NATI - NI Reports Record Revenue for a Second Quarter

July, 29 2021 04:05 PM National Instruments Corporation

Revenue of $347 million exceeds high end of guidance as momentum continues into Q3

Q 2 2021 Summary

Record GAAP revenue for a second quarter of $347 million, up 15 percent year over year
Record orders for a second quarter up 33 percent year over year
Strong GAAP operating income of $25 million, up 50 percent year over year
Record non-GAAP operating income for a second quarter of $60 million, up 38 percent year over year
Strong diluted GAAP EPS of $0.13 and record diluted non-GAAP EPS for a second quarter of $0.35
Cash and short-term investments of $265 million as of June 30, 2021

National Instruments Corporation (Nasdaq: NATI) today announced Q2 2021 revenue of $347 million, up 15 percent year over year, a record for a second quarter.

In Q2 2021 the value of the company's orders was up 33 percent year over year. For Q2 2021, year over year orders were up 22 percent in the Americas, up 51 percent in EMEA, and up 36 percent in APAC.

Geographic revenue in U.S. dollar terms for Q2 2021 compared with Q2 2020 was up 11 percent in the Americas, up 17 percent in APAC and up 19 percent in EMEA. Historical revenue from these three regions can be found on NI’s investor website at www.ni.com/nati .

In Q2, GAAP gross margin was 71 percent and non-GAAP gross margin was 75 percent. Total GAAP operating expenses were $223 million. Total non-GAAP operating expenses were $200 million. GAAP operating income for Q2 was $25 million with non-GAAP operating income of $60 million. GAAP net income for Q2 was $17 million and non-GAAP net income was $47 million, with GAAP diluted EPS of $0.13 and non-GAAP diluted EPS of $0.35. Our GAAP diluted EPS was above the high-end of our guidance while our non-GAAP diluted EPS was at the high-end of our guidance.

“We were very pleased with the strong results in the second quarter with revenue exceeding the high end of guidance. Momentum in customer demand continued with the total value of orders for Q2 up 33 percent year-over-year. This represents record orders for a second quarter and double-digit growth year-over-year across all industries and all regions,” said Eric Starkloff, NI President and CEO. “We believe these results are proof that our strategy is working, and our continued market focus is paying off.”

"We delivered record non-GAAP Operating Income for a second quarter, up 38 percent year-over-year. While we continue to invest in areas of critical importance, our focus on driving scale is making our business model more resilient,” said Karen Rapp, NI CFO. “We remain committed to the execution of our growth strategy while also improving our profitability in order to ensure our priority of maximizing shareholder value."

As of June 30, 2021, NI had $265 million in cash and short-term investments. During the second quarter, NI paid $36 million in dividends. The NI Board of Directors approved a quarterly dividend of $0.27 per share payable on August 30, 2021, to stockholders of record on August 9, 2021.

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.

H1 2021 Summary

Record GAAP revenue for a first half of $682 million, up 12 percent year over year
Strong GAAP operating income of $34 million
Record non-GAAP operating income for a first half of $111 million
Strong diluted GAAP EPS of $0.16 and record diluted non-GAAP EPS for a first half of $0.67

Guidance

Q3 GAAP revenue to be in the range of $355 million to $385 million, up 20 percent year over year at the midpoint
GAAP diluted EPS to be in the range of $0.10 to $0.24 for Q3, up 21 cents year over year at the midpoint
Non-GAAP diluted EPS expected to be in the range of $0.31 to $0.45, up 65 percent year over year at the midpoint

Conference Call Information

Interested parties can listen to the Q2 2021 earnings conference call with NI Management today, at ni.com/call or by dial (855) 212-2361 and enter confirmation code 6289401. Replay information is available by calling (855) 859-2056, confirmation code 6289401, shortly after the call through August 2 at 11:59 p.m. CT or by visiting the company’s website at www.ni.com/call .

Non-GAAP Presentation

To supplement NI’s financial statements presented on a GAAP basis, NI has provided non-GAAP financial information, including GAAP revenue or net sales, gross profit, gross margin, operating expenses, operating income, operating margin, provision for income taxes, net income, net margin, diluted EPS and EBITDA. A reconciliation of the adjustments to GAAP results is included in the tables below. 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 long-term financial model, our continued momentum across regions and business units, our opportunities to drive growth, profitability and efficiency in our business, confidence in our software strategy, and our guidance and expectations for our Q3 2021 revenue, diluted EPS, backlog and lead times. 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 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; cyber-attacks; the dependency of our product revenue on certain industries and the risk of contractions in such industries; fluctuations in demand for our products including orders from our large customers; 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; component shortages; 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 and technical personnel; the 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 ability to achieve the benefits of employee restructuring plans; our exposure to large orders; our ability to effectively manage our operating expenses and meet budget; expense overruns; manufacturing inefficiencies and the level of capacity utilization; 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; adverse effects of price changes; and changes in accounting principles. The company directs readers to its Form 10-K for the year ended December 31, 2020, 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.

