Graphical System Design Continues to Create Long-Term Sustainable Differentiation(PRNewswire) —
Q2 2012 Highlights
- Record revenue of $292 million, up 15 percent year-over-year
- Record Q2 revenue for PXI and NI CompactRIO products
- GAAP gross margin of 76 percent and non-GAAP gross margin of 77 percent
- Record operating income for a second quarter
- Fully diluted GAAP EPS of $0.22
- Fully diluted non-GAAP EPS of $0.27
- EBITDA of $47 million, or $0.38 per share
- Cash and short-term investments of $351 million as of June 30
National Instruments (Nasdaq: NATI) today announced Q2 revenue of $292 million, an all-time revenue record and a 15 percent increase from Q2 2011. In constant currency terms, Q2 revenue increased 18 percent from Q2 2011. Orders were up 24 percent year-over-year in Q2, with backlog increasing by $16 million and short-term deferred revenue increasing by $5 million during the quarter. In Q2, the company's orders greater than $20,000 grew 40 percent year-over-year, and the average order size reached a new record of approximately $5,300.
GAAP net income for Q2 was $26 million, with fully diluted earnings per share (EPS) of $0.22, and non-GAAP net income was $33 million, with non-GAAP fully diluted EPS of $0.27. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $47 million, or $0.38 per share.
In Q2, GAAP gross margin was 76 percent and non-GAAP gross margin was 77 percent, down sequentially from 77 and 78 percent, respectively.
The company's non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles, acquisition accounting for deferred revenue, acquisition-related transaction costs and the adjustment of NI's GSA accrual. Reconciliations of the company's GAAP and non-GAAP results are included as part of this news release.
A significant contributor to National Instruments' success in the first half of 2012 was winning the largest application sale in the history of the company. This application involves the use of NI LabVIEW system design software and the NI PXI hardware platform to rapidly develop a production test solution. This test solution offers the customer outstanding performance and accuracy at a very low cost of test per unit. In H1 2012, National Instruments received $40 million in orders for this application – $25 million of this was recognized as revenue in Q1 and Q2, and the company anticipates recognizing the remainder in Q3.
"The resilience of our business despite a significant weakening of the global industrial economy demonstrates the strength of our long-term approach," said Dr. James Truchard, co-founder, president and CEO. "The strong growth in larger orders and the record quarter for PXI products illustrate the increased acceptance of our technology, and I remain optimistic that our strategic investments over the last decade will support our goal of achieving $2 billion in annual revenue by 2016."
Excluding NI's recent AWR and Phase Matrix acquisitions, geographic revenue in U.S. dollar terms for Q2 2012 compared to Q2 2011 was down 2 percent in the Americas, down 4 percent in Europe and up 45 percent in Asia. In local currency terms, revenue was up 1 percent in Europe and up 48 percent in Asia. Also during the quarter, the acquisitions of AWR and Phase Matrix contributed $10 million of revenue. Including these acquisitions, revenue was up 9 percent in the Americas.
As of June 30, NI had $351 million in cash and short-term investments. The National Instruments Board of Directors approved a quarterly dividend of $0.14 per share on the company's common stock payable on Aug. 31 to stockholders of record on Aug. 13.
Guidance for Q3 2012
National Instruments remains very concerned with the continued weakness of the Global PMI in Q2, especially with the drop below 50 in June. Of ongoing concern is the drop in the new order element of the PMI to below 48 in June. The company believes this trend, coupled with the fall in the Euro, will restrain growth in the test and measurement industry in the second half of the year. Despite this challenging economic backdrop, NI expects continued year-over-year revenue growth in Q3 as a result of its success in growing its systems sales this year. Also, as the company continues to absorb the significant investments made in 2011, it expects the year-over-year growth in non-GAAP operating expenses to continue to moderate in Q3.
"Despite the weak global economy, we are pleased with our execution in Q2," said Alex Davern, NI COO and CFO. "Looking forward, we plan to leverage the investments we made in 2011 to enable sustained revenue growth and to continue to drive toward our goal of $2 billion in annual revenue by 2016."
NI expects revenue for Q3 2012 to be between $272 million and $302 million. The company expects fully diluted EPS to be in the range of $0.14 to $0.26 for Q3, with non-GAAP fully diluted EPS expected to be in the range of $0.20 to $0.32. Built into the company's guidance is a $.01 per share loss on foreign exchange due to fall of the Euro in July. National Instruments expects revenue in Q3 to benefit from a reduction in backlog as the company completes shipment of the large system order discussed earlier. As a result, National Instruments expects sequential revenue growth in Q4 to be below the company's historical seasonal average.
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 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- and six-month periods ending June 30, 2012 and 2011, on a GAAP and non-GAAP basis. NI is also providing guidance on its non-GAAP fully diluted EPS. 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 accounting for deferred revenue, acquisition-related transaction costs and the adjustment of our GSA accrual 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 also discloses the company's EBITDA and EBITDA diluted EPS for the three- and six-month periods ending June 30, 2012 and 2011. The company also 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.