Other Derivatives

Other derivatives not designated as hedging instruments consist primarily of foreign currency forward contracts that we use to hedge our foreign denominated ~~net receivable or net payable positions~~monetary assets and liabilities to help protect against the change in value caused by a fluctuation in foreign currency exchange rates. We typically attempt to hedge up to 90% of our outstanding foreign denominated net receivables or net payables and typically limit the duration of these foreign currency forward contracts to approximately 90 days or less. The gain or loss on the derivatives as well as the offsetting gain or loss on the hedge item attributable to the hedged risk is recognized in current earnings under the line item ~~“net foreign exchange gain (loss).~~“Other (expense) income.” As of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, we held foreign currency forward contracts that were not designated as hedging instruments with a notional amount of ~~$59~~$102 million and ~~$60~~$94 million, respectively.

The following tables present the fair value of derivative instruments on our Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, respectively.


	Asset Derivatives
		March 31, 2022		December 31, 2021
		(Unaudited)

(In thousands)	Balance Sheet Location	Fair Value		Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts - ST forwards	Prepaid expenses and other current assets	$	11,386	$	8,993
Foreign exchange contracts - LT forwards	Other long-term assets	2,449		2,908
Total derivatives designated as hedging instruments		$	13,835	$	11,901

Derivatives not designated as hedging instruments
Foreign exchange contracts - ST forwards	Prepaid expenses and other current assets	$	1,017	$	506
Total derivatives not designated as hedging instruments		$	1,017	$	506

Total derivatives		$	14,852	$	12,407

Asset Derivatives
September 30, 2017 December 31, 2016
(In thousands) (Unaudited)

Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Derivatives designated as hedging instruments

Foreign exchange contracts - ST forwards Prepaid expenses and other current assets $ 3,695
Prepaid expenses and other current assets $ 9,378

Foreign exchange contracts - LT forwards Other long-term assets 2,702
Other long-term assets 3,866
Total derivatives designated as hedging instruments $ 6,397
$ 13,244

Derivatives not designated as hedging instruments

Foreign exchange contracts - ST forwards Prepaid expenses and other current assets $ 177
Prepaid expenses and other current assets $ 1,869
Total derivatives not designated as hedging instruments $ 177
$ 1,869

Total derivatives $ 6,574
$ 15,113

Liability Derivatives
September 30, 2017 December 31, 2016
(In thousands) (Unaudited)
Balance Sheet Location Fair Value Balance Sheet Location Fair Value

Derivatives designated as hedging instruments

Foreign exchange contracts - ST forwards Other current liabilities $ (6,695 ) Other current liabilities $ (4,672 )

Foreign exchange contracts - LT forwards Other long-term liabilities (4,082 ) Other long-term liabilities (3,352 )
Total derivatives designated as hedging instruments $ (10,777 ) $ (8,024 )

Derivatives not designated as hedging instruments

Foreign exchange contracts - ST forwards Other current liabilities $ (923 ) Other current liabilities $ (175 )
Total derivatives not designated as hedging instruments $ (923 ) $ (175 )

Total derivatives $ (11,700 ) $ (8,199 )

~~The following tables present the effect of derivative instruments on our Consolidated Statements of Income for three month periods ended September 30, 2017 and 2016, respectively:~~


	Liability Derivatives
		March 31, 2022		December 31, 2021
		(Unaudited)
(In thousands)	Balance Sheet Location	Fair Value		Fair Value

Derivatives designated as hedging instruments
Foreign exchange contracts - ST forwards	Other current liabilities	$	(6,514)	$	(6,425)
Foreign exchange contracts - LT forwards	Other long-term liabilities	(2,354)		(2,377)
Total derivatives designated as hedging instruments		$	(8,868)	$	(8,802)

Derivatives not designated as hedging instruments
Foreign exchange contracts - ST forwards	Other current liabilities	$	(1,250)	$	(666)
Total derivatives not designated as hedging instruments		$	(1,250)	$	(666)

Total derivatives		$	(10,118)	$	(9,468)

September 30, 2017
(In thousands)
(Unaudited)
Derivatives in Cash Flow Hedging Relationship Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)
Foreign exchange contracts - forwards and options $ (5,804 ) Net sales $ (1,401 ) Net foreign exchange gain/(loss) $ —

Foreign exchange contracts - forwards and options 1,421
Cost of sales (105 ) Net foreign exchange gain/(loss) —

Foreign exchange contracts - forwards and options 1,247
Operating expenses (148 ) Net foreign exchange gain/(loss) —
Total $ (3,136 ) $ (1,654 ) $ —

September 30, 2016
(In thousands)
(Unaudited)
Derivatives in Cash Flow Hedging Relationship Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)
Foreign exchange contracts - forwards and options $ (1,156 ) Net sales $ (160 ) Net foreign exchange gain/(loss) $ —

Foreign exchange contracts - forwards and options 1,412
Cost of sales (414 ) Net foreign exchange gain/(loss) —

Foreign exchange contracts - forwards and options 720
Operating expenses (389 ) Net foreign exchange gain/(loss) —
Total $ 976
$ (963 ) $ —

(In thousands)
Derivatives not Designated as Hedging Instruments Location of Gain (Loss) Recognized in Income Amount of Gain (Loss) Recognized in Income Amount of Gain (Loss) Recognized in Income
September 30, 2017 September 30, 2016
(Unaudited) (Unaudited)
Foreign exchange contracts - forwards Net foreign exchange gain/(loss) $ (887 ) (814 )

Total $ (887 ) $ (814 )

The following tables present the effect of derivative instruments on our Consolidated Statements of Income for the ~~nine months~~three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively:


September 30, 2017
March 31, 2022												March 31, 2022
(In thousands)	(In thousands)											(In thousands)
(Unaudited)	(Unaudited)											(Unaudited)
Derivatives in Cash Flow Hedging Relationship		Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)	Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)		Derivatives in Cash Flow Hedging Relationship	Gain or (Loss) Recognized in OCI on Derivative		Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Gain or (Loss) Reclassified from Accumulated OCI into Income
Foreign exchange contracts - forwards and options		$	(20,601	)	Net sales	$	1,348		Net foreign exchange gain/(loss)	$	—
Foreign exchange contracts - forwards												Foreign exchange contracts - forwards	$	1,884	Net sales	$	1,739

Foreign exchange contracts - forwards and options		5,901			Cost of sales	(1,083		)	Net foreign exchange gain/(loss)	—
Foreign exchange contracts - forwards												Foreign exchange contracts - forwards	(21)		Cost of sales	(327)

Foreign exchange contracts - forwards and options		5,230			Operating expenses	(1,127		)	Net foreign exchange gain/(loss)	—
Foreign exchange contracts - forwards												Foreign exchange contracts - forwards	4		Operating expenses	(239)
Total		(9,470		)		$	(862	)		$	—	Total	$	1,867		$	1,173


September 30, 2016
March 31, 2021												March 31, 2021
(In thousands)	(In thousands)											(In thousands)
(Unaudited)	(Unaudited)											(Unaudited)
Derivatives in Cash Flow Hedging Relationship		Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)	Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)		Derivatives in Cash Flow Hedging Relationship	Gain or (Loss) Recognized in OCI on Derivative		Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Gain or (Loss) Reclassified from Accumulated OCI into Income
Foreign exchange contracts - forwards and options		$	(1,432	)	Net sales	$	(1,301	)	Net foreign exchange gain/(loss)	$	—
Foreign exchange contracts - forwards												Foreign exchange contracts - forwards	$	16,286	Net sales	$	(2,026)

Foreign exchange contracts - forwards and options		3,009			Cost of sales	(1,367		)	Net foreign exchange gain/(loss)	—
Foreign exchange contracts - forwards												Foreign exchange contracts - forwards	(2,529)		Cost of sales	(21)

Foreign exchange contracts - forwards and options		2,964			Operating expenses	(1,278		)	Net foreign exchange gain/(loss)	—
Foreign exchange contracts - forwards												Foreign exchange contracts - forwards	(1,776)		Operating expenses	(9)
Total		$	4,541			$	(3,946	)		$	—	Total	$	11,981		$	(2,056)

(In thousands)

��

Derivatives not Designated as Hedging Instruments

Location of Gain (Loss) Recognized in Income

Amount of Gain (Loss) Recognized in Income

March 31, 2022

March 31, 2021

(Unaudited)

Foreign exchange contracts - forwards

Other (expense) income

(803)

(1,601)

Total

(803)

(1,601)

໿

Note 6 – Inventories, net

Inventories, net consist of the following:


	March 31, 2022		December 31,
(In thousands)	(Unaudited)		2021

Raw materials	$	196,514	$	181,676
Work-in-process	16,247		14,573
Finished goods	95,131		92,994
Total	$	307,892	$	289,243

September 30, 2017 December 31,
(In thousands) (Unaudited) 2016

Raw materials $ 93,023
$ 92,906
Work-in-process 9,095
9,125
Finished goods 82,523
91,577
$ 184,641
$ 193,608

໿

Note 7 – Intangible assets and goodwill, net

Intangible assets at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 are as follows:


	March 31, 2022
(In thousands)	(Unaudited)						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Capitalized software development costs	$	44,554	$	(37,262)	$	7,292	$	45,671	$	(36,457)	$	9,214
Acquired technology	151,531		(39,788)		111,743		148,155		(34,264)		113,891
Customer relationships	96,966		(21,606)		75,360		93,931		(19,717)		74,214
Patents	36,498		(29,879)		6,619		36,217		(29,316)		6,901
Other	33,986		(18,708)		15,278		32,962		(16,764)		16,198
Total	$	363,535	$	(147,243)	$	216,292	$	356,936	$	(136,518)	$	220,418

September 30, 2017
(In thousands) (Unaudited) December 31, 2016
Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Capitalized software development costs $ 116,760
$ (32,701 ) $ 84,059
$ 103,887
$ (39,180 ) $ 64,707
Acquired technology 95,963
(85,573 ) 10,390
94,124
(79,485 ) 14,639
Patents 32,678
(19,424 ) 13,254
31,513
(17,573 ) 13,940
Other 45,212
(30,234 ) 14,978
42,848
(27,471 ) 15,377
$ 290,613
$ (167,932 ) $ 122,681
$ 272,372
$ (163,709 ) $ 108,663

Software development costs capitalized for the three ~~month periods~~months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 were ~~$10.1~~$0.2 million and ~~$9.1~~$0.3 million, respectively, and related amortization expense was $5.7 million and $4.9 million, respectively. For the nine months ended September 30, 2017 and 2016, capitalized software development costs were $35.8 million and $25.0 million, respectively, and related amortization expense was $16.5 million and $14.0 million, respectively. Capitalized software development costsexpenses for the three ~~month periods ended September 30, 2017 and 2016 included costs related to stock based compensation of $487,000 and $445,000, respectively. For the nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, capitalized software development costs included costs related to stock based compensation of $1.4~~2021 were $2.0 million and ~~$1.0~~$7 million, respectively. ~~The related amounts in the table above are net of fully amortized assets.~~

Amortization of capitalized software development costs is computed on an individual product basis for those products available for market and is recognized based on the product’s estimated economic life, which generally range from three to six years. Acquired technology, customer relationships and other intangible assets are amortized over their useful lives, which range from ~~three~~five to ~~eight~~ten years. Patents are amortized using the straight-line method over their estimated period of benefit, generally 10ten to 17seventeen years. Total intangible assets amortization expenses were ~~$8.7~~$12.4 million and $8$14.0 million for the three ~~month periods ended September 30, 2017 and 2016, respectively, and $25.7 million and $27 million for the nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively.

~~Note 8 – Goodwill~~

Goodwill

The carrying amount of goodwill as of ~~September 30, 2017,~~March 31, 2022 was as follows:


	Amount
	(In thousands)
Balance as of December 31, 2021	$	575,992
Acquisitions	13,516
Measurement period adjustment	5,085
Foreign currency translation impact	(2,519)

Balance as of March 31, 2022 (unaudited)	$	592,074

Amount
(In thousands)
Balance as of December 31, 2016 $ 253,197
Acquisitions —
Foreign currency translation impact 11,894
Balance as of September 30, 2017 (unaudited) $ 265,091

The excess purchase price over the fair value of assets acquired is recorded as goodwill. As businesses are acquired, we assign assets acquired (including goodwill) and liabilities assumed to either our existing reporting unit or a newly identified reporting unit as of the date of the acquisition. In the event a disposal group meets the definition of a business, goodwill is allocated to the disposal group based on the relative fair value of the disposal group to the related reporting unit. As we have ~~one~~1 operating segment comprised of components with similar economic characteristics, we allocate goodwill to ~~one~~1 reporting unit for goodwill impairment testing. Goodwill is tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach based on the market capitalization of the reporting unit. Our annual impairment test ~~was~~is performed asin the fourth quarter of ~~February 28, 2017.~~each year.

No impairment of goodwill was identified during ~~2017~~the three months ended March 31, 2022 or ~~2016.~~ the twelve months ended December 31, 2021.

Note 8 – Leases

We have operating leases for corporate offices, automobiles, and certain equipment. Our leases have remaining terms of 1 year to 92 years, some of which may include options to extend the leases for up to 9 years, and some of which may include options to terminate the leases within 1 year. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

Amounts related to finance lease activities and income from leasing activities were not material for the periods presented.

The components of operating lease expense were as follows (unaudited):


(In thousands)	March 31, 2022		March 31, 2021
Operating Lease Cost (1)	$	5,417	$	5,330
(1) includes variable and short-term lease costs

Maturities of lease liabilities as of March 31, 2022 were as follows (unaudited):


(In thousands)
Years ending December 31,	Operating Leases
2022 (Excluding the three months ended March 31, 2022)	$	11,496
2023	11,776
2024	9,973
2025	7,069
2026	6,193
Thereafter	2,921
Total future minimum lease payments	49,428
Less imputed interest	(3,579)
Total lease liabilities	$	45,849

As of March 31, 2022, we have additional operating leases that have not commenced during the period, which were not material.

Note 9 – Income taxes

We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are established when necessary to reduce deferred tax assets to amounts which are more likely than not to be realized. We had a valuation allowance of ~~$62~~$84 million at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016, and $102 million at December 31, 2015.~~2021. A majority of the valuation allowance is related to the deferred tax assets of National Instruments Hungary Kft. (“NI Hungary”). The decrease in the valuation allowance from 2015 to 2016 was primarily due to the revaluation of NI Hungary’s gross deferred tax assets following the reduction in the Hungarian corporate income tax rate from 19% to 9%.

