National Instruments (Nasdaq:NATI) today reported record revenue in Q2 2006 of $160 million, a 14 percent USD increase over Q2 2005 and an equivalent 16 percent increase in local currency. Generally Accepted Accounting Principles (GAAP) fully diluted earnings per share (EPS) for Q2 2006 was 21 cents with GAAP net income of $17 million, up 13 percent from Q2 2005. Non-GAAP fully diluted EPS was 25 cents with non-GAAP net income of $20.5 million, up 33 percent from Q2 2005. Non-GAAP results exclude the impact of stock-based compensation and the impact of the amortization of acquisition-related intangibles. A reconciliation of GAAP to non-GAAP results is included as a part of this press release.
For the first half of 2006, the company reported revenue growth of 16 percent in USD terms and 20 percent in local currency. In addition, the company reported GAAP net income of $29.6 million, up 13 percent, and non-GAAP net income of $36.6 million, up 38 percent year-over-year.
"We are pleased with the results for the first half of 2006, as we saw revenue growth of 20 percent in local currency with strong operating leverage," said Dr. James Truchard, NI president and CEO. "At NIWeek, Aug. 8-10, we will highlight how NI LabVIEW, graphical system design and PXI Express will help further our expansion into key application areas."
NI continues to have a very strong balance sheet, with $211 million in net cash and short-term investments as of June 30, 2006. The company also announced today a dividend of 6 cents per share on its common stock payable on Aug. 28, 2006, to shareholders of record on Aug. 7, 2006.
Q2 2006 Highlights
-- Record quarterly revenue of $160 million, up 14 percent year-over-year
-- Quarterly GAAP net income of $17 million, up 13 percent year-over-year
-- Quarterly non-GAAP net income of $20.5 million, up 33 percent year-over-year
-- GAAP operating margin of 13 percent and non-GAAP operating margin of 16 percent
-- Strong sales of software, PXI, modular instruments and distributed I/O products
-- Cash and short-term investments of $211 million
"In Q2 last year, we saw very strong sequential growth in both revenue and earnings. Given these tough compares, we are pleased to have delivered 14 percent year-over-year revenue growth in U.S. dollar terms and 16 percent in local currency," said Alex Davern, NI CFO. "Our goal of driving operating leverage continued to pay off in Q2 with a 33 percent increase in non-GAAP net income, and we are well-positioned for a significant increase in operating margin for the full year."
Geographically, the growth of revenue in U.S. dollar terms for Q2 2006 compared to Q2 2005 was as follows: up 16 percent in the Americas, up 6 percent in Europe and up 19 percent in Asia, equaling overall growth of 14 percent. In local currency terms, revenue was up 15 percent in Europe and up 21 percent in Asia, for an overall local currency growth of 16 percent.
Looking at Q2 revenue growth in U.S. dollars in more detail, sales of NI instrument control products were up 10 percent year-over-year. Management believes this is indicative of continued improvement in the test and measurement market in Q2. The first-year impact of acquisitions added $4.4 million in revenue in Q2. This is lower than Q1 2006, as NI passed the first anniversary of the acquisition of Measurement Computing Corporation, during the first quarter. Sales of the rest of the NI product portfolio, in other words, NI virtual instrumentation products, were up 11 percent year-over-year. NI growth in Q2 was driven by the success of new products, especially in the areas of software, data acquisition, PXI, modular instruments and distributed I/O.
Guidance for Q3 2006
For Q3 2006, NI currently expects revenue to be in the range of $157 million to $164 million and non-GAAP gross margins to be approximately 75 percent. The company currently expects GAAP fully diluted EPS to be in the range of 16 cents to 21 cents per share and expects non-GAAP fully diluted EPS to be in the range of 21 cents to 26 cents per share.
In Q3 2006, the company expects the impact of stock-based compensation to be 4 cents per share and the impact of the amortization of acquisition-related intangibles to be 1 cent per share. A reconciliation of the company's Q3 2006 guidance on a GAAP basis to its guidance on its non-GAAP basis is included as part of this press release.
Accounting for Stock-Based Compensation
In accordance with SFAS123R, the company began expensing all stock-based compensation in its GAAP results for all periods beginning after Jan. 1, 2006. This includes the impact of the company's current restricted stock and employee stock purchase plans, in addition to its unvested options outstanding under its stock option plans.
Non-GAAP Earnings Presentation and Non-GAAP Earnings Guidance
In addition to disclosing results determined in accordance with GAAP, the company also discloses non-GAAP operating results that exclude certain charges. In this press release, the company has presented its results for Q2 2006 and its guidance for Q3 2006 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 as part of the press release.