About NI

LabVIEW, NI (ni.com) develops high-performance automated test and automated measurement systems to help you solve your engineering challenges now and into the future. Our open, software-defined platform uses modular hardware and an expansive ecosystem to help you turn powerful possibilities into real solutions. (NATI-F)

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)

June 30,
December 31,

2021
2020

(unaudited)

Assets


Cash and cash equivalents
$
250,421

$
260,232

Short-term investments
14,110

59,923

Accounts receivable, net
258,641

266,869

Inventories, net
211,023

194,012

Prepaid expenses and other current assets
80,121

68,470

Total current assets
814,316

849,506

Property and equipment, net
250,761

254,399

Goodwill
483,136

467,547

Intangible assets, net
149,126

172,719

Operating lease right-of-use assets
57,812

67,674

Other long-term assets
76,878

72,643

Total assets
$
1,832,029

$
1,884,488




Liabilities and Stockholders' Equity


Accounts payable and accrued expenses
$
56,477

$
51,124

Accrued compensation
68,932

87,068

Deferred revenue - current
125,986

132,151

Operating lease liabilities - current
13,389

15,801

Other taxes payable
39,339

48,129

Debt, current
—

5,000

Other current liabilities
26,854

42,578

Total current liabilities
330,977

381,851

Deferred income taxes
28,359

25,288

Income tax payable - non-current
54,195

61,623

Deferred revenue - non-current
34,624

36,335

Operating lease liabilities - non-current
29,512

35,854

Debt, noncurrent
100,000

92,036

Other long-term liabilities
18,710

26,630

Total liabilities
$
596,377

$
659,617

Stockholders' equity:


Common stock
1,330

1,312

Additional paid-in capital
1,087,622

1,033,284

Retained earnings
161,475

211,101

Accumulated other comprehensive loss
(14,775
)
(20,826
)
Total stockholders' equity
1,235,652

1,224,871

Total liabilities and stockholders' equity
$
1,832,029

$
1,884,488

National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data, unaudited)





Three Months Ended
Six Months Ended

June 30,
June 30,

2021
2020
2021
2020





Net sales:




Product
$
306,490

$
266,261

$
601,583

$
540,239

Software maintenance
40,206

35,068

80,295

70,470

Total net sales
346,696

301,329

681,878

610,709






Cost of sales:




Product
95,722

83,795

187,379

165,866

Software maintenance
3,516

2,106

7,273

3,796

Total cost of sales
99,238

85,901

194,652

169,662






Gross profit
247,458

215,428

487,226

441,047


71.4%


71.5%


71.5%


72.2%


Operating expenses:




Sales and marketing
111,199

105,419

227,983

221,165

Research and development
81,434

64,225

161,520

135,846

General and administrative
30,277

29,369

63,636

55,549

Total operating expenses
222,910

199,013

453,139

412,560

Gain on sale of business/assets
—

—

—

159,753

Operating income
24,548

16,415

34,087

188,240

Other expense
(2,963
)
(1,143
)
(8,031
)
(583
)
Income before income taxes
21,585

15,272

26,056

187,657

Provision for income taxes
4,279

4,383

4,254

44,113

Net income
$
17,306

$
10,889

$
21,802

$
143,544






Basic earnings per share
$
0.13

$
0.08

$
0.17

$
1.10

Diluted earnings per share
$
0.13

$
0.08

$
0.16

$
1.09






Weighted average shares outstanding -




Basic
132,498

131,014

131,996

130,813

Diluted
133,539

131,602

133,157

131,499






Dividends declared per share
$
0.27

$
0.26

$
0.54

$
0.52

Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)

Six Months Ended June 30,

2021
2020


Cash flow from operating activities:


Net income
$
21,802

$
143,544

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


Disposal gains on sale of business/asset
—

(159,753
)
Depreciation and amortization
50,024

38,341

Stock-based compensation
37,208

27,335

Loss from equity-method investees
5,360

1,932

Deferred income taxes
1,301

2,711

Net change in operating assets and liabilities
(63,372
)
47,388

Net cash provided by operating activities
52,323

101,498




Cash flow from investing activities:


Acquisitions, net of cash received
(19,784
)
—

Capital expenditures
(17,411
)
(25,362
)
Proceeds from sale of assets/business, net of cash divested
—

160,266

Capitalization of internally developed software
(721
)
(3,108
)
Additions to other intangibles
(1,519
)
(630
)
Payments to acquire equity-method investments
(12,551
)
—