We account for uncertainty in income taxes recognized in our financial statements using prescribed recognition thresholds and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on our tax returns. We had ~~$9.3~~$10.1 million and ~~$11.7~~$9.4 million of gross unrecognized tax benefits at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, respectively, all of which would affect our effective income tax rate if recognized. We recorded a gross increase in unrecognized tax benefits of ~~$0.5 million and $1 million~~$779,000 for the three ~~and nine month periods~~months ended ~~September 30, 2017, respectively,~~March 31, 2022, as a result of the tax positions taken during ~~these periods. We recorded a gross decrease in unrecognized tax benefits of $3.7 million for each of the three and nine month periods ended September 30, 2017 as a result of closing open tax years.~~this period. As of ~~September 30, 2017,~~March 31, 2022, it is reasonably possible that we will recognize gross tax benefits in the amount of $1.5 million in the next twelve months due to the closing of open tax years. The nature of the uncertainty is related to ~~deductions~~positions taken on returns that have not been examined by the applicable tax authority. Our continuing policy is to recognize interest and penalties related to income tax matters in income tax expense. During the three months ended March 31, 2022, we recognized interest expense related to uncertain tax positions of approximately $26,000. As of ~~September 30, 2017,~~March 31, 2022, we had approximately $1$0.3 million accrued for interest related to uncertain tax positions. The tax years ~~2008~~2015 through ~~2017~~2022 remain open to examination by the major taxing jurisdictions to which we are subject.

Our provision for income taxes reflected an effective tax rate of ~~12%~~17% and ~~16%~~(1)% for the three ~~month periods ended September 30, 2017 and 2016, respectively, and 15% and 21% for the nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. For the three ~~and nine month periods~~months ended ~~September 30, 2017,~~March 31, 2022, our effective tax rate was lower than the U.S. federal statutory rate of ~~35%~~21% primarily as a result of deduction for foreign-derived intangible income, an enhanced deduction for certain research and development expenses ~~profits in foreign jurisdictions with reduced income tax rates,~~and the research and development tax credit, aoffset by the change in unrecognized tax ~~benefit from disqualifying dispositions~~benefits, nondeductible officer compensation, state income taxes net of ~~equity awards that do not ordinarily result in a tax~~federal benefit and ~~excess~~U.S. tax ~~benefits from share-based compensation.~~on global intangible low-taxed income. For the three ~~and nine month periods~~months ended ~~September 30, 2016,~~March 31, 2021, our effective tax rate was lower than the U.S. federal statutory rate of ~~35%~~21% primarily as a result of excess tax benefits from share-based compensation and other discrete items, an enhanced deduction for certain research and development expenses, ~~profits in foreign jurisdictions with reduced income tax rates,~~ the research and development tax credit, and athe deduction for foreign-derived intangible income, offset by the U.S. tax on global intangible low-taxed income, state income taxes net of federal benefit ~~from disqualifying dispositions of equity awards that do not ordinarily result in a tax benefit.~~ and nondeductible officer compensation.

Our earnings in Hungary are subject to a statutory tax rate of 9%. In addition, our research and development activities in Hungary benefit from a tax law in Hungary that provides for an enhanced deduction for qualified research and development expenses. The tax position of our Hungarian operations resulted in income tax benefits of ~~$4.3~~$2.0 million and ~~$4.5~~$0.2 million for the three ~~month periods ended September 30, 2017 and 2016, respectively, and $11.6 million and $10.3 million for the nine~~ months ended ~~September 30, 2017~~March 31, 2022, and ~~2016,~~March 31, 2021, respectively.

Earnings from our operations in Malaysia are free of tax under a tax holiday effective January 1, 2013. This tax holiday expires in ~~2027.~~2037. If we fail to satisfy the conditions of the tax holiday, this tax benefit may be terminated early. The income tax benefits of the tax holiday for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022, and March 31, 2021 were approximately ~~$0.8~~$0.6 million and ~~$1.9~~$0.1 million, respectively. The impact of the tax holiday on a per share basis for each of the three ~~and nine~~ months ended ~~September 30, 2017 was a benefit of $0.01 per share. The income tax benefits of the tax holiday for the three~~March 31, 2022 and nine months ended September 30, 2016 were approximately $0.8 million and $1.9 million, respectively. The impact of the tax holiday on a per share basis for each of the three and nine months ended September 30, 2016March 31, 2021 was a benefit of $0.01 per share.

No other taxing jurisdictions had a significant impact on our effective tax rate. We have not entered into any advanced pricing or other agreements with the ~~IRS~~Internal Revenue Service ("IRS") with regard to any foreign jurisdictions.

Note 10 – Comprehensive income

Our ~~comprehensive income~~OCI is comprised of net income, foreign currency translation adjustments, and unrealized gains and losses on forward ~~and option~~ contracts and securities classified as available-for-sale. The accumulated OCI, net of tax, for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, consisted of the following:


	March 31, 2022
	(Unaudited)
(In thousands)	Currency translation adjustment		Investments		Derivative instruments		Accumulated other comprehensive income/(loss)
Balance as of December 31, 2021	$	(23,179)	$	—	3,048		$	(20,131)
Current-period other comprehensive (loss) income	(3,805)		—		3,040		(765)
Reclassified from accumulated OCI into income	—		—		(1,173)		(1,173)
Income tax (benefit) expense	—		—		425		425
Balance as of March 31, 2022	$	(26,984)	$	—	$	4,490	$	(22,494)


	September 30, 2017													March 31, 2021
	(Unaudited)													(Unaudited)
(In thousands)	Currency translation adjustment			Investments			Derivative instruments			Accumulated other comprehensive income/(loss)			(In thousands)	Currency translation adjustment		Investments		Derivative instruments		Accumulated other comprehensive income/(loss)
Balance as of December 31, 2016	$	(37,174	)	$	(669	)	3,222			$	(34,621	)
Current-period other comprehensive income (loss)	21,890			187			(10,332		)	11,745
Balance as of December 31, 2020													Balance as of December 31, 2020	$	(10,066)	$	(426)	(10,334)		$	(20,826)
Current-period other comprehensive (loss) income													Current-period other comprehensive (loss) income	(7,195)		(88)		9,925		2,642
Reclassified from accumulated OCI into income	—			—			862			862			Reclassified from accumulated OCI into income	—		—		2,056		2,056
Income tax (benefit) expense	13			14			(3,360		)	(3,333		)	Income tax (benefit) expense	—		(2)		2,762		2,760
Balance as of September 30, 2017	$	(15,297	)	$	(496	)	$	(2,888	)	$	(18,681	)
Balance as of March 31, 2021													Balance as of March 31, 2021	$	(17,261)	$	(512)	$	(1,115)	$	(18,888)

September 30, 2016
(Unaudited)
(In thousands) Currency translation adjustment Investments Derivative instruments Accumulated other comprehensive income/(loss)
Balance as of December 31, 2015 $ (31,871 ) $ (857 ) (5,362 ) $ (38,090 )
Current-period other comprehensive income 12,130
479
595
13,204
Reclassified from accumulated OCI into income —
—
3,946
3,946
Income tax expense 2,582
123
1,537
4,242
Balance as of September 30, 2016 $ (22,323 ) $ (501 ) $ (2,358 ) $ (25,182 )

໿

Note 11 – Authorized shares of common and preferred stock and stock-based compensation plans

Authorized shares of common and preferred stock

Following approval by the Company’s Board of Directors and stockholders, on May 14, 2013, the Company’s certificate of incorporation was amended to increase the authorized shares of common stock by 180,000,000 shares to a total of 360,000,000 shares. As a result of this amendment, theThe total number of shares which ~~the Company is~~we are authorized to issue is 365,000,000 shares, consisting of (i) 5,000,000 shares of preferred stock, par value ~~$.01~~$0.01 per share, and (ii) 360,000,000 shares of common stock, par value ~~$.01~~$0.01 per share.

Stock-Based Compensation Plan

~~Restricted stock plan~~

Our stockholders approved our 2005 Incentive Plan (the “2005 Plan”) inon May 10, 2005. At the time of approval, 4,050,000 shares of our common stock were reserved for issuance under ~~this plan,~~the 2005 Plan, as well as the number of shares which had been reserved but not issued under our 1994 Incentive Stock Options Plan (the “1994 Plan”), which terminated in May 2005, ~~(the “1994 Plan”),~~ and any shares that returned to the 1994 Plan as a result of termination of options or repurchase of shares issued under such plan. The 2005 Plan ~~administered by the Compensation Committee of the Board of Directors,~~ provided for the granting of incentive awards in the form of restricted stock and RSUs to directors, executive officers and employees of the Company and its subsidiaries. Awards vest over a three, five or ten-year period, beginning on the date of grant. Vesting of ~~ten year~~ten-year awards may accelerate based on ~~the Company’s~~our previous year’s earnings and growth but ~~ten year~~ten-year awards cannot accelerate to vest over a period of less than five years. The 2005 Plan terminated on May 11, 2010, except with respect to outstanding awards previously granted thereunder. There were 3,362,304 shares of common stock that were reserved but not issued under the 2005 Plan as of May 11, 2010.

Our stockholders approved our 2010 Incentive Plan (the “2010 Plan”) on May 11, 2010. At the time of approval, 3,000,000 shares of our common stock were reserved for issuance under ~~this plan,~~the 2010 Plan, as well as the 3,362,304 shares of common stock that were reserved but not issued under the 1994 Plan and the 2005 Plan as of May 11, 2010, and any shares that are returned to the 1994 Plan and the 2005 Plan as a result of the forfeiture or termination of options or RSUs or repurchase of shares issued under ~~these~~those plans. The 2010 Plan ~~administered by~~provided for the ~~Compensation Committee of the Board of Directors, provides for~~ granting of incentive awards in the form of restricted stock and RSUs to employees, directors and consultants of the Company and employees and consultants of any parent or subsidiary of the Company. Awards vest over a three, five or ten-year period, beginning on the date of grant. Vesting of ~~ten year~~ten-year awards may accelerate based on ~~the Company’s~~our previous year’s earnings and growth but ~~ten year~~ten-year awards cannot accelerate to vest over a period of less than five years. The 2010 Plan terminated on May 12, 2015, except with respect to the outstanding awards previously granted thereunder. There were 2,518,416 shares of common stock that were reserved but not issued under the 2010 Plan as of May 12, 2015.

Our stockholders approved our 2015 Equity Incentive Plan (the “2015 Plan”) on May 12, 2015. At the time of approval, 3,000,000 shares of our common stock were reserved for issuance under ~~this plan,~~the 2015 Plan, as well as the 2,518,416 shares of common stock that were reserved but not issued under the 2010 Plan as of May 12, 2015, and any shares that were returned to the 1994 Plan, 2005 Plan, and the 2010 ~~Plans~~Plan as a result of the forfeiture or termination of options or RSUs or repurchase of shares issued under ~~these~~those plans. The 2015 Plan ~~administered by~~provides for the ~~Compensation Committee~~granting of incentive awards in the form of restricted stock and RSUs, to employees, directors and consultants of the ~~Board~~Company and employees and consultants of ~~Directors,~~any parent or subsidiary of the Company and such awards may be subject to performance-based vesting conditions. Awards generally vest over a three, four, five or ten-year period, beginning on the date of grant. Vesting of ten-year awards may accelerate based on our previous year’s earnings and growth but ten-year awards cannot accelerate to vest over a period of less than five years. The 2015 Plan terminated on May 5, 2020, except with respect to the outstanding awards previously granted thereunder. There were 567,142 shares of common stock that were reserved but not issued under the 2015 Plan as of May 5, 2020.

Our stockholders approved our 2020 Equity Incentive Plan (the “2020 Plan”) on May 5, 2020. At the time of approval, 4,500,000 shares of our common stock were reserved for issuance under the 2020 Plan, as well as the 567,142 shares of common stock that were reserved but not issued under the 2015 Plan as of May 5, 2020, and any shares that were returned to the 1994 Plan, 2005 Plan, 2010 Plan, and 2015 Plan as a result of the forfeiture or termination of options or RSUs or repurchase of shares issued under those plans. The 2020 Plan provides for the granting of incentive awards in the form of restricted stock and RSUs to employees, directors and consultants of the Company and employees and consultants of any parent or subsidiary of the Company. Awards generally vest over a one, two, three ~~four, five~~ or ~~ten-year~~four-year period, beginning on the date of ~~grant. Vesting of ten year~~the grant and awards may ~~accelerate based on the Company’s previous year’s earnings and growth but ten year awards cannot accelerate~~be subject to ~~vest over a period of less than five years.~~performance-based vesting conditions. There were ~~3,848,515~~1,637,992 shares available for grant under the ~~2015~~2020 Plan at ~~September 30, 2017.~~ March 31, 2022.

Performance-based stock units

During the three ~~month period~~months ended ~~September 30, 2017,~~March 31, 2022 and 2021, we ~~did not make any changes in accounting principles or methods of estimates related~~granted 164,843 and 130,006 performance-based restricted stock units ("PRSUs"), respectively, to executive officers pursuant to the ~~2005, 2010~~2020 Plan and 2015 ~~Plans.~~ Plan. The PRSUs may be earned based on our total shareholder return ("TSR") compared to the TSR of the Russell 2000 Index (the “Index”) over a three-year performance period. For the PRSUs granted during the three months ended March 31, 2022, the three-year performance period commenced on January 1, 2022, and will end on December 31, 2024, and for the PRSUs granted during the three months ended March 31, 2021, the three-year performance commenced on January 1, 2021 and will end on December 31, 2023, using the average daily closing price over a 30-day lookback in each case. The number of awards earned could range from zero to two times the target number of shares granted.

The fair values of PRSUs are estimated using a Monte Carlo simulation. The determination of fair value of the PRSUs is based on our stock price and a number of assumptions including the expected volatility, expected dividend yield and the risk-free interest rate. The expected volatility at the date of grant was based on the historical volatilities of our stock and the companies included in the Index over the performance period. The Monte Carlo model is based on random projections of stock-price paths and must be repeated numerous times to achieve a probabilistic assessment. The key assumptions used in valuing these market-based awards are as follows:


	Three Months Ended
	(unaudited)
	March 31, 2022	March 31, 2021
Number of simulations	100,000	100,000
Expected volatility	37.81%	40.60%
Expected life in years	2.95 years	2.95 years
Risk-free interest rate	1.33%	0.21%
Dividend yield	2.52%	2.66%

The weighted average grant date fair value of the market-based awards, as determined by the Monte Carlo valuation model, was $59.65 per share and $66.97 per share in 2022 and 2021, respectively.

Employee stock purchase plan

Our employee stock purchase plan ("ESPP") permits substantially all domestic employees and employees of designated subsidiaries to acquire our common stock at a purchase price of 85% of the lower of the market price at the beginning or the end of the purchase period. The plan has quarterly purchase periods generally beginning on February 1, May 1, August 1 and November 1 of each year. Employees may designate up to 15% of their compensation for the purchase of common stock under ~~this plan.~~the ESPP. On May ~~9, 2017,~~14, 2019, our stockholders approved an additional 3,000,000 shares for issuance under our ~~employee stock purchase plan.~~ESPP. At ~~September 30, 2017,~~March 31, 2022, we had ~~3,069,958~~1,797,679 shares of common stock reserved for future issuance under ~~this plan.~~the ESPP. We issued ~~863,093~~263,842 shares under this plan in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and the weighted average purchase price of the ~~employees’ purchase rights~~shares issued was ~~$26.5~~$35.04 per share. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, we did not make any changes in accounting principles or methods of estimates with respect to ~~such plan.~~our ESPP.

