the impact of both stock-based compensation and the amortization of acquisition-related intangibles. Other companies may calculate non-GAAP results differently than the company, limiting its usefulness as a comparative measure. In addition, such non-GAAP measures may exclude financial information that some may consider important in evaluating the company’s performance. Management compensates for the foregoing limitations of non-GAAP measures by presenting certain information on both a GAAP and non-GAAP basis and providing reconciliations of these certain GAAP and non-GAAP measures.






National Instruments Reports Record Quarterly Revenue
July 29, 2008
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Interested parties can listen to a conference call today, July 29, beginning at 4:00 p.m. CDT, at www.ni.com/call. Replay information is available by calling (719) 457-0820, confirmation code #9418275, from July 29 at 7:00 p.m. CDT through August 5 at midnight CDT.

This release contains “forward-looking statements,” including statements related to the company’s product portfolio expansion and the growth of the NI field sales force being key to continuing expansion into new application areas; investment in R&D and sales force expansion by NI driving new product success; NI expansion of its sales force to benefit from eventual recovery in the industrial economy; systems growth; and NI guidance for Q3 2008 and Q4 2008, including, as applicable, revenue, GAAP and non-GAAP diluted EPS, the estimated impact of stock-based compensation and acquisition-related intangibles. These statements are subject to a number of risks and uncertainties, including the risk of further adverse changes in the global economy, delays in the release of new products, fluctuations in customer demand for NI products, manufacturing inefficiencies and foreign exchange fluctuations. Actual results may differ materially from the expected results. The company directs readers to documents filed 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 25,000 different companies worldwide, with no one customer representing more than 3 percent of revenue and no one industry representing more than 10 percent of revenue. Headquartered in Austin, Texas, NI has more than 4,800 employees and direct operations in nearly 40 countries. For the past nine 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.

CompactRIO, LabVIEW, microLEX, 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 Reports Record Quarterly Revenue
July 29, 2008
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National Instruments
Condensed Consolidated Balance Sheets
(in thousands)







































































































 June 30,


 December 31,


2008


2007


(unaudited)


Assets


Current assets:


Cash and cash equivalents


               222,025


              194,839


Short-term investments


                 26,317


                93,838


Accounts receivable, net


               130,183


              131,282


Inventories, net


                 95,674


                82,675


Prepaid expenses and other current assets


                 25,684


                23,312


Deferred income taxes, net


                 21,080


                19,264


Total current assets


               520,963


              545,210


Long-term investments


                 10,084


                       –  


Property and equipment, net


               154,455


              151,462


Goodwill, net


                 65,608


                54,111


Intangible assets, net


                 46,970


                40,357


Other long-term assets


                 30,197


                27,672


Total assets


               828,277


              818,812


Liabilities and Stockholders’ Equity


Current liabilities:


Accounts payable


                 38,949


                36,187


Accrued compensation


                 28,814


                25,778


Deferred revenue