Management believes that including the non-GAAP results assists investors in assessing the company's operational and cash-flow performance. The company presents these non-GAAP results as a complement to results provided in accordance with GAAP, and they should not be regarded as a substitute to GAAP. 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 and to allocate resources. Management also considers such non-GAAP results to be an important supplemental measure of its performance.
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 under the new accounting standard SFAS123R 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.
Interested parties can listen to a conference call today, July 27, 2006, beginning at 4:00 p.m. CDT, at www.ni.com/call. Replay information is available by calling 719-457-0820, confirmation code #1047037, from July 27, 2006, at 7:00 p.m. CDT, through Aug. 3, 2006, at midnight CDT.
This release contains "forward-looking statements," including statements related to expansion in key application areas, expected revenue and gross margin for Q3 2006, estimated Q3 2006 GAAP and non-GAAP EPS and estimated Q3 2006 EPS impact of stock-based compensation and acquisition-related intangibles. These statements are subject to a number of risks and uncertainties, including the risk of 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
For 30 years, National Instruments (www.ni.com) has been a technology pioneer and leader in virtual instrumentation -- a revolutionary concept that has changed the way engineers and scientists in industry, government and academia approach measurement and automation. Leveraging PCs and commercial technologies, virtual instrumentation increases productivity and lowers costs for test, control and design applications through easy-to-integrate software, such as NI LabVIEW, and modular measurement and control hardware for PXI, PCI, PCI Express, USB and Ethernet. Headquartered in Austin, Texas, NI has more than 3,900 employees and direct operations in nearly 40 countries. For the past seven years, FORTUNE magazine has named NI one of the 100 best companies to work for in America. Readers may 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.
The condensed consolidated balance sheets and statements of income follow.
LabVIEW, National Instruments, NI, ni.com and NIWeek 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
2006 2005
----------- -----------
(unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents $54,666 $55,864
Short-term investments 156,486 119,846
Accounts receivable, net 103,503 95,733
Inventories, net 82,421 62,827
Other current assets 34,032 28,036
----------- -----------
Total current assets 431,108 362,306
Property and equipment, net 142,355 144,330
Goodwill, net 53,409 52,533
Intangibles, net 41,108 43,602
Other long-term assets 5,030 5,565
----------- -----------
Total assets $673,010 $608,336
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $34,230 $30,832
Accrued expenses and other liabilities 67,146 56,788
----------- -----------
Total current liabilities 101,376 87,620
Deferred income taxes, net 16,866 16,866
----------- -----------
Total liabilities 118,242 104,486
----------- -----------
Stockholders' equity:
Preferred stock - -
Common stock 797 793
Additional paid-in capital 102,729 91,430
Deferred stock-based compensation - (16,547)
Retained earnings 449,992 429,859
Other 1,250 (1,685)
----------- -----------
Total stockholders' equity 554,768 503,850
----------- -----------
Total liabilities and stockholders' equity $673,010 $608,336
=========== ===========
National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
Three Months
Ended June 30
2006
--------------
GAAP Amortization Stock-Based Non-GAAP
of Acquisition Compensation
Intangibles
Net sales $160,123 $- $- $160,123
Cost of sales 40,852 (677) (177) 39,998
---------- -------------- ------------ ----------
Gross profit 119,271 677 177 120,125
---------- -------------- ------------ ----------
Sales and marketing 57,580 (114) (1,477) 55,989
Research and
development 27,397 (9) (1,258) 26,130
General and
administrative 13,373 - (563) 12,810
Patent litigation 10 - - 10
---------- -------------- ------------ ----------
Total operating
expenses 98,360 (123) (3,298) 94,939
Operating income 20,911 800 3,475 25,186
Interest income 1,681 - - 1,681
Foreign currency
gain/(loss) 149 - - 149
Other income, net (82) - - (82)
---------- -------------- ------------ ----------
Income before
income taxes 22,659 800 3,475 26,934
Provision for
income taxes 5,638 254 591 6,483
---------- -------------- ------------ ----------
Net income $17,021 $546 $2,884 $20,451
========== ============== ============ ==========
Earnings per share:
Basic $0.21 $0.26
========== ==========
Diluted $0.21 $0.25
========== ==========
Weighted average
shares
outstanding:
Basic 79,611 79,611
========== ==========
Diluted 81,653 81,653
========== ==========
Dividends declared
per share $0.06 $0.06
---------- -------------- ------------ ----------
2005
--------------
GAAP Amortization Stock-Based Non-GAAP
of Acquisition Compensation
Intangibles
Net sales $140,822 $- $- $140,822
Cost of sales 36,713 (352) - 36,361
---------- -------------- ------------ ----------
Gross profit 104,109 352 - 104,461
---------- -------------- ------------ ----------
Sales and marketing 52,327 (74) - 52,253
Research and
development 22,307 (65) - 22,242
General and
administrative 11,857 - - 11,857
Patent litigation (1,475) - - (1,475)
---------- -------------- ------------ ----------
Total operating
expenses 85,016 (139) - 84,877
Operating income 19,093 491 - 19,584
Interest income 853 - - 853
Foreign currency
gain/(loss) (238) - - (238)
Other income, net 61 - - 61
---------- -------------- ------------ ----------
Income before
income taxes 19,769 491 - 20,260
Provision for
income taxes 4,745 118 - 4,863
---------- -------------- ------------ ----------
Net income $15,024 $373 $- $15,397
========== ============== ============ ==========
Earnings per share:
Basic $0.19 $0.20
========== ==========
Diluted $0.19 $0.19
========== ==========
Weighted average
shares
outstanding:
Basic 78,303 78,303
========== ==========
Diluted 80,190 80,190
========== ==========
Dividends declared
per share $0.05 $0.05
---------- -------------- ------------ ----------
National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
Six Months
Ended June 30
2006
--------------
GAAP Amortization Stock-Based Non-GAAP
of Acquisition Compensation
Intangibles
Net sales $314,875 $- $- $314,875
Cost of sales 82,357 (1,343) (283) 80,731
---------- -------------- ------------ ----------
Gross profit 232,518 1,343 283 234,144
---------- -------------- ------------ ----------
Sales and marketing 113,980 (228) (2,958) 110,794
Research and
development 55,379 (18) (2,655) 52,706
General and
administrative 26,385 - (1,153) 25,232
Patent litigation 37 - - 37
---------- -------------- ------------ ----------
Total operating
expenses 195,781 (246) (6,766) 188,769
Operating income 36,737 1,589 7,049 45,375
Interest income 2,934 - - 2,934
Foreign currency
(loss) (237) - - (237)
Other income, net 107 - - 107
---------- -------------- ------------ ----------
Income before
income taxes 39,541 1,589 7,049 48,179
Provision for
income taxes 9,918 513 1,127 11,558
---------- -------------- ------------ ----------
Net income $29,623 $1,076 $5,922 $36,621
========== ============== ============ ==========
Earnings per share:
Basic $0.37 $0.46
========== ==========
Diluted $0.36 $0.45
========== ==========
Weighted average
shares
outstanding:
Basic 79,334 79,334
========== ==========
Diluted 81,591 81,591
========== ==========
Dividends declared
per share $0.12 $0.12
---------- -------------- ------------ ----------
2005
--------------
GAAP Amortization Stock-Based Non-GAAP
of Acquisition Compensation
Intangibles
Net sales $270,562 $- $- $270,562
Cost of sales 69,077 (352) - 68,725
---------- -------------- ------------ ----------
Gross profit 201,485 352 - 201,837
---------- -------------- ------------ ----------
Sales and marketing 103,900 (87) - 103,813
Research and
development 42,690 (158) - 42,532
General and
administrative 23,120 - - 23,120
Patent litigation (1,500) - - (1,500)
---------- -------------- ------------ ----------
Total operating
expenses 168,210 (245) - 167,965
Operating income 33,275 597 - 33,872
Interest income 1,838 - - 1,838
Foreign currency
(loss) (766) - - (766)
Other income, net 75 - - 75
---------- -------------- ------------ ----------
Income before
income taxes 34,422 597 - 35,019
Provision for
income taxes 8,262 143 - 8,405
---------- -------------- ------------ ----------
Net income $26,160 $454 $- $26,614
========== ============== ============ ==========
Earnings per share:
Basic $0.33 $0.34
========== ==========
Diluted $0.32 $0.33
========== ==========
Weighted average
shares
outstanding:
Basic 78,735 78,735
========== ==========
Diluted 81,086 81,086
========== ==========
Dividends declared
per share $0.10 $0.10
---------- -------------- ------------ ----------
Reconciliation of GAAP to non-GAAP Guidance for Q3 2006
Diluted Net Earnings per Share
Q3 2006
------------------------------------------------- ----------------
Range of diluted GAAP net earnings per share $0.16-0.20
------------------------------------------------- ----------------
Estimated stock-based compensation $0.04
------------------------------------------------- ----------------
Estimated amortization of acquired intangibles $0.01
------------------------------------------------- ----------------
Range of diluted non-GAAP net earnings per share $0.21-0.26
------------------------------------------------- ----------------