Authorized Preferred Stock and Preferred Stock Purchase Rights Plan

We have 5,000,000 authorized shares of preferred stock. On January 21, 2004, our Board of Directors designated 750,000 of these shares as Series A Participating Preferred Stock in conjunction with the adoption of a Preferred Stock Rights Agreement which expired on May 10, 2014. There were no shares of preferred stock issued and outstanding at ~~September 30, 2017.~~March 31, 2022.

Stock repurchases and retirements

~~From time to time,~~On April 21, 2010, our Board of Directors ~~has~~ authorized ~~various programs for our~~a program to repurchase of shares of our common stock from time to time, depending on market conditions and other ~~factors.~~factors(the “2019 Program”). The Board has amended the 2019 Program several times over the years to increase the number of shares that may be purchased under the program. On October 23, 2019, our Board amended the 2019 Program to increase the number of shares that may be repurchased by 3,000,000 shares.

On January 19, 2022, our Board of Directors approved a new stock repurchase plan for up to $250 million of our common stock, effective immediately (the "2022 Program"). This new repurchase program is in addition to the existing 2019 Program. Under the ~~current program, we did~~2022 Program, shares may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the other terms of the repurchase will depend on a variety of factors, including legal requirements, economic and market conditions, and other investment opportunities. The 2022 Program may be changed, suspended or discontinued at any time and does not ~~make any share repurchases during~~have a specified expiration date.

At March 31, 2022, there were 0 shares remaining available for repurchase under the ~~nine months ended September 30, 2017 or~~2019 Program and there was $230 million available for repurchase under the ~~three months ended September 30, 2016.~~2022 Program. We repurchased ~~a total of 206,780~~772,052 shares of our common stock at a weighted average price per share of ~~$27.25~~$40.74 during the ~~nine months~~three-months ended ~~September 30, 2016. At September 30, 2017, there were 1,134,247~~March 31, 2022 under the 2019 Program and 2022 Program. We did not repurchase any shares ~~remaining available for repurchase~~of our common stock during the three-months ended March 31, 2021 under ~~this program. This repurchase program does not have an expiration date.~~ the 2019 Program.

Note 12 –Segment and geographic information

We operate as ~~one~~1 operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, who is our chief executive officer, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker evaluates our financial information and resources and assesses the performance of these resources on a consolidated basis. Since we operate ~~in one~~as 1 operating segment, all required financial segment information can be found in the condensed consolidated financial statements and the notes thereto.

We sell our ~~product~~products in ~~three~~3 geographic regions which consist ofof: the Americas; Europe, Middle East ~~India,~~ and Africa ~~(EMEIA)~~region ("EMEA"); and Asia-Pacific ~~(APAC)~~region ("APAC"). Our sales to these regions share similar economic characteristics ~~similar product mix, similar~~including the nature of products and services we sell, the type and class of customers, and ~~similar distribution methods.~~the methods used to distribute our products and services. Revenue from the sale of our products, which are similar in nature, and software maintenance is reflected as total net sales in our Consolidated Statements of Income.

~~Total~~(See Note 2 –Revenue of Notes to Consolidated Financial Statements for total net sales by the major geographic areas in which we ~~operate,~~operate).

The following table present summarized information for net sales by country. Revenues from external customers are ~~as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) (Unaudited) (Unaudited)
2017 2016 2017 2016
Net sales:
Americas $ 133,191
$ 129,710
$ 373,277
$ 354,806
EMEIA 93,277
92,232
288,565
278,616
APAC 94,453
84,422
277,793
266,225
$ 320,921
$ 306,364
$ 939,635
$ 899,647

~~Based on~~generally attributed to countries based upon the ~~billing location of the customer, total~~customer's location. Net sales attributable to each individual foreign country outside the U.S. and China were not material.


(in millions)	United States		China(1)	Rest of the World	Total
Net sales:
Three months ended March 31, 2022	$	152	55	178	$	385
Three months ended March 31, 2021	$	120	54	161	$	335
(1): Includes Mainland China and the Hong Kong Special Administrative Region

The following table presents summarized information for long-lived assets by country. Long-lived assets attributable to each individual country outside the ~~three months ended September 30, 2017~~U.S., Hungary and ~~2016~~Malaysia were ~~$195 million and $184 million, respectively, and $588 million and $564 million for the nine months ended September 30, 2017 and 2016, respectively.~~

~~Total~~not material. Long-lived assets consist of property, plant, and equipment ~~net, outside the U.S. was $133 million as of September 30, 2017~~ and ~~December 31, 2016.~~operating lease right-of-use assets and excludes intangible assets.


(in millions)	United States		Hungary	Malaysia	Rest of the World	Total
Long-lived Assets:
March 31, 2022	$	126	52	77	60	$	315
December 31, 2021	$	125	51	76	60	$	312

Note 13 - Debt

On ~~May 9, 2013,~~June 18, 2021, we entered into ~~a Loan~~the Second Amended and Restated Credit Agreement (the ~~“Loan Agreement”~~"Credit Agreement") with Wells Fargo Bank, National Association, as the administrative agent, swingline lender and issuing lender (the ~~“Lender”~~“Administrative Agent”). , Wells Fargo Securities, LLC, as sole lead arranger and bookrunner, and the lenders party thereto. The ~~Loan~~Credit Agreement ~~provided~~amended and restated and refinanced our prior Amended and Restated Credit Agreement, dated as of June 12, 2020 (as further amended on October 30, 2020, the "Prior Credit Agreement"), by and among us, the lenders from time-to-time party thereto and Administrative Agent. All outstanding loans under the Prior Credit Agreement were repaid in full in connection with the entry into the Credit Agreement.

The Credit Agreement provides for a ~~$50~~secured revolving loan facility in an aggregate principal amount of up to $500 million ~~unsecured~~at any time outstanding with sublimit of $25 millionfor the issuance of letters of credit. Subject to the terms of the Credit Agreement, including obtaining commitments from existing lenders or new lenders, we may request term loans or additional revolving commitments. Pursuant the Credit Agreement, the revolving line of credit ~~with a scheduled maturity date of May 9, 2018 (the “Maturity Date”). On October 29, 2015, we entered into a First Amendment to Loan~~terminates, and all revolving loans under the Credit Agreement (the “Amendment”) with the Lender, which amended our Loan Agreement to among other things, (i) increase the unsecured revolving line of credit from $50 million to $125 million, (ii) extend the Maturity Date of the line of credit from May 9, 2018 to October 29, 2020,will be due and (iii) provide us with an option to request increases to the line of credit of up to an additional $25 million in the aggregate, subject to consent of the Lender and terms and conditions to be mutually agreed between us and the Lender.payable, on June 18, 2026.

The revolving loans ~~bear~~and term loans accrue interest, at our option, atat: (i) a base rate equal to the highest of (a) the prime rate (b) the federal funds rate plus 0.50%, and (c) LIBOR for an interest period of one month plus 1.00%, in each case, plus a margin of 0.25% to 0.75%; or (ii) LIBOR plus a margin of 1.25% to 1.75%, with the margin being determined based upon our consolidated total net leverage ratio. The Credit Agreement contains financial covenants requiring us to maintain a maximum total leverage ratio of less than or equal to 3.50 to 1.00 which increases to 4.00 to 1.00 for a specified period following material acquisitions, and a minimum interest coverage ratio of greater than or equal to 3.00 to 1.00, in each case determined in accordance with the ~~Loan~~Credit Agreement.

The Credit Agreement ~~plus~~provides for a ~~spread~~commitment fee of ~~0.0%~~0.150% to ~~0.50%, or a LIBOR rate plus a spread of 1.13% to 2.00%, in each case with such spread~~0.250% per annum, determined based upon our consolidated total net leverage ratio, on the average daily unused amount of the revolving committed amount, payable quarterly in arrears.

Under the circumstances described in the Credit Agreement, certain of our wholly owned domestic subsidiaries (the "Subsidiary Guarantors") are required to enter into a ~~ratio~~guaranty agreement ("Guaranty") in favor of ~~consolidated indebtedness to EBITDA, determined~~the Administrative Agent guarantying the obligations of the Company under the Credit Agreement, among other things. As of December 31, 2021, there were no Subsidiary Guarantors, and no Guaranty had been executed in ~~accordance~~connection with the ~~Loan~~Credit Agreement. ~~Principal, together~~In connection with the Credit Agreement, we have entered (and our future Subsidiary Guarantors will enter into an Amended and Restated Collateral Agreement pursuant to which we and our Subsidiary Guarantors from time-to-time have granted (or will grant) a lien on substantially all ~~accrued~~of our and ~~unpaid interest, is due~~their assets to secure our and ~~payable on~~their obligations under the ~~Maturity Date. We are also obligated to pay a quarterly commitment fee, payable in arrears, based on~~Credit Agreement and the ~~available commitments at a rate of 0.18% to 0.30%, with such rate determined based on the ratio described above.~~ Guaranty.

The ~~Loan~~Credit Agreement contains customary affirmative and negative covenants. The affirmative covenants include, among other things, delivery of financial statements, compliance certificates and ~~notices;~~notices, payment of taxes and other ~~obligations;~~obligations, maintenance of ~~existence;~~existence, maintenance of properties and ~~insurance;~~insurance, maintenance of books and records, and compliance with applicable laws and regulations.The negative covenants include, among other things, limitations on indebtedness, liens, mergers, consolidations, acquisitions and sales of assets, investments, changes in the nature of the business, affiliate transactions and certain restricted payments. The Loan Agreement also requires us to maintain a ratio of consolidated indebtedness to EBITDA equal to or less than 3.25 to 1.00, and a ratio of consolidated EBITDA to interest expense greater than or equal to 3.00 to 1.00, in each case determined in accordance with the Loan Agreement. As of September 30, 2017, we were in compliance with all covenants in the Loan Agreement.

~~The Loan~~Credit Agreement contains customary events of default including, among other things, payment defaults, breaches of covenants or representations and warranties, cross-defaults with certain other indebtedness, bankruptcy and insolvency events, judgment defaults and change in control events, subject to grace periods in certain instances. Upon an event of default, the ~~lender~~Administrative Agent and the Lenders may declare all or a portion of the outstanding obligations payable by us to be immediately due and payable and exercise other rights and remedies provided for under the ~~Loan~~Credit Agreement. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default under the ~~Loan~~Credit Agreement at a per annum rate of interest equal to 2.00% above the otherwise applicable interest rate.

Proceeds of revolving loans ~~made under~~of the ~~Loan~~Credit Agreement may be used for working capital and other general corporate purposes. We may prepay the loans under the ~~Loan~~Credit Agreement in whole or in part at any time without premium or penalty. ~~Certain~~

The following table presents the amounts outstanding related to our borrowing arrangements discussed above as of ~~our existing~~March 31, 2022, and ~~future material domestic subsidiaries are required to guaranty our obligations under the Loan Agreement.~~December 31, 2021, respectively (in thousands):


	March 31,		December 31,
	2022		2021
Secured

2021 revolving loan facility (effective interest rate of 1.4%)	325,000		300,000




Total Debt, non-current	$	325,000	$	300,000

As of ~~September 30, 2017, we had outstanding $15~~March 31, 2022, debt issuance costs of approximately $2.4 million attributable to our revolving credit facility are presented within "Other long-term assets" in ~~borrowings under this line of credit. During the three month periods ended September 30, 2017 and September 30, 2016, we incurred~~our Consolidated Balance Sheet. These amounts are amortized to interest expense ~~related to our outstanding borrowings~~ratably over the life of $176,000 and $167,000, respectively. During the nine months ended September 30, 2017 and September 30, 2016, we incurred interest expense related to our outstanding borrowings of $519,000 and $377,000, respectively. As of September 30, 2017 and September 30, 2016, the weighted-average interest rate on the revolving line of ~~credit was 2.4% and 1.6%, respectively. These charges are included in “Other income (loss), net” in our Consolidated Statements of Income.~~credit.

Note 14 – Commitments and contingencies

We offer a one-year limited warranty on most hardware products which is included in the terms of sale of such products. We also offer optional extended warranties on our hardware products for which the related revenue is recognized ratably over the warranty period. Provision is made for estimated future warranty costs at the time of the sale for the estimated costs that may be incurred under the standard warranty. Our estimate is based on historical experience and product sales during the period. The warranty reserve for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was as follows:


	Three Months Ended March 31,
(In thousands)	(Unaudited)
	2022		2021
Balance at the beginning of the period	$	3,210	$	2,872
Accruals for warranties issued during the period	641		681
Accruals related to pre-existing warranties	83		130
Settlements made (in cash or in kind) during the period	(584)		(803)
Balance at the end of the period	$	3,350	$	2,880

Nine Months Ended September 30,
(In thousands) (Unaudited)
2017 2016
Balance at the beginning of the period $ 2,686
$ 1,755
Accruals for warranties issued during the period 1,929
1,764
Accruals related to pre-existing warranties 193
690
Settlements made (in cash or in kind) during the period (1,983 ) (2,088 )
Balance at the end of the period $ 2,825
$ 2,121

AsIn the ordinary course of ~~September 30, 2017,~~business, we ~~had~~enter into purchase orders with suppliers for the purchase of goods and services, including non-cancelable ~~purchase commitments with various suppliers of~~agreements for customized inventory and inventory components ~~totaling approximately $7.8 million over~~("unconditional purchase obligations"). The majority of our unconditional purchase obligations relate to amounts due within the next ~~twelve~~12 months.

As of ~~September 30, 2017, we had~~March 31, 2022, our future payments under noncancellable unconditional purchase obligations with a remaining term in excess of one year were approximately $17.7 million. Our unconditional purchase obligations primarily consist of payments to various suppliers for customized inventory components. As of March 31, 2022, our outstanding guarantees for payment of customs and foreign grants ~~totaling approximately $3.1 million, which are generally payable over the next twelve months.~~were not material.

Note 15 – Restructuring

~~Since~~On October 26, 2021, we initiated a restructuring plan (the “2021 Plan”) that will result in the ~~first~~site closure of our facilities in Aachen, Germany. This targeted restructuring effort is intended to further optimize our research and development operations and accelerate investment in strategic growth opportunities. In connection with the 2021 Plan, the majority of these charges were recognized during the fourth quarter of 2017, we have been taking steps to reduce our overall employee headcount by approximately 2% by the end of 2017 in an effort to minimize job duplication or evaluate where we should shift and centralize activities, improve efficiencies, and rebalance our resources on higher return activities. The timing and scope of our headcount reductions will vary. 2021.