Purchases of short-term investments
—

(206,330
)
Sales and maturities of short-term investments
45,671

306,955

Net cash (used in) provided by investing activities
(6,315
)
231,791




Cash flow from financing activities:


Proceeds from revolving loan facility
100,000

20,000

Proceeds from term loan
—

70,000

Payments on term loan
(98,750
)
—

Debt issuance costs
(1,993
)
(1,480
)
Proceeds from issuance of common stock
17,239

17,252

Repurchase of common stock
—

(23,680
)
Dividends paid
(71,428
)
(68,156
)
Net cash (used in) provided by financing activities
(54,932
)
13,936




Impact of changes in exchange rates on cash
(887
)
(636
)



Net change in cash and cash equivalents
(9,811
)
346,589

Cash and cash equivalents at beginning of period
260,232

194,616

Cash and cash equivalents at end of period
$
250,421

$
541,205

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,






2021
2020
2021
2020
Stock-based compensation




Cost of sales
$
1,191

$
932

$
2,305

$
1,736

Sales and marketing
6,922

6,467

12,617

11,642

Research and development
6,180

4,428

11,893

7,947

General and administrative
5,854

3,404

10,520

6,008

Provision for income taxes
(3,916
)
(2,905
)
(7,241
)
(4,406
)
Total
$
16,231

$
12,326

$
30,094

$
22,927






Amortization of acquisition-related intangibles and fair value adjustments




Net sales
$
738

$
—

$
1,551

$
—

Cost of sales
4,226

635

8,497

1,381

Sales and marketing
2,357

480

4,528

966

Research and development
—

28

—

55

Other expense
554

117

948

241

Provision for income taxes
(979
)
(133
)
(1,969
)
(290
)
Total
$
6,896

$
1,127

$
13,555

$
2,353






Acquisition transaction and integration costs, restructuring charges, and other ⁽¹⁾⁽²⁾




Cost of sales
$
(118
)
$
—

$
(43
)
$
20

Sales and marketing
839

1,239

5,487

7,612

Research and development
548

147

1,036

4,816

General and administrative
873

3,399

6,539

2,385

Gain on sale of business/assets
—

—

—

(159,753
)
Other expense
280

—

4,006

128

Provision for income taxes
(578
)
(78
)
(3,463
)
34,676

Total
$
1,844

$
4,707

$
13,562

$
(110,116
)
(1): During the first quarter of 2020, we recognized a gain of approximately $160 million related to the divestiture of AWR, presented within "Gain on sale of business/assets".
(2): During the first quarter of 2021, we recognized a $3.5 million impairment loss related to one of our equity-method investments.





Capitalization and amortization of internally developed software costs




Cost of sales
$
6,227

$
7,144

$
13,101

$
14,226

Research and development
(495
)
(1,181
)
(721
)
(3,095
)
Provision for income taxes
(1,204
)
(1,252
)
(2,600
)
(2,337
)
Total
$
4,528

$
4,711

$
9,780

$
8,794

National Instruments
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, unaudited)






Three Months Ended
Six Months Ended

June 30,
June 30,

2021
2020
2021
2020





Reconciliation of Net sales to Non-GAAP Net sales




Net sales, as reported
$
346,696

$
301,329

$
681,878

$
610,709

plus: Impact of acquisition-related fair value adjustments

738


—


1,551


—

Non-GAAP net sales
$
347,434


301,329


683,429

$
610,709






Reconciliation of Gross Profit to Non-GAAP Gross Profit




Gross profit, as reported
$
247,458

$
215,428

$
487,226

$
441,047

Stock-based compensation

1,191


932


2,305


1,736

Amortization of acquisition-related intangibles and fair value adjustments

4,964


635


10,048


1,381

Acquisition transaction and integration costs, restructuring charges and other

(118
)

—


(43
)

20

Amortization of internally developed software costs

6,227


7,144


13,101


14,226

Non-GAAP gross profit
$
259,722

$
224,139

$
512,637

$
458,410

Non-GAAP gross margin
74.8%
74.4%
75.0%
75.1%





Reconciliation of Operating Expenses to Non-GAAP Operating Expenses




Operating expenses, as reported
$
222,910

$
199,013

$
453,139

$
412,560

Stock-based compensation

(18,956
)

(14,299
)

(35,030
)

(25,597
)
Amortization of acquisition-related intangibles and fair value adjustments

(2,357
)

(508
)

(4,528
)

(1,021
)
Acquisition transaction and integration costs, restructuring charges and other

(2,260
)

(4,785
)

(13,062
)

