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NI Reports Q4 Revenue of $334 Million

January 28, 2016 4:02 PM

Continued Year-Over-Year Core Revenue Growth

Q4 2015 Highlights

AUSTIN, Texas--(BUSINESS WIRE)-- NI (Nasdaq: NATI) today announced Q4 revenue of $334 million, up 0.5 percent year over year in U.S. dollar terms with core revenue up 4.3 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 GAAP revenue to core revenue is included with this news release.

In Q4 2015, NI received $10 million in orders from its largest customer compared with $8 million in orders from this customer in Q4 2014. Excluding NI’s largest customer, the company’s total order growth was flat for the quarter with orders under $20,000 down 5 percent year over year; orders between $20,000 and $100,000 up 1 percent year over year; and orders above $100,000 up 9 percent year over year.

“Despite the revenue headwinds, the strength of our business model has allowed us to deliver strong gross and operating margins for the year. Our platform-based approach, built around highly differentiated software, has created a large ecosystem of customers, partners and technologies that are key drivers to the long-term growth and profitability of the company,” said Dr. James Truchard, NI president, CEO and co-founder. “The recent convergence of technology has led to an explosion in the amount of data required to characterize systems. Our differentiated software-defined platform puts us at the forefront as we empower engineers to solve their unique challenges through our flexible tools designed specifically to measure, process and connect to these sources of Big Analog Data.”

GAAP net income for Q4 was $32 million, with fully diluted earnings per share (EPS) of $0.25, and non-GAAP net income was $43 million, with non-GAAP fully diluted EPS of $0.34. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $63 million, or $0.49 per share in the fourth quarter.

In Q4, GAAP gross margin was 74 percent and non-GAAP gross margin was 75 percent. Total GAAP operating expenses were $198 million, up 2 percent year over year. Total non-GAAP operating expenses were $190 million, up 2 percent year over year.

GAAP operating margin was 15 percent in Q4, with GAAP operating income of $50 million, down 9 percent year over year. Non-GAAP operating margin was 18.5 percent in Q4, with non-GAAP operating income of $62 million, down 6 percent year over year.

“While our results for 2015 were below our expectations coming into the year, I am proud of our execution. Given the revenue headwinds that developed due to currency, a weak PMI and other issues, I am proud that we were able to essentially maintain our revenue and operating profitability in 2015,” said Alex Davern, NI COO and CFO. “We remain committed to our goal of driving operating leverage to achieve our long-term operating margin targets.”

Geographic revenue in U.S. dollar terms for Q4 2015 compared with Q4 2014 was down 4 percent in the Americas, up 3 percent in EMEIA and up 3 percent in APAC. In constant currency terms, revenue was down 1 percent in the Americas, up 8 percent in EMEIA and up 9 percent in APAC. Historical revenue from these three regions can be found on NI’s investor website at www.ni.com/nati.

As of Dec. 31, 2015, NI had $333 million in cash and short-term investments. For the year, the company paid $98 million in dividends, used $75 million to repurchase 2.6 million shares of NI’s common stock at an average price of $29.04 per share and used $126 million in net cash for acquisitions. The NI Board of Directors approved a quarterly dividend of $0.20 per share payable on March 7, 2016, to stockholders of record on Feb. 16, 2016.

The company’s non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles and acquisition transaction costs and restructuring charges. Reconciliations of the company’s GAAP and non-GAAP results are included as part of this news release.

FY 2015 Highlights

Full-year 2015 revenue was $1.23 billion, down 1.5 percent year-over-year. GAAP net income for 2015 was $95 million, with fully diluted GAAP EPS of $0.74, and non-GAAP net income was $128 million, with fully diluted EPS of $1.00.

Guidance for Q1 2016

NI currently expects Q1 revenue to be in the range of $290 million to $320 million. Based on current exchange rates the company expects that the impact of the strengthening of the U.S. dollar will reduce the company’s year over year dollar revenue growth rate by approximately 400 basis points in Q1 and approximately 200 basis points for Q2 through Q4. At the midpoint, NI’s guidance reflects a 5 percent increase in U.S. dollars and approximately 9 percent year over year core revenue growth. The company currently expects that GAAP fully diluted EPS will be in the range of $0.09 to $0.21 for Q1, with non-GAAP fully diluted EPS expected to be in the range of $0.17 to $0.29. In Q1, NI currently expects its non-GAAP effective tax rate to be approximately 21 percent.