A summary of the charges in ~~the~~our consolidated statement of operations resulting from our restructuring activities is shown below:


	Three Months Ended March 31,
(In thousands)	(Unaudited)
	2022		2021
Cost of sales	$	—	$	75
Research and development	400		155
Sales and marketing	—		4,086
General and administrative	—		1,959
Total restructuring and other related costs	$	400	$	6,275

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) (Unaudited) (Unaudited)
2017 2016 2017 2016
Cost of sales $ 79
—
$ 986
—
Research and development 86
—
1,382
—
Sales and marketing 1,618
—
7,997
—
General and Administration 207
—
801
—
Total restructuring and other related costs $ 1,990
—
$ 11,166
—

Total restructuring and other charges incurred during the three months ended March 31, 2022 related to the2021 Plan were $0.4 million primarily related to employee severance costs. A summary of balance sheet activity during 2022 related to the restructuring activity is shown below:


	Restructuring Liability
	(in thousands)
Balance as of December 31, 2021	$	11,520
Income statement expense	400
Cash payments	(2,107)
Balance as of March 31, 2022	$	9,813

Restructuring Liability
(in thousands)
Balance as of December 31, 2016 $ —
Income statement expense 11,166
Cash payments (7,714 )
Balance as of September 30, 2017 $ 3,452

The restructuring liability of ~~$3.5~~$9.8 million at ~~September 30, 2017~~March 31, 2022 relating primarily to severance payments associated with the restructuring activity, is recorded in the “accrued compensation” line item of ~~the~~our consolidated balance sheet.

໿

Note 16 – Litigation

We are not currently a party to any material litigation. However, in the ordinary course of our business, we have in the past, are currently and may likely become involved in ~~a limited number of~~various legal ~~actions, both as plaintiff~~proceedings, claims, and ~~defendant,~~regulatory, tax or government inquiries and investigations, and could incur uninsured liability in any one or more of them. We also periodically receive notifications from various third parties related to alleged infringement of patents or intellectual property rights, commercial disputes or other matters. No assurances can be given with respect to the extent or outcome of any ~~future~~investigation, litigation or dispute.

Note 17 – Acquisitions

Acquisition of Electronic Vehicle (“EV”) Business From Heinzinger Electronic GmbH ("Heinzinger")

On February 28, 2022, we completed the acquisition of the systems business of Heinzinger for $22.5 million in total cash consideration, subject to certain post-closing adjustments. This transaction was accounted for as a business combination using the acquisition method of accounting. All of the acquired assets and liabilities of Heinzinger have been recorded at their respective fair values as of the acquisition date. We recognized approximately $14 million of goodwill and $7 million of other intangible assets as part of our preliminary purchase price allocation. Transaction costs have been expensed as incurred and were not material to the periods presented. The acquisition was funded by cash on hand.

The preliminary purchase price allocation related to the acquisition was not finalized as of March 31, 2022, and is based upon a preliminary valuation which is subject to change as we obtain additional information with respect to certain intangible assets and income taxes. Pro-forma results of operations have not been presented as the impact of the acquired operations was not material.

The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is primarily attributable to expected growth in the scope of and market opportunities for our existing offerings related to vehicle electrification and other related applications. Goodwill is not deductible for tax purposes.

Acquisition of N H Research, LLC ("NHR")

On October 19, 2021, we completed the acquisition of NHR, a manufacturer of test and measurement solutions for high power applications including EV and batteries. As a result of acquiring 100% of the outstanding share capital of NHR, NHR became our wholly owned subsidiary. This transaction is being accounted for as a business combination using the acquisition method of accounting. All of the acquired assets and liabilities of NHR have been recorded at their respective fair values as of the acquisition date. Transaction costs have been expensed as incurred.

The acquisition was funded primarily by cash on hand in addition to $200 million drawn under our existing credit facility in October 2021. See Note 13 – Debt of Notes to Consolidated Financial Statements for further information on our outstanding borrowings. During the year ended December 31, 2021, we expensed $6 million of transaction costs in connection with the acquisition of NHR, which are included in selling, general and administrative expenses.

At the acquisition date, total consideration transferred was approximately $206 million, inclusive of $3 million in cash acquired. The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is primarily attributable to expected growth in the scope of and market opportunities for our existing offerings related to vehicle electrification and other related applications. As a result of the structure of the transaction, the balance of goodwill is deductible in the U.S. over 15 years for income tax purposes.

During the first quarter of 2022, we recorded a measurement period adjustment to our preliminary estimate of the fair value of liabilities assumed related to amounts owed for certain pre-acquisition activities. The increase to the fair value of acquired liabilities was $5.1 million, with a corresponding increase to goodwill. The change to this provisional amount had no impact to the current period income statement.

Fair value of net assets acquired and liabilities assumed

The information below represents the preliminary purchase price allocation of NHR (in thousands):


	October 19, 2021
Consideration Transferred	$	206,238

Cash	2,935
Accounts receivable, net	3,902
Inventories, net	4,764
Property and equipment, net	287
Other assets and liabilities	(4,621)
Intangible assets	98,510
Goodwill	102,932
Accounts payable and accrued expenses	(2,186)
Deferred revenue	(285)
Net assets acquired	$	206,238

Our preliminary estimates of the fair value of the assets acquired and the liabilities assumed are based on the information currently available, and we are continuing to evaluate the underlying inputs and assumptions used in our valuations. Accordingly, these preliminary estimates are subject to change during the measurement period, which is up to one year from the date of acquisition. A decrease in the fair value of assets acquired or an increase in the fair value of liabilities assumed in the acquisition would result in a corresponding increase in the amount of goodwill acquired. The primary areas of the purchase price that are not yet finalized relate to income taxes, certain liabilities related to preacquisition activities, and residual goodwill.

Acquired intangible assets will be amortized over their estimated useful lives on a straight-line basis. The following table summarizes the preliminary purchase price allocation, and the preliminary average remaining useful lives, for identifiable intangible assets acquired (dollars in thousands):


	Estimated Fair Value		Estimated Useful Lives (in years)
Customer relationships	$	54,350	7
Developed software	6,010		2-7
Existing product configurations	28,300		9
In-process research and development (IPR&D)	4,030		Indefinite
Trade name	5,820		6
Total	$	98,510

Customer relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers. Customer relationships were valued using the multi-period excess earnings method of the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by customer relationships less charges representing the contribution of other assets to those cash flows. The economic useful life was determined by examining the period of time over which a target cumulative present value of discounted cash flows could be achieved.

Existing product configurations represent the existing hardware configurations of products sold by NHR. These products are created from component parts and assembled based on their intended purpose and application. Existing product configurations were valued using the avoided costs / lost profits method. The fair value represents the total costs that would be avoided by having this asset in place. The economic useful life was determined based on the number of years since launch for each product compared to the expected total life of each product.

Unaudited Pro Forma Information

The following unaudited pro forma financial information presents combined results of operations for the periods presented, as if the NHR acquisition had occurred on January 1, 2020, with adjustments to give effect to pro forma events that are directly attributable to the acquisition. These pro forma adjustments include additional amortization expense for the identifiable intangible assets and an increase in interest expense related to the additional borrowings entered into in connection with the acquisition, net of tax effects. For the pro forma presentation, given the assumed acquisition date of January 1, 2020, transaction and integration costs that were incurred at or subsequent to the actual acquisition date have been included in the calculation of pro forma net income for the three months ended March 31, 2021, whereas transaction and integration costs that were incurred prior to the acquisition date have been excluded from the calculation of pro forma net income. The unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what actual results of operations would have been if the acquisition had occurred as the beginning of the period presented, nor are they indicative of future results of operations. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the unaudited pro forma results.


	Three Months Ended March 31,
(in thousands)	2021

Net sales	$	342,935
Net income	$	3,884

Other Acquisitions

During the second quarter of 2021, we also completed the acquisition of MonoDrive, a software company that specializes in signal processing and hi-fi simulation software for validation of autonomous vehicles and advanced driver assistance systems (ADAS), for approximately $20 million in total cash consideration, subject to certain post-closing adjustments. This transaction was accounted for as a business combination using the acquisition method of accounting. All of the acquired assets and liabilities of the software company have been recorded at their respective fair values as of the acquisition date. We recognized approximately $17 million of goodwill and $4 million of other intangible assets as part of our purchase price allocation. Transaction costs have been expensed as incurred and were not material to the periods presented.

Pro-forma results of operations have not been presented because the effects of the acquired operations were not material.

The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is primarily attributable to expected growth in the scope of and market opportunities for our software-defined automated test and measurement platform. Goodwill is not deductible for tax purposes.

Note 1718 – Subsequent events

On ~~October 25, 2017,~~April 20, 2022, our Board of Directors declared a quarterly cash dividend of ~~$0.21~~$0.28 per common share, payable on ~~December 4, 2017,~~May 31, 2022, to stockholders of record on ~~November 13, 2017.~~May 9, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~This Quarterly Report on Form 10-Q contains~~National Instruments Corporation and its subsidiaries (referred to as the “Company,” “we,” “us,” “our,” “National Instruments” or “NI”) has made forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)., that are subject to risks and uncertainties. Any statements contained herein regarding our future financial performance, operations, plans, investments, expected effects of investments, or other matters (including, without limitation, statements to the effect that we “believe,” ~~"expect," "plan," "may," "will,~~“expect,” “plan,” “intend to,” ~~"project,"~~“may,” “could,” “can,” “will,” “project,” “predict,” “anticipate,” ~~"continue,~~“continue,” “strive to,” “endeavor to,” “seek to,” “are committed to,” "remaining committed to," “are encouraged by,” "remain cautious," "remain optimistic," “estimate”, "focus on"; statements of “goals,” “commitments,” "strategy" or ~~"estimate"~~“visions”; or other variations thereof or comparable terminology or the negative thereof) should be considered forward-looking statements. ~~Actual~~All forward-looking statements are based on current expectations and projections of future events. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements are not guarantees of performance and actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors, including those set forth under the heading “Risk Factors” ~~beginning on page41,~~below and in ~~the discussion below. Readers are also encouraged to refer to the documents regularly filed by us with the Securities and Exchange Commission, including~~"Part 1, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016, for further discussion of~~2021 (the "2021 Form 10-K"). Actual results could differ materially from those stated or implied by our forward-looking statements, due to risks and uncertainties associated with our business or under different assumptions or conditions. You should not place undue reliance on any of these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The following discussion should be read in conjunction with the 2021 Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") and the ~~risks attendant thereto.~~ condensed consolidated financial statements and accompanying notes included in Part 1, Item 1 of this Form 10-Q.

Overview and Current Business Outlook

~~National Instruments Corporation (the “Company”, “we”, “us” or “our”) designs, manufactures and sells systems to~~For more than 40 years, we have enabled engineers and scientists ~~that~~around the world to accelerate productivity, innovation and discovery. Our ~~platform-based approach to engineering~~software-centric platform provides an ~~integrated~~advanced approach through integration of software and modular hardware ~~platform that speeds the development of systems needing~~to create automated test and automated measurement ~~and control.~~systems. We believe ~~that~~ our long-term ~~vision~~track record of innovation and ~~focus on technology supports~~our differentiated platform help support the success of our customers, employees, suppliers, community and stockholders. We have been profitable in every year since 1990. We sell to a large number of customers in a wide variety of industries. ~~We have been profitable in every year since 1990.~~

The key strategies that we focus on in running our business are the following:

•Expanding our ~~broad customer base~~

available market opportunity

We strive to increase our ~~already broad customer base and to grow our large order business~~available market by ~~serving a large market on many computer platforms, through a global marketing and distribution network. We also seek to acquire new technologies and expertise from time to time to open~~identifying new opportunities ~~for~~in existing customers, attracting and serving new customers, and expanding our business to market adjacencies. Our large network of existing ~~product portfolio.~~ customers provides a broad base from which to expand.

•Maintaining a high level of customer satisfaction

To maintain a high level of customer satisfaction we strive to offer innovative, modular and integrated products through a global sales and support network. We strive to maintain a high degree of ~~backwards~~backward compatibility across different platforms to preserve the customer’s investment in our products. In this time of intense global competition, we believe ~~that~~ it is crucial that we continue to offer products with high quality and reliability, and that our products provide cost-effective solutions for our customers.

•Leveraging external and internal technology

Our product strategy is to provide superior products by leveraging generally available technology, supporting open architectures on multiple platforms and by leveraging our core technologies ~~such as custom application specific integrated circuits (“ASICs”)~~ across multiple products.

We sell into test and measurement and industrial/embedded applications in a broad range of industries and are subject to the economic and industry forces that drive those markets. It has been our experience that the performance of these industries and our performance are impacted by general trends in industrial production for the global economy and by the specific performance of certain vertical markets that are intensive consumers of measurement technologies. Examples of these ~~markets are advanced research, automotive, automated test equipment, consumer electronics, commercial aerospace, computers~~types of customers include semiconductor and electronics, ~~continuous process manufacturing, education, government/~~transportation, and aerospace, defense ~~medical research/pharmaceutical, power/energy, semiconductors,~~ and ~~telecommunications.~~government.

•Leveraging a worldwide sales, distribution and manufacturing network

We distribute and sell our software and hardware products primarily through a direct sales organization. We also use independent distributors, ~~OEMs, VARs,~~original equipment manufacturers, value added resellers, system integrators and consultants to market and sell our products. We have sales offices in the U.S. and sales offices and distributors in key international markets. Sales outside of the Americas accounted for approximately ~~58%~~59% and ~~58%~~62% of our net sales during the three ~~month periods~~months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. The vast majority of our foreign sales are denominated in the customers’ local currency, which exposes us to the effects of changes in foreign currency exchange rates. We expect that a significant portion of our total ~~net sales~~revenues will continue to be derived from international sales. (See ~~“Note~~Note 2 - Revenue and Note 12 –- Segment and geographic ~~information”~~information of Notes to ~~consolidated financial statements~~Consolidated Financial Statements for details concerning the geographic breakdown of our net ~~sales)~~sales and long-lived assets, respectively).

We manufacture substantially all of our product volume at our facilities in Debrecen, Hungary and Penang, Malaysia. In the remainder of 2017, our site in Malaysia is expected to produce approximately 35% of our global production and our site in Hungary is expected to produce approximately 65% of our global production. Our product manufacturing operations can be divided into four areas: electronic circuit card and module assembly; chassis and cable assembly; technical manuals and product support documentation; and software duplication. Most of our electronic circuit card assemblies, modules and chassis are manufactured in house, although subcontractors are used from time to time. The majority of our electronic cable assemblies are produced by subcontractors; however, we do manufacture some on an exception basis. Our software duplication, technical manuals and product support documentation is primarily produced by subcontractors.

•Delivering high quality, reliable products

We believe that our long-term growth and success depend on delivering high quality software and hardware products on a timely basis. Accordingly, we focus significant efforts on research and development. We focus our research and development efforts on enhancing existing products and developing new products that incorporate appropriate features and functionality to be competitive with respect to technology, price and performance. Our success also depends on our ability to obtain and maintain patents and other proprietary rights related to technologies used in our products. We have engaged in litigation when necessary, and ~~where necessary,~~ will likely engage in future litigation to protect our intellectual property rights. ~~In monitoring and policing our intellectual property rights, we have been and may be required to spend significant resources.~~

Our operating results fluctuate from period to period due to changes in global economic conditions and a number of other ~~factors.~~factors such as the impact of the COVID-19 pandemic. As a result, we believe our historical results of operations should not be relied upon as indications of future performance. There can be no assurance that our net sales will grow, or not decline, or that we will remain profitable in future periods.

