05 Sep National Instruments Reports Record Revenue for a Second Quarter of $319 Million
Q2 2017 Highlights
- Revenue of $319 million, up 4 percent year over year with core revenue up 7 percent year over year
- GAAP gross margin of 74 percent
- Non-GAAP gross margin of 75 percent
- Fully diluted GAAP EPS of $0.19 and fully diluted non-GAAP EPS of $0.27
- GAAP net income of $25 million
- Non-GAAP net income of $35 million, a record for a second quarter
- EBITDA of $46 million
- Cash and short-term investments of $368 million as of June 30, 2017
AUSTIN, Texas–(BUSINESS WIRE)– National Instruments (Nasdaq: NATI) today announced Q2 2017 revenue of $319 million, up 4 percent year over year with core revenue up 7 percent year over year. The company’s definition of core revenue is GAAP revenue excluding the impact of NI’s largest customer and the impact of foreign currency exchange. A reconciliation of the year over year change in GAAP revenue to the year over year change in core revenue is included with this news release.
In Q2 2017, NI received $12 million in orders from its largest customer compared with $18 million in orders from this customer in Q2 2016. Excluding NI’s largest customer, the value of the company’s total orders was up 8 percent year over year for the quarter; orders under $20,000were flat year over year; orders between $20,000 and $100,000 were up 1 percent year over year; and orders above $100,000 were up 42 percent year over year.
GAAP net income for Q2 was $25 million, with fully diluted earnings per share (EPS) of $0.19, and non-GAAP net income was $35 million, a record for a second quarter, with non-GAAP fully diluted EPS of $0.27. Included in NI’s GAAP net income for Q2 is $4 million related to restructuring charges. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $46 million for Q2.
In Q2, GAAP gross margin was 74 percent and non-GAAP gross margin was 75 percent. Total GAAP operating expenses were $208 million, up 3 percent year over year. Total non-GAAP operating expenses were flat year over year at $194 million. GAAP operating margin was 9 percent in Q2, with GAAP operating income of $29 million, up 5 percent year over year. Non-GAAP operating margin was 14 percent in Q2, with non-GAAP operating income of $44 million, up 15 percent year over year.
“I am pleased with our Q2 performance and execution as we continue to drive toward our revenue and profitability goals with record revenue for a second quarter and 26% year over year non-GAAP net income growth for the first half of 2017,” said Alex Davern, NI president and CEO. “We believe alignment of our product and channel investments toward the growth opportunity in 5G communications, semiconductor test, the connected vehicle, and the Industrial Internet of Things continues to move our platform closer to our users’ challenges, which increases our impact within these applications.”
Karen Rapp, NI CFO, said, “We are encouraged by the strong order growth and improved trends in the industrial economy. Our leadership team is focused on executing to the updated leverage model shared at our recent investor day. We are going to do this through deliberate decision making and discipline in managing our expenses. We believe this focus will keep us on the right path as we strive to meet both our growth and profitability goals this year and in 2018.”
Geographic revenue in U.S. dollar terms for Q2 2017 compared with Q2 2016 was up 6 percent in the Americas, down 1 percent in APAC and up 6 percent in EMEIA. Excluding the impact of foreign currency exchange, revenue was up 6 percent in the Americas, flat in APAC and up 10 percent in EMEIA. Historical revenue from these three regions can be found on NI’s investor website at www.ni.com/nati.
As of June 30, 2017, NI had $368 million in cash and short-term investments. During the second quarter, NI paid $27 million in dividends. The NI Board of Directors approved a quarterly dividend of $0.21 per share payable on Sept. 5, 2017, to stockholders of record on Aug. 14, 2017.
The company’s non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction costs, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, and restructuring charges. Reconciliations of the company’s GAAP and non-GAAP results are included as part of this news release.