(14,813
)
Capitalization of internally developed software costs

495


1,181


721


3,095

Non-GAAP operating expenses
$
199,832

$
180,602

$
401,240

$
374,224






Reconciliation of Operating Income to Non-GAAP Operating Income




Operating income, as reported
$
24,548

$
16,415

$
34,087

$
188,240

Stock-based compensation

20,147


15,231


37,335


27,333

Amortization of acquisition-related intangibles and fair value adjustments

7,321


1,143


14,576


2,402

Acquisition transaction and integration costs, restructuring charges and other

2,142


4,785


13,019


14,833

Net amortization of internally developed software costs

5,732


5,963


12,380


11,131

Gain on sale of business/assets

—


—


—


(159,753
)
Non-GAAP operating income
$
59,890

$
43,537

$
111,397

$
84,186

Non-GAAP operating margin
17.2%
14.4%
16.3%
13.8%





Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes ⁽¹⁾




Provision for income taxes, as reported
$
4,279

$
4,383

$
4,254

$
44,113

Stock-based compensation

3,916


2,905


7,241


4,406

Amortization of acquisition-related intangibles and fair value adjustments

979


133


1,969


290

Acquisition transaction and integration costs, restructuring charges and other

578


466


3,463


2,083

Net amortization of internally developed software costs

1,204


1,252


2,600


2,337

Gain on sale of business/assets

—


(388
)

—


(36,759
)
Non-GAAP provision for income taxes ⁽¹⁾
$
10,956

$
8,751

$
19,527

$
16,470

(1): The income tax effect related to each non-GAAP item is calculated based on the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current and deferred tax impact of those adjustments.

Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Net Income, Non-GAAP Diluted EPS, and EBITDA
(in thousands, except per share data, unaudited)






Three Months Ended
Six Months Ended

June 30,
June 30,

2021
2020
2021
2020





Net income, as reported
$
17,306

$
10,889

$
21,802

$
143,544

Adjustments to reconcile net income to non-GAAP net income:




Stock-based compensation
20,147

15,231

37,335

27,333

Amortization of acquisition-related intangibles and fair value adjustments
7,875

1,260

15,524

2,643

Acquisition transaction and integration costs, restructuring charges and other
2,422

4,785

17,025

14,981

Net amortization of internally developed software costs
5,732

5,963

12,380

11,131

Gain on sale of business/assets
—

—

—

(159,753
)
Income tax effects and adjustments ⁽¹⁾
(6,677
)
(4,368
)
(15,273
)
27,643

Non-GAAP net income
$
46,805

$
33,760

$
88,793

$
67,522

Non-GAAP net margin
13.5%
11.2%
13.0%
11.1%

Diluted EPS, as reported
$
0.13

$
0.08

$
0.16

$
1.09

Adjustment to reconcile diluted EPS to non-GAAP diluted EPS




Stock-based compensation
0.15

0.12

0.28

0.21

Amortization of acquisition-related intangibles and fair value adjustments
0.06

0.01

0.12

0.02

Acquisition transaction and integration costs, restructuring charges and other
0.02

0.04

0.13

0.11

Net amortization of internally developed software costs
0.04

0.05

0.09

0.08

Gain on sale of business/assets
—

—

—

(1.21
)
Income tax effects and adjustments ⁽¹⁾
(0.05
)
(0.04
)
(0.11
)
0.21

Non-GAAP diluted EPS
$
0.35

$
0.26

$
0.67

$
0.51

(1): The income tax effect related to each non-GAAP item is calculated based on the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current and deferred tax impact of those adjustments.



Three Months Ended

Six Months Ended


June 30,

June 30,


2021

2020


2021

2020

Net income, as reported

$
17,306


$
10,889



$
21,802


$
143,544


Adjustments to reconcile net income to EBITDA:








Interest expense (income), net

1,110


(945
)


1,653


(3,168
)

Tax expense

4,279


4,383



4,254


44,113


Depreciation and amortization

26,152


19,076



50,024


38,341


EBITDA

$
48,847


$
33,403



$
77,733


$
222,830


Weighted average shares outstanding - Diluted

133,539


131,602



133,157


131,499

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS Guidance
(unaudited)

Three Months Ended

September 30, 2021




Low
High
GAAP Diluted EPS, guidance
$
0.10

$
0.24

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


Stock-based compensation
0.14

0.14

Amortization of acquisition-related intangibles and fair value adjustments
0.06

0.06

Acquisition transaction and integration costs, restructuring charges, and other
0.01

0.01

Net amortization of software development costs
0.04

0.04

Income tax effects and adjustments ⁽¹⁾
(0.04
)
(0.04
)
Non-GAAP Diluted EPS, guidance
$
0.31

$
0.45

(1): The income tax effect related to each non-GAAP item is calculated based on the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current and deferred tax impact of those adjustments.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210729006058/en/

Marissa Vidaurri
Head of Investor Relations
(512) 683-5215

Company Name:	National Instruments Corporation
Stock Symbol:	NATI
Market:	NASDAQ

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