Backlog

Backlog is a measure of firm orders that are received but have not yet shipped to customers. Our measure of backlog excludes amounts related to shipments where the customer has specified delivery in a future period.

Our backlog was approximately $210 million and $154 million at March 31, 2022 and December 31, 2021, respectively, primarily driven by strong order growth during the year and longer lead times for certain components. We expect the majority of backlog to be recognized as revenue within 12 months. While backlog on any particular date can be an indicator of short-term revenue performance, it is not necessarily a reliable indicator of medium or long-term revenue performance.

Current business outlook

Many of the industries we serve have historically been cyclical and have experienced periodic downturns. In assessing our business, we consider the trends in the Global Purchasing Managers’ Index (“PMI”), global industrial production as well as industry reports on the specific vertical industries that we target. Historically, our business cycles have generally followed the expansion and contraction cycles in the global industrial economy as measured by the Global PMI. In the three month period ended September 30, 2017, the average of the Global PMI was 53.0 and the average of the new order element of the Global PMI was 53.8. As of September 30, 2017, the Global PMI was at its highest readings in over six years. Although these readings are indicative of expansion in the industrial sector we are unable to predict whether the industrial economy, as measured by the PMI, will remain above the neutral reading of 50, strengthen or contract during the remainder of 2017.

We are ~~pleased~~continuing to experience strong demand from our customers across the geographic regions and end markets that we serve, with ~~our disciplined execution which allowed us to deliver record revenue for a third quarter while improving our operating profitability compared to~~ the ~~third quarter~~value of ~~2016. Since~~total orders during the first quarter of ~~2017 we have been taking steps to reduce our overall employee headcount~~2022 increasing by approximately 2%27% compared to the same period in ~~an effort to reduce job duplication or evaluate where~~2021. Although the strength and duration of the recent trends will vary by region and offering, we ~~should shift and centralize activities, improve efficiencies, and rebalance our resources on higher return activities.~~remain optimistic about opportunities for additional order growth expected in 2022. We expect our customers will continue to ~~incur $8 million~~make investments in emerging technologies related to ~~$9 million in severance~~5G/mmWave, vehicle electrification, advanced driver assistance systems (“ADAS") and ~~other restructuring-related charges, net~~new space innovation.

We continue to experience component shortages for some of tax, by the end of 2017, as a result of these actions of which approximately $1 million will be incurred in the fourth quarter of 2017. We remain concerned about the geopolitical instability in the Middle East and the Korean peninsula, the ongoing uncertainty created by the execution of the exit by the U.K. from the European Union (“Brexit”)our products as well as ~~uncertainty created by~~higher costs to obtain a consistent supply of certain components due to global supply chain constraints. The duration of these supply chain challenges remains uncertain. Additionally, strong demand and a strategic shift to longer lead times to fulfill orders for certain offerings has continued to shift the ~~various policy proposals by the new administration~~timing of revenue recognition into future periods and increased backlog. We have also recently experienced further delays in the ~~U.S.~~fulfillment of orders in China due to additional COVID-19 lockdown protocols. During the remainder of 2022, we also expect operating costs to increase due to wage inflation and increased travel. While we ~~remain cautious~~expect to continue to experience some challenges related to these supply chain constraints as the global supply chain continues to adjust to the significant increases in ~~the short-term due to uncertain economic conditions,~~demand, we are optimistic about our ~~long-term position in~~ability to maintain competitive lead times while continuing to maintain higher backlog levels as part of our strategic focus on application-specific system offerings.

Revenue from software and related services as a percentage of total revenue during the ~~industry through~~first quarter of 2022 remained consistent with 2021, at approximately 20% of our total revenue. During the ~~sustained differentiation~~first quarter of 2022 we ~~deliver~~also undertook actions to accelerate our transition to a predominantly subscription-based licensing model for the majority of our software offerings. While we expect our subscription base, recurring revenue and cash flow to increase over time as a result of this licensing model transition, we expect some initial headwinds to our ~~customers through~~net sales and operating profitability during the transition period. However, we expect recent additions and enhancements to our platform-based approach. In the third quarter of 2017, we saw a 1% year over year increase from orders under $20,000, an 8% year over year increase from orders between $20,000 and $100,000, and a 9% year over year increase from orders over $100,000. Wesoftware portfolio will continue to ~~see growth in~~differentiate our ~~orders above $20,000 which~~products and fuel demand across our end markets. We currently estimate the impact of our subscription licensing transition will decrease total revenue by 2% during 2022.

As part of our efforts to streamline the process of doing business with NI, we ~~believe reflects~~have increased our focus on ~~developing highly differentiated products, particularly~~customer account tiers when assessing trends in our order growth. Specifically, we have grouped our customers into tiers based on their historical spending patterns and potential for ~~complex test and measurement systems.~~

~~Excluding~~future order growth. Our "Focus" account tiers are comprised of approximately 2,500 accounts we have identified as having a high potential to maintain or expand our ~~largest~~business through system-level offerings. The Focus tier currently represents approximately 70% of our total order value. Our "Broad-based" account tier is comprised of the remainder of our customer ~~orders over $100,000 were up 5 % year over year.~~base of approximately 30,000 accounts. The ~~timing and amount~~Broad-based tier currently represents approximately 30% of our total order value. During the three months ended March 31, 2022, orders from our ~~largest~~Focus accounts and Broad-based accounts increased by 28% and 25%, respectively, compared to the same period in 2021.

We also continue to focus on scale and efficiency when engaging with our Broad-based customers. Our focus to streamline the process of doing business with NI means effectively scaling our operations while also improving the experience for the large number of smaller accounts. We are making additional investments in ni.com for a better digital experience and expect to continue to expand customer reach through our distributor channel during 2022 and beyond. We are ~~unpredictable and therefore~~also simplifying our product offerings for the Broad-based customers to make our products easier-to-use. We believe these actions will allow our direct sales force to accelerate our revenue growth through proactive engagements with accounts where we can ~~cause unusual variations~~deliver enterprise-level value. During the three months ended March 31, 2022, indirect sales through our distributor channels increased to represent about 13% of our total sales, compared to 5% in the ~~results and trends~~same period of 2021. As of March 31, 2022, our distributors were not carrying significant amounts of our ~~business. See “Results~~products in inventory and were not eligible for any variable adjustments related to their previous purchases. For the three months ended March 31, 2022 no single distributor or end customer accounted for more than 2% of ~~Operations” below~~our total net sales.

Acquisitions and divestitures

Refer to Note 1 - Basis of presentation and Note 17 - Acquisitions of Notes to Consolidated Financial Statements for additional ~~discussion on the impact of orders from our largest customer~~information on our ~~business for~~acquisitions and divestitures during the ~~three month period ended September 30, 2017.~~periods presented.

~~During the third quarter of 2017,~~

Critical Accounting Estimates

In preparing our consolidated financial statements, we ~~saw~~make assumptions, judgments and estimates that can have a ~~moderate~~significant impact on our net sales, operating income and ~~broad decline in~~net income, as well as on the value of certain assets and liabilities on our condensed consolidated balance sheets. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the ~~U.S. dollar~~circumstances. At least quarterly, we evaluate our assumptions, judgments and estimates, and make changes as deemed necessary.

These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. For further information about our critical accounting estimates, see the discussion in ~~many~~Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the ~~currency markets where we~~heading “Critical Accounting Estimates” in our 2021 Form 10-K. There have ~~exposure, although the year over year impact of this change in the value of the dollar was not significant~~been no material changes to our ~~results of operations. As of~~critical accounting policies and estimates since the date of this filing, the U.S. dollar index, as tracked by the St. Louis Federal Reserve, remains above its ten year average. See “Results of Operations” below for additional discussion on the impact of foreign exchange rates on our business for the three month period ended September 30, 2017. See “Our Revenues are Subject to Seasonal Variations” under “Risk Factors” for additional discussion of potential fluctuations in our net sales. 2021 Form 10-K.

We have hedging programs in place to help mitigate the risks associated with foreign currency risks. However, there can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in the foreign currency markets in which we do business. (See “Note 5 – Derivative instruments and hedging activities” of Notes to consolidated financial statements for additional details concerning hedging programs.)

Results of Operations

The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items reflected in our Consolidated Statements of Income:


	Three Months Ended March 31,
	(Unaudited)
	2022		2021
Net sales:
Americas	41.3	%	37.8	%
EMEA	26.1		25.5
APAC	32.6		36.7
Total net sales	100.0		100.0
Cost of sales	30.9		28.5
Gross profit	69.1		71.5
Operating expenses:
Sales and marketing	31.2		34.8
Research and development	21.3		23.9
General and administrative	8.6		10.0
Total operating expenses	61.1		68.7

Operating income	7.9		2.8
Other (expense) income:	—		(1.5)
Income before income taxes	7.9		1.3
(Benefit) Provision for income taxes	1.4		—
Net income	6.6	%	1.3	%

Three Months Ended September 30, Nine Months Ended September 30,
(Unaudited) (Unaudited)
2017 2016 2017 2016
Net sales:

Americas 41.5 % 42.3 % 39.7 % 39.4 %
EMEIA 29.1
30.1
30.7
31.0
APAC 29.4
27.6
29.6
29.6
Total net sales 100.0
100.0
100.0
100.0
Cost of sales 26.1
25.0
25.8
25.6
Gross profit 73.9
75.0
74.2
74.4
Operating expenses:

Sales and marketing 36.4
38.1
38.1
38.5
Research and development 17.6
19.3
18.3
19.8
General and administrative 8.2
8.0
8.3
8.3
Total operating expenses 62.2
65.4
64.7
66.6
Operating income 11.7
9.6
9.4
7.8
Other income (expense):

Interest income 0.2
0.1
0.2
0.1
Net foreign exchange loss 0.3
(0.2 ) 0.2
(0.2 )
Other income, net (0.4 ) 0.1
(0.1 ) (0.2 )
Income before income taxes 11.8
9.6
9.7
7.5
Provision for income taxes 1.5
1.5
1.5
1.5
Net income 10.4 % 8.0 % 8.2 % 6.0 %

Figures may not sum due to rounding.

Results of Operations for the three months ended March 31, 2022 and ~~nine month periods ended September 30, 2017 and 2016~~2021

Net Sales. The following table sets forth our net sales for the three months ended March 31, 2022 and ~~nine month periods ending September 30, 2017 and 2016~~2021 along with the changes between the corresponding periods.


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	(Unaudited)						(Unaudited)							(Unaudited)
					Change						Change							Change
(In millions)	2017		2016		Dollars	Percentage	2017		2016		Dollars	Percentage	(In millions)	2022		2021		Dollars	Percentage

Product sales	$	291.9	$	278.5	13.4	5%	$	853.2	$	816.5	36.7	4%	Product sales	$	343.7	$	295.1	48.6	16%
Software maintenance sales	29.0		27.8		1.2	4%	86.4		83.2		3.2	4%	Software maintenance sales	41.6		40.1		1.5	4%
Total net sales	$	320.9	$	306.4	14.5	5%	$	939.6	$	899.6	40.0	4%	Total net sales	$	385.3	$	335.2	50.1	15%

Figures may not sum due to rounding.

Net Sales - Summary

~~Large orders, defined as orders with a value greater than $100,000, increased by 9% year over year during~~

Net sales for the three months ended ~~September 30, 2017,~~March 31, 2022 increased 15 percent compared to the ~~year over year~~same period in 2021.

•The increase ~~of 28%~~ in ~~the three month period ended September 30, 2016. In the nine month period ended September 30, 2017, large orders increased by 16% year over year compared~~product sales was primarily attributable to the year over year increase of 10% during the nine month period ended September 30, 2016. A significant factor in the continued expansion of our large orders in the three and nine months ended September 30, 2017, compared to the comparable periods in 2016 was strong demand for our ~~RF products, 5G prototyping~~system-level offerings, particularly our ADG and transportation solutions ~~and semiconductor test systems. Year over year, orders from our largest customer were up 68%~~(See Note 2 - Revenue for additional information on revenue by industry grouping). Geographically, we saw strong growth in the ~~three~~Americas region, which was partially driven by revenue from acquisitions completed within the last 12 months, ~~ended September 30, 2017. Excluding the~~which increased our total revenue by approximately 3% compared to same period in 2021. The impact of ~~our largest customer, large orders~~recent pricing changes also increased by 5% year over year during the three month period ended September 30, 2017, and increased by 21% year over year during the nine month period ended September 30, 2017. Orders from our largest customer are discussed in more detail below. During each of the three month periods ended September 30, 2017 and 2016, large orders were 24% of our total orders, and for the nine month periods ended September 30, 2017 and 2016, large orders were 25% and 23% of our total orders, respectively. Large orders are more volatile, are subject to greater discount variability and may contract at a faster pace during an economic downturnrevenue by approximately 4% compared to ~~our other orders.~~the same period in 2021.

~~During the three month periods ended September 30, 2017 and 2016, we received $8.1 million and $4.8 million, respectively,~~•The increase in ~~orders~~software maintenance sales was primarily related to additional billings from our largest customer. During the nine month periods ended September 30, 2017 and 2016, we received $24.7 million and $29.5 million, respectively, in orders from our largest customer. In the three month periods ended September 30, 2017 and 2016, we recognized net salesannual renewals of $7.8 million and $7.9 million, respectively, from orders from our largest customer, and in the nine month periods ended September 30, 2017 and 2016, we recognized net sales of $22 million and $31 million, respectively, from these orders.software maintenance programs, including enterprise-wide subscription licensing agreements.

Net Sales by Region

The following table sets forth our net sales by geographic region for the three months ended March 31, 2022 and ~~nine month periods ending September 30, 2017 and 2016~~2021 along with the changes between the corresponding periods and the region’s percentage of total net sales.


	Three Months Ended March 31,
	(Unaudited)
							Change
(In millions)	2022			2021			Dollars	Percentage

Americas	$	159.2		$	126.7		32.5	26%
Percentage of total net sales	41.3		%	37.8		%

EMEA	$	100.4		$	85.5		14.8	17%
Percentage of total net sales	26.1		%	25.5		%

APAC	$	125.7		$	122.9		2.7	2%
Percentage of total net sales	32.6		%	36.7		%

Figures may not sum due to rounding.

Three Months Ended September 30, Nine Months Ended September 30,
(Unaudited) (Unaudited)
Change Change
(In millions) 2017 2016 Dollars Percentage 2017 2016 Dollars Percentage

Americas $ 133.2
$ 129.7
3.5 3% $ 373.3
$ 354.8
18.5 5%
Percentage of total net sales 41.5 % 42.3 % 39.7 % 39.4 %

EMEIA 93.3
$ 92.2
1.1 1% 288.6
278.6
10.0 4%
Percentage of total net sales 29.1 % 30.1 % 30.7 % 31.0 %

APAC $ 94.5
$ 84.4
10.1 12% 277.8
266.2
11.6 4%
Percentage of total net sales 29.4 % 27.6 % 29.6 % 29.6 %

We expect sales outside of the Americas to continue to represent a significant portion of our net sales. We intend to continue to expand our international operations by increasing our presence in existing markets, adding a presence in ~~some~~certain new geographical markets and continuing to increase the use of distributors to sell our products in some countries.