Non-GAAP Presentation

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 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- and twelve-month periods ending December 31, 2015 and 2014, on a GAAP and non-GAAP basis. NI is also providing guidance on its non-GAAP fully diluted EPS and non-GAAP effective tax rate.

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, restructuring charges, foreign exchange loss on acquisitions and impairment of minority cost basis investments 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 and EBITDA diluted EPS for the three- and twelve-month periods ending December 31, 2015 and 2014. 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 and EBITDA diluted EPS to GAAP net income and GAAP diluted EPS is included with this news release. This news release also discloses the company’s core revenue for the three- and twelve-month periods ending December 31, 2015 and 2014. The company believes that including its core revenue assists investors in assessing the company’s operational performance. A reconciliation of core revenue to GAAP revenue is included with this news release.

Conference Call Information and Availability of Presentation Materials

Interested parties can listen to the Q4 2015 earnings conference call with NI management today, Jan. 28, at 4:00 p.m. CT at ni.com/call. Replay information is available by calling (855) 212-2361, confirmation code 10953888 shortly after the call through Jan. 31, at 11:00 p.m. CT, or by visiting the company’s website at ni.com/call. Presentation materials referred to on the conference call can also be found at ni.com/nati.

Forward-Looking Statements

This release contains “forward-looking statements,” including statements regarding continued year over year core revenue growth; that our platform-based approach has created a large ecosystem of customers, partners, and technologies that are key drivers to long-term growth and profitability; that our platform puts us at the forefront as we empower engineers to solve their unique challenges; that we remain committed to our goal of driving operating leverage to achieve our long-term operating margin targets; that NI expects the impact of the strengthening of the U.S. dollar to reduce its year-over-year dollar revenue growth rate by approximately 400 basis points in Q1; expected revenue from NI’s largest customer in Q1; and NI’s guidance for Q1 revenue and GAAP and non-GAAP fully diluted EPS and non-GAAP tax rate. 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, component shortages, delays in the release of new products, fluctuations in demand for NI products including orders from NI’s largest customer, 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 and adverse effect of price changes and 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, 2014; its Form 10-Q for the quarter ended September 30, 2015; and the other documents it files with the SEC for other risks associated with the company’s future performance.

About NI

Since 1976, NI (www.ni.com) has made it possible for engineers and scientists to solve the world’s greatest engineering challenges with powerful, flexible technology solutions 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)

Big Analog Data, 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, unaudited)
December 31, December 31,
2015 2014
Assets
Current assets:
Cash and cash equivalents

$

251,129

$

274,030

Short-term investments 81,789 197,163
Accounts receivable, net 216,244 202,329
Inventories, net 185,197 173,052
Prepaid expenses and other current assets 65,381 70,075
Deferred income taxes, net - 31,171
Total current assets 799,740 947,820
Property and equipment, net 257,853 264,086
Goodwill 257,718 144,325
Intangible assets, net 108,196 78,282
Other long-term assets 30,349 20,978
Total assets

$

1,453,856

$

1,455,491

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable

$

50,970

$

58,603

Accrued compensation 27,956 33,774
Deferred revenue - current 112,283 105,964
Accrued expenses and other liabilities 11,755 14,714
Other taxes payable 37,250 34,602
Total current liabilities 240,214 247,657
Long-term debt 37,000 -
Deferred income taxes 44,673 47,406
Liability for uncertain tax positions 11,974 10,127
Deferred revenue - long-term 27,708 26,452
Other long-term liabilities 10,565 6,353
Total liabilities 372,134 337,995
Stockholders' equity:
Preferred stock - -
Common stock 1,275 1,278
Additional paid-in capital 717,706 662,889
Retained earnings 400,831 464,993
Accumulated other comprehensive income (loss) (38,090 ) (11,664 )
Total stockholders' equity 1,081,722 1,117,496
Total liabilities and stockholders' equity

