National Instruments Reports Strong Increase in Q3 Revenue

National Instruments Reports Strong 8 Percent Sequential Increase in Q3 Revenue. Company Guides to Strong Sequential Q4 Revenue Growth


AUSTIN, Texas – Oct. 27, 2009 – National Instruments (Nasdaq: NATI) 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.


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.


National Instruments Reports Strong  8 Percent Sequential Increase in Q3 Revenue
Oct. 27, 2009


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.


National Instruments Reports Strong  8 Percent Sequential Increase in Q3 Revenue
Oct. 27, 2009


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.


National Instruments Reports Strong  8 Percent Sequential Increase in Q3 Revenue
Oct. 27, 2009


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.


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