Almost all of the sales made by our direct sales offices in the Americas (excluding the U.S.), ~~EMEIA,~~EMEA, and APAC are denominated in local currencies, and accordingly, the U.S. dollar equivalent of these sales is affected by changes in foreign currency exchange rates. In order to provide a framework for assessing how our underlying business performed excluding the effects of foreign currency fluctuations between periods, we compare the percentage change in our results from period to period using constant currency disclosure. To calculate the change in constant currency, current and comparative prior period results for entities reporting in currencies other than U.S. Dollars are converted into U.S. Dollars at constant exchange rates (i.e., the average rates in effect during the three ~~and nine month periods~~months ended ~~September 30, 2016)~~March 31, 2021). The following ~~tables present~~table presents this information, along with the impact of changes in foreign currency exchange rates on sales denominated in local currencies, for the three ~~and nine month periods~~months ended ~~September 30, 2017.~~

Three Months ended September 30, 2016
Change
in Constant Dollars
Impact of changes in foreign currency exchange rates on net sales Three Months ended September 30, 2017
(In millions)
GAAP
Net Sales
Dollars Percentage Dollars Percentage
GAAP
Net Sales

Americas $ 129.7
3.2
2.5% 0.3
0.2% 133.2
EMEIA $ 92.2
1.3
1.4% (0.2 ) (0.2)% 93.3
APAC $ 84.4
10.2
12.1% (0.2 ) (0.2)% 94.5
Total net sales $ 306.3
14.7
4.8% (0.1 ) (0.1)% 320.9

Nine Months ended September 30, 2016
Change
in Constant Dollars
Impact of changes in foreign currency exchange rates on net sales Nine Months ended September 30, 2017
(In millions)
GAAP
Net Sales
Dollars Percentage Dollars Percentage
GAAP
Net Sales

Americas $ 354.8
18.0
5.1% 0.4
—% 373.3
EMEIA $ 278.6
14.9
5.3% (5.0 ) (1.8)% 288.6
APAC $ 266.2
12.8
4.8% (1.2 ) (0.5)% 277.8
Total net sales $ 899.6
45.7
5.1% (5.8 ) (0.6)% 939.6

March 31, 2022.


	Three Months Ended March 31, 2021		Change in Constant Dollars		Impact of changes in foreign currency exchange rates on net sales		Three Months Ended March 31, 2022
(In millions)	GAAP Net Sales		Dollars	Percentage	Dollars	Percentage	GAAP Net Sales

Americas	$	126.7	32.7	25.8%	(0.3)	(0.2)%	$	159.2
EMEA	$	85.5	18.4	21.5%	(3.5)	(4.1)%	$	100.4
APAC	$	122.9	4.1	3.3%	(1.4)	(1.1)%	$	125.7
Total net sales	$	335.2	55.2	16.5%	(5.1)	(1.5)%	$	385.3

Figures may not sum due to rounding.

ToWe use a foreign currency cash flow hedging program to help protect against changes in U.S. dollar equivalent value caused by fluctuations in foreign currency exchange rates of forecasted foreign currency cash flows resulting from international ~~sales, we have instituted a foreign currency cash flow hedging program.~~sales. We hedge portions of our forecasted net sales denominated in foreign currencies with average rate forward contracts. During the three ~~month periods~~months ended ~~September 30, 2017~~March 31, 2022 and 2016, these hedges had the effect of decreasing our net sales by $(1.4) million and decreasing our net sales by $(0.2) million, respectively. During the nine month periods ended September 30, 2017 and 2016,2021, these hedges had the effect of increasing our net sales by ~~$1.3~~$1.7 million and decreasing our net sales by ~~$(1.3)~~$2.0 million, respectively. (See ~~“Note~~Note 5 - Derivative instruments and hedging ~~activities”~~activities of Notes to ~~consolidated financial statements~~Consolidated Financial Statements for further discussion regarding our cash flow hedging program and its related impact on our net sales for ~~2017~~2022 and ~~2016)~~2021).

Gross Profit. Our gross profit as a percentage of sales is impacted by many factors ~~including changes~~as described in the ~~amount of revenues from our largest customer and changes in the foreign currency exchange markets.~~table below. We continue to focus on cost control and cost reduction measures throughout our manufacturing cycle. The following table sets forth our gross profit and gross profit as a percentage of net sales for the three months ended March 31, 2022 and ~~nine month periods ending September 30, 2017 and 2016~~2021 along with the percentage changes in gross profit for the corresponding periods.


	Three Months Ended March 31,
	(Unaudited)

(In millions)	2022	2021

Gross Profit	$266.0	$239.8
% change compared with prior period	11.0%
Gross Profit as a percentage of net sales	69.1%	71.5%

Three Months Ended September 30, Nine Months Ended
September 30,
(Unaudited) (Unaudited)

(In millions) 2017 2016 2017 2016

Gross Profit $237.2 $229.6 $696.9 $669.3
% change compared with prior period 3.3% 4.1%
Gross Profit as a percentage of net sales 73.9% 75.0% 74.2% 74.4%

~~For the three month periods ended September 30, 2017 and 2016, the change~~The decrease in ~~exchange rates had the effect~~gross profit as a percentage of increasing our cost of sales by $0.1 million and decreasing our cost of sales by $0.5 million, respectively. For the nine month periods ended September 30, 2017 and 2016, the change in exchange rates had the effect of decreasing our cost of sales by $1.4 million and $3.2 million, respectively. To help protect against changes in our cost of sales caused by a fluctuation in foreign currency exchange rates of forecasted foreign currency cash flows, we have a foreign currency cash flow hedging program. We hedge portions of our forecasted costs of sales denominated in foreign currencies with average rate forward contracts. During the three month periods ended September 30, 2017 and 2016, these hedges had the effect of increasing our cost of sales by $0.1 million and $0.4 million, respectively. During the nine month periods ended September 30, 2017 and 2016, these hedges had the effect of increasing our cost of sales by $1.1 million and $1.4 million, respectively. (See “Note 5 - Derivative instruments and hedging activities” of Notes to Consolidated Financial Statements for further discussion regarding our cash flow hedging program and its related impact on our cost of sales for 2017 and 2016).

~~We do not typically maintain a large amount of order backlog as orders typically translate to sales quickly. As such, any weakness in orders typically has a pronounced impact on our~~ net sales inwas primarily related to the ~~short term.~~following:


	Three Months Ended
	(Unaudited)
March 31, 2021	71.5	%
Impact of increases in component costs	(4.0)	%
Impact of increases in our selling price	1.0	%
Impact of increases in outbound freight and other logistics costs	(1.0)	%
Impact of changes related to recently acquired/divested businesses	(0.2)	%
Impact of amortization of acquired intangibles and other purchase accounting adjustments	0.3	%
Impact of decrease in amortization of previously capitalized software development costs	1.5	%

March 31, 2022	69.1	%

Operating Expenses. The following table sets forth our operating expenses for the three months ended March 31, 2022 and ~~nine month periods ending September 30, 2017 and 2016~~2021 along with the percentage changes between the corresponding periods and the line item as a percentage of total net sales.


	Three Months Ended March 31,
	(Unaudited)
(In thousands)	2022		2021		Change

Sales and marketing	$	120,157	$	116,783	3%
Percentage of total net sales	31%		35%

Research and development	$	82,161	$	80,086	3%
Percentage of total net sales	21%		24%

General and administrative	$	33,179	$	33,358	(1)%
Percentage of total net sales	9%		10%




Total operating expenses	$	235,497	$	230,227	2%
Percentage of total net sales	61%		69%

Three Months Ended September 30, Nine Months Ended September 30,
(Unaudited) (Unaudited)
(In thousands) 2017 2016 Change 2017 2016 Change

Sales and marketing $ 116,661
$ 116,662
—% $ 358,335
$ 346,230
3%
Percentage of total net sales 36 % 38 % 38 % 38 %

Research and development $ 56,526
59,066
(4)% 171,701
178,244
(4)%
Percentage of total net sales 18 % 19 % 18 % 20 %

General and Administrative $ 26,468
24,537
8% 78,400
74,308
6%
Percentage of total net sales 8 % 8 % 8 % 8 %

Total operating expenses $ 199,655
200,265
(0.3)% 608,436
598,782
2%
Percentage of total net sales 62 % 65 % 65 % 67 %

During the three month period ending September 30, 2017, operating expenses were relatively flat year over year, indicative of our disciplined expense management. In the three month period ended September 30, 2017, we capitalized $10 million of software development costs compared to $9 million in the three month period ended September 30, 2016. The ~~year over year change in exchange rates had a minimal effect on our operating expenses during the period.~~

~~During the nine month period ending September 30, 2017, the~~ year over year increase in our total operating expenses of $5 million during the three months ending March 31, 2022 was primarily related to the ~~result of $24~~following:

•a $7 million increase in ~~personnel-related expenses due~~personnel costs, primarily attributable to ~~increased variable compensation in regions with strong sales growth, accrual of a potential payment under our annual company profit sharing program,~~ an increase in ~~our employer matching contribution for our defined contribution retirement plan, and $10 million in severance~~commissions, salaries, benefits and other personnel expenses as well as an increase in additional stock-based compensation expense (due to comparatively higher stock prices on the grant date of unvested RSU awards and an increase in the number of RSU awards granted), partially offset by a decrease in our variable compensation programs;

•a $5 million increase attributable to higher acquisition-related operating costs and amortization of acquisition-related intangibles, primarily related to our recently acquired NHR business, partially offset by lower transaction and integration costs;

•a $(1) million decrease in travel and other outside services due to less spend on marketing and advertising offset by an increase in travel during the period due to the loosening of COVID-19 restrictions; and

•a $(6) million decrease related to accruals for restructuring-related severance activity.

Sales and Marketing

The primary drivers of the increase in sales and marketing expenses for the three months ended March 31, 2022 were additional costs associated with ~~our restructuring initiative. These increases~~salaries and commissions, an increase in the amortization of acquired intangibles, and an increase in stock based compensation which were partially offset by lower severance-related costs, variable compensation programs and lower marketing and advertising expenses, compared to the same period in 2021.

Research and Development

The primary drivers of the increase in research and development expenses for the three months ended March 31, 2022 were additional costs for salaries, benefits, outside services, and stock-based compensation, which were partially offset by a decrease in ~~software development costs of $10 million due to an increase in capitalization of software development costs~~accruals associated with our variable compensation programs, compared to the ~~nine month~~same period ~~ending September 30, 2016. During~~in 2021.

General and administrative

The primary drivers of the ~~nine month period ending September 30, 2017, the year over year change~~decrease in ~~exchange rates had the effect of decreasing our operating expenses by $4 million.~~

~~We believe that our long-term growth~~general and success depends on developing high quality software and hardware products on a timely basis. We are focused on leveraging recent investments in research and development and in our field sales force and taking actions to help ensure that those resources are concentrated in areas and on initiatives that will contribute to future growth in our business. The decreases in our research and developmentadministrative expenses for the three months ended March 31, 2022 were a decrease in acquisition expenses and ~~nine month periods ended September 30, 2017, compared to the three and nine month periods ended September 30, 2016 were primarily driven~~severance costs partially offset by an increase in ~~capitalized software development from expenditures related to LabVIEW NXG, a redesign of the software platform underlying our flagship application, LabVIEW. The increase in our sales~~salary and ~~marketing expenses for the three~~benefits, outside service costs and nine month periods ended September 30, 2017, compared to the three and nine month periods ended September 30, 2016, was primarily driven by increased variable compensation in regions with strong sales growth and the timing of our annual global sales conference and NIWeek conference in May 2017. Previously, these events were held in the third quarter.stock-based compensation.

Operating Income. For the three ~~month periods~~months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, operating income was ~~$38~~$31 million and ~~$29~~$10 million, respectively, an increase of ~~28%~~220%. As a percentage of net sales, operating income was ~~11.7%~~7.9% and ~~9.6%~~2.8% for the three ~~month periods~~months ended ~~September 30, 2017~~March 31, 2022 and 2016, respectively. For the nine month periods ended September 30, 2017 and 2016, operating income was $88 million and $70 million, respectively, an increase of 26%. As a percentage of net sales, operating income was 9.4% and 7.8% for the nine month periods ended September 30, 2017 and 2016,2021, respectively. The ~~increases~~increase in operating income in absolute dollars for the three ~~month period~~months ended ~~September 30, 2017,~~March 31, 2022, compared to the three ~~month period~~months ended ~~September 30, 2016, and for the nine month period ended September 30, 2017, compared to the nine month period ended September 30, 2016, are~~March 31, 2021, is primarily attributable to the ~~factors discussed~~increases in ~~Net Sales, Gross Profit~~revenue partially offset by the increases in cost of sales and ~~Operating Expenses~~operating expenses described above.

Other (Expense) Income.

•Interest Income.For the three ~~month periods~~months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, interest income was ~~$0.7~~less than $0.1 million and $0.3 million, respectively. For the nine month periods ended September 30, 2017 and 2016, interest income was $1.5 million and $0.8 million, respectively. We are seeing improving yields for high quality investment alternatives that comply with our corporate investment policy.

~~Net Foreign Exchange Gain/(Loss).For the three month periods ended September 30, 2017 and 2016, net foreign exchange gain/(loss) was $1.1 million and $(0.8)~~$0.2 million, respectively. During the ~~nine month periods~~three months ended ~~September 30, 2017~~March 31, 2022, the Federal Reserve raised the federal funds rate target by 25 basis points to a range of 0.25 to 0.50% and ~~2016, net foreign exchange gain/(loss)~~signaled the possibility of additional increases in 2022.

•Interest Expense. For the three months ended March 31, 2022 and 2021, interest expense was ~~$1.6~~approximately $1.3 million, and ~~$(1.5)~~$0.7 million, respectively. These ~~results~~interest charges are ~~attributable~~due to ~~movements in the foreign currency exchange rates between the U.S. dollar~~interest on outstanding borrowings, commitment fees and ~~foreign currencies in subsidiaries for which our functional currency is not the U.S. dollar. During the third quarter~~amortization of 2017, we saw a moderate and broad decline in the value of the U.S. dollar in many of the currency markets where we have exposure, although the year over year impact of this change in the value of the dollar was not significantdeferred costs related to our results of operations. As of the date of this filing, the U.S. dollar index, as tracked by the St. Louis Federal Reserve, remains above its ten year average. The ongoing uncertainty surrounding the implementation of Brexit, including the conditions and timing of the exit negotiation period, and uncertainty in relationCredit Agreement. Refer to the relationship of the U.K. with the remaining members of the E.U. (including in relation to trade) may cause volatility in the foreign currency markets. We cannot predict the direction or degree of future volatility in the foreign exchange markets or the impact the impending implementation of the Brexit U.K. referendum will have in future periods. In the past, we have noted that significant volatility in the foreign currency exchange markets in which we do business has had a significant impact on the revaluation of our foreign currency denominated firm commitments, on our ability to forecast our U.S. dollar equivalent net sales and expenses and on the effectiveness of our hedging programs. We cannot predict to what degree foreign currency markets will fluctuate in the future.In the past, these dynamics have also adversely affected our net sales growth in international markets and may pose similar challenges in the future. We recognize the local currency as the functional currency in virtually all of our international subsidiaries.