$

1,453,856

$

1,455,491

National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data, unaudited)
Three Months Ended Year Ended
December 31, December 31,
2015 2014 2015 2014
Net sales:
Product $ 306,350 $ 305,176 $ 1,113,590 $ 1,143,000
Software maintenance 27,989 27,600 111,866 100,862
Total net sales 334,339 332,776 1,225,456 1,243,862
Cost of sales:
Product 85,575 83,094 311,226 312,623
Software maintenance 1,200 1,066 5,730 5,509
Total cost of sales 86,775 84,160 316,956 318,132
Gross profit 247,564 248,616 908,500 925,730
74.0 % 74.7 % 74.1 % 74.4 %
Operating expenses:
Sales and marketing 116,348 113,819 452,263 461,845
Research and development 56,670 57,351 225,131 227,433
General and administrative 24,544 22,411 93,935 91,265
Total operating expenses 197,562 193,581 771,329 780,543
Operating income 50,002 55,035 137,171 145,187
Other income (expense):
Interest income 314 340 1,403 1,133
Net foreign exchange loss (5,110 ) (1,245 ) (7,075 ) (2,250 )
Other (expense) income, net (1,014 ) (352 ) (221 ) (69 )
Income before income taxes 44,192 53,778 131,278 144,001
Provision for income taxes 12,058 10,393 36,016 17,668
Net income $ 32,134 $ 43,385 $ 95,262 $ 126,333
Basic earnings per share $ 0.25 $ 0.34 $ 0.74 $ 0.99
Diluted earnings per share $ 0.25 $ 0.34 $ 0.74 $ 0.99
Weighted average shares outstanding -
basic 127,341 127,755 127,997 127,030
diluted 127,798 128,233 128,668 127,799
Dividends declared per share $ 0.19 $ 0.15 $ 0.76 $ 0.60
National Instruments
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
Year Ended December 31,
2015 2014
Cash flow from operating activities:
Net income

$

95,262

$

126,333

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 74,090 70,206
Stock-based compensation 24,572 25,759
Tax expense/(benefit) expense from deferred income taxes 9,361 5,886
Tax benefit from stock option plans (967 ) (1,242 )
Net change in operating assets and liabilities (39,586 ) (31,836 )
Net cash provided by operating activities 162,732 195,106
Cash flow from investing activities:
Capital expenditures (33,984 ) (44,944 )
Capitalization of internally developed software (31,356 ) (25,781 )
Additions to other intangibles (2,811 ) (2,834 )
Acquisitions, net of cash received (125,710 ) -
Purchases of short-term investments (29,649 ) (123,849 )
Sales and maturities of short-term investments 145,023 89,835
Net cash used by investing activities (78,487 ) (107,573 )
Cash flow from financing activities:
Proceeds from revolving line of credit 54,000 -
Principal payments on revolving line of credit (17,000 ) -
Proceeds from issuance of common stock 27,785 31,277
Repurchase of common stock (75,255 ) -
Dividends paid (97,643 ) (76,285 )
Tax benefit from stock option plans 967 1,242
Net cash used by financing activities (107,146 ) (43,766 )
Net change in cash and cash equivalents (22,901 ) 43,767
Cash and cash equivalents at beginning of period 274,030 230,263
Cash and cash equivalents at end of period

$

251,129

$

274,030

Detail of GAAP charges related to stock-based compensation, amortization of acquisition intangibles, acquisition related transaction costs, restructuring charges, foreign exchange loss on acquisitions and impairment of minority cost basis investments (unaudited)