NI currently expects Q3 revenue to be in the range of $304 million to $334 million, which would be a new Q3 record at the midpoint. Based on current exchange rates, the company expects that the impact of foreign exchange on dollar revenue will be minimal in Q3. The company currently expects that GAAP fully diluted EPS will be in the range of $0.16 to $0.30 for Q3, with non-GAAP fully diluted EPS expected to be in the range of $0.22 to $0.36. Included in the company’s Q3 2017 GAAP EPS guidance is approximately $1 million of restructuring charges. For the full year, NI estimates the restructuring charges impacting net income to be approximately $7 million to $8 million. For 2017, NI estimates its non-GAAP effective tax rate to be approximately 21 percent.
In addition to disclosing results determined in accordance with GAAP, NI discloses certain non-GAAP operating results and non-GAAP information that exclude certain charges. In this news release, the company has presented its year over year change in core revenue, gross profit, gross margin, operating expenses, operating income, operating margin, income before income taxes, provision for income taxes, net income and basic and fully diluted EPS for the three-month and six-month periods ending June 30, 2017 and 2016, on a GAAP and non-GAAP basis. NI is also providing guidance on its non-GAAP fully diluted EPS and expected effective tax rate. The company is not able to provide guidance on its GAAP tax rate or a related reconciliation without unreasonable efforts since its future GAAP tax rate depends on its future stock price and related information that is not currently available.
When presenting non-GAAP information, the company includes a reconciliation of the non-GAAP results to the GAAP results. 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, amortization of acquisition-related intangibles, acquisition-related transaction costs, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, and restructuring 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 the 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.
This news release discloses the company’s EBITDA for the three-month and six-month periods ending June 30, 2017 and 2016. The company believes that including the EBITDA results assists investors in assessing the company’s operational performance relative to its competitors. A reconciliation of EBITDA to GAAP net income is included with this news release. This news release also discloses the year over year change in the company’s core revenue for the three-month period ending June 30, 2017. The company believes that including its year over year change in core revenue assists investors in assessing the company’s operational performance. A reconciliation of its year over year change in GAAP revenue to its year over year change in core revenue is included with this news release.
Conference Call Information and Availability of Presentation Materials
Interested parties can listen to the Q2 2017 earnings conference call with NI management today, July 27, at 4:00 p.m. CT at www.ni.com/call. Replay information is available by calling (855) 859-2056, confirmation code 41457332, shortly after the call through July 30 at 11:59 p.m. CTor by visiting the company’s website at www.ni.com/call. Presentation materials referred to on the conference call can be found at www.ni.com/nati.
This release contains “forward-looking statements” including statements regarding driving towards our revenue and profitability goals, belief that alignment of our product and channel investments will move our platform closer to our users’ challenges which increases our impact within these applications, being encouraged by the strong order growth and improved trends in the industrial economy, being focused on executing to the updated leverage model, deliberate decision making and discipline in managing our expenses, that this focus will keep us on the right path as we strive to meet both our growth and profitability goals this year and in 2018, expecting Q3 revenue to be in the range of $304 million to $334 million, that the impact of foreign exchange on dollar revenue will be minimal in Q3, expecting GAAP fully diluted EPS will be in the range of $0.16 to $0.30 for Q3, with non-GAAP fully diluted EPS expected to be in the range of $0.22 to $0.36, expecting about $1 million of restructuring charges in Q3, that restructuring charges impacting net income will be approximately $7 million to $8 million and that non-GAAP effective tax rate to be approximately 21 percent for 2017. These statements are subject to a number of risks and uncertainties, including the risk of adverse changes or fluctuations in the global economy, foreign exchange fluctuations, fluctuations in demand for NI products including orders from NI’s largest customer, component shortages, delays in the release of new products, the company’s ability to effectively manage its operating expenses, manufacturing inefficiencies and the level of capacity utilization, the impact of any recent or future acquisitions by NI, expense overruns, adverse effects of price changes or effective tax rates. Actual results may differ materially from the expected results.
The company directs readers to its Form 10-K for the year ended Dec. 31, 2016, its Form 10-Q for the quarter ended March 31, 2017 and the other documents it files with the SEC for other risks associated with the company’s future performance.
Since 1976, NI (www.ni.com) has made it possible for engineers and scientists to solve the world’s greatest engineering challenges with powerful platform-based systems 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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