We utilize foreign currency forward contracts to hedge our foreign denominated net foreign currency balance sheet positions to help protect against the change in value caused by a fluctuation in foreign currency exchange rates. We typically hedge up to 90% of our outstanding foreign denominated net receivable or payable positions and typically limit the duration of these foreign currency forward contracts to approximately 90 days. The gain or loss on these derivatives as well as the offsetting gain or loss on the hedged item attributable to the hedged risk is recognized in current earnings under the line item “Net foreign exchange gain (loss).” Our hedging strategy decreased our foreign exchange gain by $(0.9) million and increased our foreign exchange loss by $(0.8) million in the three month periods ended September 30, 2017 and September 30, 2016, respectively. Our hedging strategy decreased our foreign exchange gain by $(4.1) million and increased our foreign exchange loss by $(1.0) million in the nine month periods ended September 30, 2017 and 2016, respectively. (See “Note 5Note 13 - ~~Derivative instruments and hedging activities”~~Debt of Notes to Consolidated Financial Statements for ~~a further description~~additional information regarding the terms of our ~~derivative instruments~~Credit Agreement and ~~hedging activities).~~related borrowings.

•Gain/Loss From Equity-Method Investments. For the three months ended March 31, 2022 and 2021, gain from equity-method investments was approximately $0.6 million and loss from equity-method investments was approximately $4.2 million, respectively. The increase was primarily attributable to an impairment loss of $3.5 million recorded in the three months ended March 31, 2021.

•Net Foreign Exchange Gain/(Loss). For the three months ended March 31, 2022 and 2021, net foreign exchange loss was $(1.2) million and $(0.6) million, respectively. Gains and losses on foreign currency are primarily due to the impact of re-measuring foreign currency monetary assets and liabilities into the functional currency of the corresponding entity. The amount of the gain or loss on foreign currency is driven by the volume of foreign currency transactions and the foreign currency exchange rates for the period. See "Results of Operations - Net Sales" above for additional discussion on the impact of foreign exchange rates on our net sales of operations for the three months ended March 31, 2022.

•Other Income. For the three months ended March 31, 2022 and 2021, other income also increased by $1.3 million, primarily related to proceeds received from resolution of claims related to a previous acquisition after the measurement period was finalized.

Provision for Income Taxes. For the three ~~month periods~~months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, our provision for income taxes reflected an effective tax rate of ~~12%~~17% and ~~16%, respectively. For the nine month periods ended September 30, 2017 and 2016, our provision for income taxes reflected an effective tax rate of 15% and 21%~~(1)%, respectively. The factors that caused our effective tax rate to change year over year are detailed in the table below:


	Three Months Ended March 31,
	(Unaudited)
Effective tax rate at March 31, 2021	(1)	%
Foreign-derived intangible income deduction	(5)
Global intangible low-taxed income inclusion ("GILTI")	(2)
Enhanced deduction for certain research and development expenses	(1)
Change in unrecognized tax benefits	1
Research and development tax credits	2
Foreign taxes greater (less) than federal statutory rate	2
Employee share-based compensation and other discrete items	21
Effective tax rate at March 31, 2022	17	%

Three Months Ended Nine months Ended
September 30, 2017 September 30, 2017
(Unaudited) (Unaudited)
Effective tax rate at September 30, 2016 16 % 21 %
Change in profit in foreign jurisdictions with reduced tax rates (6 )% (5 )%
Change in enhanced deduction for certain research and development expenses 5 % 5 %
Change in intercompany prepaid tax asset (4 )% (4 )%
Change in unrecognized tax benefits 1 % — %
Change in tax benefit from equity awards — % (2 )%
Effective tax rate at September 30, 2017 12 % 15 %

~~(See “Note 9 – Income taxes” of Notes to Consolidated Financial Statements for further discussion regarding our effective tax rate).~~

Other operational metrics

We believe that the following additional unaudited operational metrics assist investors in assessing our operational performance relative to others in our industry and to our historical results. The following tables provide details with respect to the amount of GAAP charges related to stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction costs, restructuring charges, foreign exchange loss on acquisitions, and taxes levied on the transfer of acquired intellectual propertycertain items that were recorded in the line items indicated below (in thousands).


	Three Months Ended March 31,
(In thousands)	(Unaudited)
	2022		2021
Stock-based compensation
Cost of sales	$	1,222	$	1,113
Sales and marketing	7,089		5,696
Research and development	6,088		5,714
General and administrative	5,729		4,666
Provision for income taxes	(2,655)		(3,324)
Total	$	17,473	$	13,865

໿


	Three Months Ended March 31,
(In thousands)	(Unaudited)
	2022		2021
Amortization of acquisition-related intangibles and fair value adjustments
Net sales	$	371	$	813
Cost of sales	3,803		4,272
Sales and marketing	6,139		2,171
Research and development	(320)		—
Other (expense) income	516		394
Provision for income taxes	(1,355)		(975)
Total	$	9,154	$	6,675


	Three Months Ended March 31,
(In thousands)	(Unaudited)
	2022		2021
Acquisition-related transaction and integration costs, restructuring charges, and other
Cost of sales	$	785	$	75
Sales and marketing	307		4,648
Research and development	614		488
General and administrative	1,771		5,666


Other (expense) income	(1,866)		3,725
Provision for income taxes	(658)		(2,883)
Total	$	953	$	11,719


	Three Months Ended March 31,
	(Unaudited)
(In thousands)	2022		2021
Capitalization and amortization of internally developed software costs
Cost of sales	$	2,033	$	6,874
Research and development	(187)		(226)
Provision for income taxes	(407)		(1,396)
Total	$	1,439	$	5,252

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) (Unaudited) (Unaudited)
2017 2016 2017 2016
Stock-based compensation

Cost of sales $ 689
$ 556
$ 1,914
$ 1,643
Sales and marketing 3,014
2,635
8,523
8,422
Research and development 2,328
2,027
6,552
6,745
General and administrative 1,514
921
4,358
2,764
Provision for income taxes (2,369 ) (2,092 ) (7,388 ) (6,202 )
Total $ 5,176
$ 4,047
$ 13,959
$ 13,372

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) (Unaudited) (Unaudited)
2017 2016 2017 2016
Amortization of acquired intangibles

Cost of sales $ 1,502
$ 1,599
$ 4,648
$ 7,621
Sales and marketing 515
502
1,479
2,141
Research and development 283
276
813
815
Provision for income taxes (546 ) 854
(1,656 ) 1,312
Total $ 1,754
$ 3,231
$ 5,284
$ 11,889

໿

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) (Unaudited) (Unaudited)
2017 2016 2017 2016
Acquisition transaction costs, restructuring charges, and other

Cost of sales $ 79
$ 74
$ 988
$ 253
Sales and marketing 1,618
42
8,018
141
Research and development 235
236
1,816
648
General and administrative 207
97
803
317
Foreign exchange gain (loss)¹
—
—
—
94
Other income (loss), net²
—
—
—
2,475
Provision for income taxes (720 ) (156 ) (3,655 ) (1,358 )
Total $ 1,419
$ 293
$ 7,970
$ 2,570
(1) Foreign exchange losses on acquisitions were $0 and $94 for the nine month periods ended September 30, 2017 and 2016, respectively
(2) Taxes levied on the transfer of acquired intellectual property were $0 and $2,475 for the nine months ended September 30, 2017 and 2016, respectively

Liquidity and Capital Resources

Overview

At ~~September 30, 2017,~~March 31, 2022, we had ~~$385~~$143 million in cash and cash ~~equivalents and short-term investments.~~equivalents. Our cash and cash equivalent balances are held in numerous financial institutions throughout the world, including substantial amounts held outside of the U.S., however, the majority of our short-term investments that are located outside of the U.S. are denominated in the U.S. dollar with the exception of $5 million U.S. dollar equivalent of corporate bonds that are denominated in Euro. The following table presents the geographic distribution of our cash and cash equivalents ~~and short-term investments~~ as of ~~September 30, 2017~~March 31, 2022 (in millions):


(in millions)	Domestic	International	Total
Cash and cash equivalents	$29.8	$113.0	$142.9
	21%	79%


Total cash and cash equivalents	$29.8	$113.0	$142.9
	21%	79%

Domestic International Total
Cash and Cash Equivalents $61 $233 $294
21% 79%
Short-term Investments $— $91 $91
— 100%
Cash, Cash Equivalents and Short-term Investments $61 $324 $385
16% 84%

~~Most of the amounts held outside of the U.S. could be repatriated~~Figures may not sum due to the U.S., but under current law, would be subject to U.S. federal income taxes, less applicable foreign tax credits. We have provided for the U.S. federal tax liability on these amounts for financial statement purposes, except for foreign earnings that are considered indefinitely reinvested outside of the U.S. Repatriation could result in additional U.S. federal income tax payments in future years. We utilize a variety of tax planning and financing strategies with the objective of having our worldwide cash available in the locations in which it is needed. rounding.

The following table presents our working capital, cash and cash equivalents and short-term investments:


	September 30, 2017		December 31,		Increase/			March 31, 2022		December 31,		Increase/
(In thousands)	(unaudited)		2016		(Decrease)		(In thousands)	(unaudited)		2021		(Decrease)

Working capital	$	590,150	$	574,572	$	15,578	Working capital	$	483,534	$	486,335	$	(2,801)
Cash and cash equivalents (1)	294,194		285,283		8,911		Cash and cash equivalents (1)	142,883		211,106		(68,223)
Short-term investments (1)	91,223		73,117		18,106		Short-term investments (1)	—		—		—
Total cash, cash equivalents and short-term investments	$	385,417	$	358,400	$	27,017	Total cash, cash equivalents and short-term investments	$	142,883	$	211,106	$	(68,223)

(1) Included in working capital							(1) Included in working capital

Our principal sources of liquidity include existing cash, cash equivalents, cash generated from the sale and maturity of marketable securities, ~~as well as the~~balances and available borrowings under our Credit Facility, cash flows generated from our ~~operations. We also have additional borrowing capacity under~~operations, and cash generated from purchases of common stock through our Loan Agreement. Proceeds of loans made under the Loan Agreement may be used for working capital and other general corporate purposes. (See “Note 13 – Debt” of Notes to Financial Statements for additional information on our revolving line of credit).

employee stock purchase plan. The primary drivers of the net increase in working capital between December 31, ~~2016~~2021 and ~~September 30, 2017~~March 31, 2022 were:

◦Cash and cash equivalents ~~and short-term investments increased~~decreased by ~~$27~~$68 million. Additional analysis of the changes in our cash flows for the ~~nine month period~~three months ended ~~September 30, 2017 compared to the nine month period ended September 30, 2016 are~~March 31, 2022 is discussed ~~below.~~below;

◦Accounts receivable ~~increased~~decreased by $6$28 million. Days sales outstanding ~~(“DSO”) remained relatively flat at 67~~increased to 59 days at ~~September 30, 2017,~~March 31, 2022, compared to 6658 days at December 31, ~~2016.~~2021. The decrease in accounts receivable is primarily related to quarterly fluctuations in our net sales.

◦Inventory ~~decreased~~increased by ~~$9 million~~$19 million. Inventory turns were 1.6 at March 31, 2022 compared to ~~$185 million at September 30, 2017, from $194 million~~1.5 at December 31, ~~2016. Inventory turns were 1.7 at September 30, 2017~~2021. The increase in inventory was primarily attributable to additional purchases of raw materials to support forecasted demand and ~~December 31, 2016.~~timing differences related to delayed fulfillment of certain orders related to supply chain constraints.

◦Prepaid expenses and other current assets ~~decreased~~increased by $4$20 million ~~which was~~ primarily due to related ~~to an $7.3 million decrease~~timing of prepaid insurance, other prepaid renewals, changes in the fair value of our foreign currency forward ~~exchange~~ contracts, changes in sales and VAT taxes and prepayment of freight costs.

◦Accrued compensation decreased by $60 million attributable to annual payments under our variable compensation programs related to 2021 attainment, partially offset by ~~$3.3 million~~accruals related to ~~the timing of prepaid insurance and maintenance.~~

◦~~Accrued compensation increased by $17 million which can be attributed to accrued vacation, severance costs arising from our restructuring initiative, and a potential payment~~expected payouts under our ~~company profit sharing plan,~~2022 variable compensation programs.

◦~~The current portion of deferred~~Deferred revenue, ~~increased by $5 million, primarily due to the effect of foreign currency translation.~~

◦~~Other~~ current ~~liabilities~~ decreased by ~~$15 million which was primarily related to income tax payments.~~

◦~~Other taxes payable decreased by $4~~$3 million primarily related tochanges in foreign currency exchange rates and recognition of point-in-time deferrals during the ~~timing~~first quarter of ~~payments for VAT and other indirect taxes.~~2022, partially offset by additional software-related deferrals.

Analysis of Cash Flow

The following table summarizes our cash flow results for the ~~nine month periods~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016.~~2021.



	Nine Months Ended September 30,							Three Months Ended March 31,
(In thousands)	(unaudited)						(In thousands)	(unaudited)
	2017			2016				2022		2021
Cash provided by operating activities	$	147,456		$	150,016
Cash used in investing activities	(77,132		)	(31,462		)
Cash (used by) provided by operating activities							Cash (used by) provided by operating activities	$	(3,848)	$	29,841
Cash (used by) provided by investing activities							Cash (used by) provided by investing activities	(29,153)		6,393
Cash used in financing activities	(69,181		)	(72,534		)	Cash used in financing activities	(34,187)		(28,218)
Effect of exchange rate changes on cash	7,768			3,503			Effect of exchange rate changes on cash	(1,035)		(1,536)
Net change in cash and cash equivalents	8,911			49,523			Net change in cash and cash equivalents	(68,223)		6,480
Cash and cash equivalents at beginning of year	285,283			251,129
Cash and cash equivalents at beginning of period							Cash and cash equivalents at beginning of period	211,106		260,232
Cash and cash equivalents at end of period	$	294,194		$	300,652		Cash and cash equivalents at end of period	$	142,883	$	266,712

Operating Activities

Cash provided by operating activities is comprised of net income adjusted for certain items and changes in working capital. Cash flows from operating activities can fluctuate significantly from period to period as working capital needs and the timing of payments for income taxes, variable pay, restructuring activities, and other items impact reported cash flows.