Three Months Ended Year Ended
December 31, December 31,
2015 2014 2015 2014
Stock-based compensation
Cost of sales $ 509 $ 447 $ 1,936 $ 1,711
Sales and marketing 2,701 2,597 11,003 10,931
Research and development 2,240 2,428 9,004 9,649
General and administrative 888 810 3,544 3,467
Provision for income taxes (1,870 ) (1,497 ) (7,289 ) (7,414 )
Total $ 4,468 $ 4,785 $ 18,198 $ 18,344
Amortization of acquisition intangibles
Cost of sales $ 3,080 $ 2,660 $ 10,938 $ 10,651
Sales and marketing 740 433 2,039 1,784
Research and development 316 369 1,299 1,567
Other income, net 93 165 542 672
Provision for income taxes (1,398 ) (1,199 ) (4,867 ) (4,846 )
Total $ 2,831 $ 2,428 $ 9,951 $ 9,828
Acquisition transaction costs, restructuring charges, and other
Cost of sales $ 296 $ 742 $ 1,269 $ 1,289
Sales and marketing 123 37 123 189
Research and development 198 178 198 442
General and administrative 593 96 1,035 241
Foreign exchange loss on acquisition 3,111 - 3,111 -
Impairment of minority cost basis investment 1,000 - 1,000 -
Provision for income taxes (1,453 ) (286 ) (1,843 ) (674 )
$ 3,868 $ 767 $ 4,893 $ 1,487
Reconciliation of Gross Profit to Non-GAAP Gross Profit
Three Months Ended Year Ended
December 31, December 31,
2015 2014 2015 2014
Gross profit, as reported $ 247,564 $ 248,616 $ 908,500 $ 925,730
Stock-based compensation 509 447 1,936 1,711
Amortization of acquisition intangibles 3,080 2,660 10,938 10,651
Acquisition transaction costs, restructuring charges and other 296 742 1,269 1,289
Non-GAAP gross profit $ 251,449 $ 252,465 $ 922,643 $ 939,381
Non-GAAP gross margin 75.2 % 75.9 % 75.3 % 75.5 %
Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
Three Months Ended Year Ended
December 31, December 31,
2015 2014 2015 2014
Operating expenses, as reported $ 197,562 $ 193,581 $ 771,329 $ 780,543
Stock-based compensation (5,829 ) (5,835 ) (23,551 ) (24,047 )
Amortization of acquisition intangibles (1,056 ) (802 ) (3,338 ) (3,351 )
Acquisition transaction costs, restructuring charges and other (914 ) (311 ) (1,356 ) (872 )
Non-GAAP operating expenses $ 189,763 $ 186,633 $ 743,084 $ 752,273
Reconciliation of Operating Income to Non-GAAP Operating Income
Three Months Ended Year Ended
December 31, December 31,
2015 2014 2015 2014
Operating income, as reported $ 50,002 $ 55,035 $ 137,171 $ 145,187
Stock-based compensation 6,338 6,282 25,487 25,758
Amortization of acquisition intangibles 4,136 3,462 14,276 14,002
Acquisition transaction costs, restructuring charges and other 1,210 1,053 2,625 2,161
Non-GAAP operating income $ 61,686 $ 65,832 $ 179,559 $ 187,108
Non-GAAP operating margin 18.5 % 19.8 % 14.7 % 15.0 %

Reconciliation of Income before income taxes to Non-GAAP Income before income taxes

Three Months Ended

Year Ended
December 31, December 31,
2015 2014 2015 2014
Income before income taxes, as reported $ 44,192 $ 53,778 $ 131,278 $ 144,001
Stock-based compensation 6,338 6,282 25,487 25,758
Amortization of acquisition intangibles 4,229 3,627 14,818 14,674
Acquisition transaction costs, restructuring charges and other 5,321 1,053 6,736 2,161
Non-GAAP income before income taxes $ 60,080 $ 64,740 $ 178,319 $ 186,594
Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes
Three Months Ended Year Ended
December 31, December 31,
2015 2014 2015 2014
Provision for income taxes, as reported $ 12,058 $ 10,393 $ 36,016 $ 17,668
Stock-based compensation 1,870 1,497 7,289 7,414
Amortization of acquisition intangibles 1,398 1,199 4,867 4,846
Acquisition transaction costs, restructuring charges and other 1,453 286 1,843 674
Non-GAAP provision for income taxes $ 16,779 $ 13,375 $ 50,015 $ 30,602
Reconciliation of GAAP Net Income, Basic EPS and Diluted EPS to Non-GAAP Net Income, Non-GAAP Basic EPS and Non-GAAP Diluted EPS (unaudited)
Three Months Ended Year Ended
December 31, December 31,
2015 2014 2015 2014
Net income, as reported $ 32,134 $ 43,385 $ 95,262 $ 126,333
Adjustments to reconcile net income to non-GAAP net income:
Stock-based compensation, net of tax effect 4,468 4,785 18,198 18,344
Amortization of acquisition intangibles, net of tax effect 2,831 2,428 9,951 9,828
Acquisition transaction costs, restructuring charges and other, net of tax effect 3,868 767 4,893 1,487
Non-GAAP net income $ 43,301 $ 51,365 $ 128,304 $ 155,992
Basic EPS, as reported $ 0.25 $ 0.34 $ 0.74 $ 0.99
Adjustment to reconcile basic EPS to non-GAAP basis EPS:
Impact of stock-based compensation, net of tax effect 0.04 0.04 0.14 0.14
Impact of amortization of acquisition intangibles, net of tax effect 0.02 0.02 0.08 0.08
Impact of acquisition transaction costs, restructuring charges and other, net of tax effect 0.03 - 0.04 0.02
Non-GAAP basic EPS $ 0.34 $ 0.40 $ 1.00 $ 1.23
Diluted EPS, as reported $ 0.25 $ 0.34 $ 0.74 $ 0.99
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS:
Impact of stock-based compensation, net of tax effect 0.04 0.04 0.14 0.14
Impact of amortization of acquisition intangibles, net of tax effect 0.02 0.02 0.08 0.08
Impact of acquisition transaction costs, restructuring charges and other, net of tax effect 0.03 - 0.04 0.01
Non-GAAP diluted EPS $ 0.34 $ 0.40 $ 1.00 $ 1.22
Weighted average shares outstanding -
Basic 127,341 127,755 127,997 127,030
Diluted 127,798 128,233 128,668 127,799
National Instruments
Reconciliation of Net Income and Diluted EPS to EBITDA and EBITDA Diluted EPS
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
2015 2014 2015 2014
Net income, as reported $ 32,134 $ 43,385 $ 95,262 $ 126,333
Adjustments to reconcile net income to EBITDA:
Interest income, net of interest expense (167 ) (306 ) (1,099 ) (991 )
Tax expense 12,058 10,393 36,016 17,668
Depreciation and amortization 18,933 19,195 74,090 70,206
EBITDA $ 62,958 $ 72,667 $ 204,269 $ 213,216
Diluted EPS, as reported $ 0.25 $ 0.34 $ 0.74 $ 0.99
Adjustment to reconcile diluted EPS to EBITDA
Interest income, net of interest expense - - (0.01 ) (0.01 )
Taxes 0.09 0.08 0.28 0.14
Depreciation and amortization 0.15 0.15 0.58 0.55
EBITDA diluted EPS $ 0.49 $ 0.57 $ 1.59 $ 1.67
Weighted average shares outstanding - Diluted 127,798 128,233 128,668 127,799
Reconciliation of GAAP to Non-GAAP EPS Guidance
(unaudited)
Three Months Ended
March 31, 2016
Low High
GAAP Fully Diluted EPS, guidance $ 0.09 $ 0.21
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS:
Impact of stock-based compensation, net of tax effect 0.04 0.04
Impact of amortization of acquisition intangibles, net of tax effect 0.03 0.03
Impact of acquisition restructuring costs, net of tax effect 0.01 0.01
Non-GAAP diluted EPS, guidance $ 0.17 $ 0.29
National Instruments
Reconciliation of GAAP Revenue to Core Revenue
(unaudited)
Three Months Ended
December 31,
2015
YoY GAAP revenue growth, as reported $ 0.5 %
Effect of excluding our current largest customer -0.7 %
YoY GAAP revenue growth, excluding our largest customer -0.2 %
Effect of excluding the impact of foreign currency exchange 4.5 %
YoY Core revenue growth $ 4.3 %
National Instruments
Reconciliation of GAAP Revenue to Core Revenue
(unaudited)
Year Ended
December 31,
2015
YoY GAAP revenue growth, as reported $ -1.5 %
Effect of excluding our current largest customer 1.8 %
YoY GAAP revenue growth, excluding our largest customer

.3

%
Effect of excluding the impact of foreign currency exchange 5.8 %
YoY Core revenue growth $ 6.1 %

National Instruments
Reconciliation of GAAP Revenue to Core Revenue Guidance
(unaudited)
Three Months Ended
March 31,
2016
Estimated YoY GAAP revenue growth, as reported $ 5.3 %
Estimated effect of excluding our current largest customer -0.3 %
Estimated YoY GAAP revenue growth, excluding our largest customer 5.0 %
Estimated effect of excluding the impact of foreign currency exchange 4.0 %
Estimated YoY Core revenue growth $ 9.0 %

National Instruments

Marissa Vidaurri, 512-683-5215

Investor Relations

[email protected]

Source: National Instruments

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