Cash provided by operating activities for the ~~nine month period~~three months ended ~~September 30, 2017~~March 31, 2022 decreased by $3$34 million compared to the same period in ~~2016.~~2021. This decrease was primarily due to a ~~$23 million increase in net income offset by a $26~~$50 million decrease in cash provided by changes in operating assets and ~~liabilities.~~ liabilities during the year, further described below, partially offset by a $16 million increase in net income excluding the effect of non-cash items including stock-based compensation, depreciation and amortization, gain on sale of business/assets, loss from equity-method investments and deferred tax benefits.

•The ~~decrease~~aggregate of changes in accounts receivable, inventory and accounts payable provided net cash of $1 million during the three months ended March 31, 2022 compared to net cash provided of $21 million in the comparable period in 2021. The amount of cash flow generated from or used by ~~operating assets was~~the aggregate of accounts receivable, inventory and accounts payable depends upon the cash conversion cycle, which represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers and can be significantly impacted by the timing of shipments and purchases, as well as collections and payments in a period.

◦The changes in accrued compensation used cash of $58 million during the three months ended March 31, 2022 compared to net cash used of $26 million during the three months ended March 31, 2021. The year over year change is primarily related to an increase in payments under our variable pay programs due to 2021 attainment partially offset by lower severance payments.

◦The aggregate of changes in prepaid assets, deferred revenue and other assets and liabilities used net operating cash of $10 million during the three months ended March 31, 2022 compared to net cash used of $11 million in the comparable period in 2021. The year over year change is primarily related to timing and amount of payments ~~to tax authorities~~for prepaid goods and ~~vendors compared to the same period in 2016.~~services, federal income taxes, payroll taxes, and other indirect taxes.

Investing Activities

Cash used ~~for~~by investing activities for the ~~nine month period~~three months ended ~~September 30, 2017~~March 31, 2022 increased by ~~$46~~$36 million compared to the same period in ~~2016. This was~~2021, primarily ~~attributable~~related to ~~a net purchase of short-term investments of $17~~the following:

•$28 million ~~compared~~decrease in cash inflows related to athe net sale of short-term investments. We did not buy or sell short-term investments ~~of $30 million~~ during the same period in 2016, driven by favorable increases in the yields offered by our short-term investments. Cash outflows related to capitalized software development also increased by $10 million which was offset by a decrease in capital expenditures of $10 million compared to the same period in 2016.period.

~~Financing Activities~~ Cash used by financing activities decreased by $3.4 million for the nine month period ended September 30, 2017 compared to the same period in 2016. This was primarily due to a $6 million decrease in cash outflows related to 2016 repurchases of our common stock, offset by a $5•$6 million increase in cash outflows related to ~~the~~acquisitions and equity-method investments

•$2 million increase ~~in our quarterly dividend and $2 million decrease~~ in cash outflows related to ~~net repayment under our Loan Agreement. From time~~capital expenditures for long-lived assets.

Financing Activities

Cash used in financing activities increased by $6 million for the three months ended March 31, 2022 compared to ~~time, our Board~~the same period in 2021. This was primarily related to an increase of ~~Directors has authorized various programs for our repurchase of shares~~$31 million in cash outflows related to repurchases of our common stock ~~depending~~during 2021, partially offset by $25 million in additional borrowings on ~~market conditions and other factors. Under the current program, we did not repurchase any shares during the nine months ended September 30, 2017.~~our revolving credit agreement. (See ~~“Note~~Note 11 – Authorized shares of common and preferred stock and stock-based compensation ~~plans”~~plans of Notes to Consolidated Financial Statements for additional discussion about our equity compensation plans and share repurchase program).

Contractual Cash Obligations. Information related to our contractual obligations as of December 31, ~~2016~~2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations,” in Part II-Item 7 of ~~our Annual Report on~~the Form ~~10-K for the fiscal year ended December~~10-K. At March 31, ~~2016 filed with the SEC on February 16, 2017 (the “2016 Form 10-K”). At September 30, 2017,~~2022, there were no material changes outside the ordinary course of business to our contractual obligations ~~(including non-cancellable operating leases)~~ from those reported in our ~~2016~~2021 Form 10-K. See Note 8 - Leases of Notes to Consolidated Financial Statements for additional information regarding our non-cancellable operating lease obligations as of March 31, 2021.

~~Loan~~Credit Agreement.On ~~May 9, 2013,~~June 18, 2021, we entered into a ~~Loan~~Second Amended and Restated Credit Agreement (the ~~“Loan Agreement”~~"Credit Agreement") with Wells Fargo Bank, National Association, as the administrative agent, swingline lender and issuing lender (the ~~“Lender”~~“Administrative Agent”)~~. On October 29, 2015,~~, Wells Fargo Securities, LLC, as sole lead arranger and bookrunner, and the lenders party thereto. As of March 31, 2022, we entered into a First Amendment to Loan Agreement (the “Amendment”) with the Lender, which amended our Loan Agreement to among other things, (i) increase the unsecured revolving line of credit from $50.0 million to $125.0 million, (ii) extend the maturity date of the line of credit from May 9, 2018 to October 29, 2020, and (iii) provide us with an option to request increases to the line of credit of up to an additional $25.0had $174 million in available borrowing capacity under the ~~aggregate, subject to consent of the Lender and terms and conditions to be mutually agreed between us and the Lender.~~Credit Agreement. Proceeds of ~~loans~~additional borrowings made under the ~~Loan~~Credit Agreement may be used for working capital and other general corporate purposes. We may prepay the loans under the ~~Loan~~Credit Agreement in whole or in part at any time without premium or penalty. Certain of our ~~existing and~~ future material domestic subsidiaries are required to guaranty our obligations under the ~~Loan~~Credit Agreement. We may choose to borrow additional funds against this line of credit in future periods to have sufficient domestic cash to fund continued dividends to our stockholders, to fund potential acquisitions or repurchases of shares of our common stock, or other domestic general corporate purposes without the need to repatriate foreign earnings. (See ~~“Note~~Note 13 –- Debt ” of Notes to Consolidated Financial Statements for additional details on our ~~revolving line of credit)~~Credit Agreement).

Off-Balance Sheet Arrangements.We do not have any off-balance sheet debt. At ~~September 30, 2017,~~March 31, 2022, we did not have any relationships with any unconsolidated entities or financial partnerships, such as entities often referred to as structured finance entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we were engaged in such relationships.

Prospective Capital Needs. We believe that our existing cash, cash equivalents and short-term investments, together with cash generated from operations, ~~as well as~~cash generated from the purchase of common stock through our employee stock purchase plan and available ~~borrowings~~borrowing under our ~~Loan~~Credit Agreement will be sufficient to cover our working capital needs, capital expenditures, investment requirements, commitments, payment of dividends to our stockholders and repurchases of our common stock for at least the next 12 ~~months, although the use of certain of our funds for domestic purposes may require us to repatriate foreign earnings which would be subject to the U.S. federal statutory tax rate of 35%.~~months. We may also seek to pursue additional financing or to raise additional funds by seeking an additional increase in our secured revolving line of credit and/or term loan commitments under the Credit Agreement or selling equity or debt to the public or in private ~~transactions.~~transactions from time to time. If we elect to raise additional funds, we may not be able to obtain such funds on a timely basis or on acceptable terms, if at all. If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of our existing stockholders would be reduced. In addition, the equity or debt securities that we issue may have rights, preferences or privileges senior to those of our common stock. Although it is our intent to permanently reinvest our undistributed earnings for the foreseeable future, we may also choose to repatriate foreign earnings which would be subject to the U.S. federal statutory tax rate of 35% and therefore, would likely have a material adverse effect on our effective tax rate and on our net income and earnings per share. We could also choose to reduce certain expenditures or payments of dividends or suspend our program to repurchase shares of our common stock.

Although we believe that we have sufficient capital to fund our operating activities for at least the next 12 months, our future capital requirements may vary materially from those now planned. We anticipate that the amount of capital we will need in the future will depend on many factors, including:

•payment of dividends to our stockholders;

~~difficulties and the high tax costs associated with the repatriation of earnings;~~

•required levels of research and development and other operating costs;

•our business, product, capital expenditure and research and development plans, and product and technology roadmaps;

•acquisitions of other businesses, assets, products or technologies;

•repurchase of our common stock;

•the overall levels of sales of our products and gross profit margins;

•the levels of inventory and accounts receivable that we maintain;

•general economic and political uncertainty and specific conditions in the markets we address, including any volatility in the industrial economy in the various geographic regions in which we do business;

•the inability of certain of our customers who depend on credit to have access to their traditional sources of credit to finance the purchase of products from us, which may lead them to reduce their level of purchases or to seek credit or other accommodations from us;

•capital improvements for facilities;

~~repurchases of our common stock;~~

•our relationships with suppliers and customers; and

•the ~~level~~amount of ~~stock purchases under~~proceeds received as a result of our employee stock purchase plan.

Recently Issued Accounting Pronouncements

See ~~“Note~~Note 1 – ~~Recently issued accounting pronouncements”~~Basis of presentation in Notes to Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Changes in currency exchange rates and interest rates are our primary financial market risks. Quantitative and qualitative disclosures about market risk appear in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in Part II of our ~~2016~~2021 Form 10-K and, except as noted below, there were no material changes during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 to this information reported in our ~~2016~~2021 Form 10-K.

Interest Expense Risk

Our borrowings under our Credit Agreement bear interest at a variable rate which exposes us to market risk related to changes in interest rates. We have not entered into derivative transactions related to our borrowing arrangements. The primary base interest rate is LIBOR. Assuming the outstanding balance on our floating rate indebtedness remains constant over a year, a 100-basis point increase in the interest rate would decrease annual net income and cash flow by $3.3 million. We do not expect changes in interest rates to have a material adverse effect on our income or our cash flows in 2022. However, there is no assurance that interest rates will not significantly change in the future.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of ~~September 30, 2017,~~March 31, 2022, to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the ~~third~~first quarter of ~~2017,~~2022, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

~~ITEM~~Item 1. ~~LEGAL PROCEEDINGS~~Legal Proceedings

We are not currently a party to any material litigation. However, in the ordinary course of our business, we have in the past, are currently and will likely become involved in ~~a limited number of~~various legal ~~actions, both as plaintiff~~proceedings, claims, and ~~defendant,~~regulatory, tax or government inquiries and investigations, and could incur uninsured liability in any one or more of them. We also periodically receive notifications from various third parties related to alleged infringement of patents or intellectual property rights, commercial disputes or other matters. No assurances can be given with respect to the extent or outcome of any ~~future~~investigation, litigation or dispute.

~~ITEM~~Item 1A. ~~RISK FACTORS~~Risk Factors

~~In addition to the other information set forth in this Form 10-Q, you should carefully consider the risk~~Our business, financial condition and operating results can be affected by a number of factors, ~~discussed below. The risks described below are not the only risks that we face. Additional risks and uncertainties not~~whether currently known or unknown, including but not limited to usthose described in Part I, Item 1A of our 2021 Form 10-K under the heading “Risk Factors,” any one or ~~that we currently deem~~more of which could, directly or indirectly, cause our actual financial condition and operating results to ~~be immaterial also may~~vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, or operating ~~results.~~results and stock price. The following risk factor is provided to update the risk factors previously disclosed under the heading “Risk Factors” in our 2021 Form 10-K.

Uncertain Global Economic and Geopolitical Conditions, Including in China and other countries, Could Materially Adversely Affect Our Business and Results of Operations. Our operations and performance are sensitive to fluctuations in general economic and geopolitical conditions, both in the U.S. and globally. ~~We remain concerned~~Uncertainty about global and regional economic conditions poses a risk to us as businesses may decrease or postpone spending in response to events such as continued trade tensions between the U.S. and China, or new or existing trade tensions with other countries, geopolitical instability, pandemics and other major public health issues including the COVID-19 pandemic, financial market volatility, tariffs or other trade restrictions, government regulatory actions, negative financial news or other factors. Negative trends or sentiments in worldwide and regional economic conditions have in the ~~Middle East~~past and could again have a material adverse effect on demand for our products and services. For example, in recent years, there have been significant changes to U.S. trade policies, legislation, treaties and tariffs, in particular trade policies and tariffs affecting China. Some of these trade policies, including the ~~Korean peninsula,~~U.S.’s trading relationship with China, have been renegotiated during this timeframe and are subject to further changes in the ~~ongoing uncertainty created~~future. Changes to current policies by the ~~execution~~U.S. or other governments could adversely affect our business, including potentially through increased import tariffs and other influences on U.S. trade relations with China and other countries. The imposition of ~~Brexit~~additional tariffs or other trade barriers could increase our costs in certain markets, and may cause our customers to find alternative sourcing. Protectionist and retaliatory trade measures by any of the United States, China or another country could limit our customers’ ability to sell their products and services and could reduce demand for our customers’ products. Even if resolved, these trends could have a broad negative impact on the global industrial economy, which could have a material adverse impact on our business and our results of operations. In addition, the application of various regulations depends on the classification of our products which can change over time as ~~well as uncertainty created~~such regulations are modified or interpreted. The ongoing geopolitical tensions related to Russia’s invasion of the Ukraine and resulting sanctions imposed by the ~~various policy proposals by~~U.S. and other countries have impacted our shipments and ongoing services to customers with operations in Russia and Ukraine. During the ~~new administration~~first quarter of 2022, we suspended sales into Russia. Although our sales into Russia represented less than 1 percent of our total revenue in 2021, further escalation of geopolitical tensions could have a broader impact that expands into other markets where we do business, which could adversely affect our business and/or our supply chain, business partners or customers in the ~~U.S.~~broader region.

We have recently experienced an increase in inflationary pressures in many of the jurisdictions in which we operate. We have and may continue to attempt to offset the effect of these inflationary pressures by increasing the prices of our products. These factors as well as others we may not contemplate could have a material adverse effect on the spending patterns of businesses including our current and potential customers which could have a material adverse effect on our net sales and our results of operations. See “Current business outlook” in this Form 10-Q for information regarding recent business conditions.

~~We Have Established a Budget and Variations From Our Budget Will Affect Our Financial Results.~~ We have an operating budget for 2017. Our budget was established based on the estimated revenue from sales of our products which are based on anticipated economic conditions in the markets in which we do business as well as the timing and volume of our new products and the expected penetration of both new and existing products in the marketplace. If demand for our products during the remainder of 2017 is less than the demand we anticipated in setting our 2017 budget, our operating results could be negatively impacted.

If we exceed our budgeted level of expenses or if we cannot reduce expenditures in response to a decrease in net sales, our operating results could be adversely affected. Our spending could exceed our budget due to a number of factors, including, but not limited to:

~~continued foreign currency fluctuations;~~

~~less than expected capacity utilization of our manufacturing facility in Penang, Malaysia;~~

~~increased manufacturing costs resulting from component supply shortages or component price fluctuations;~~

~~additional marketing costs for new product introductions or for conferences and tradeshows;~~

~~the timing, cost or outcome of any future intellectual property litigation or commercial disputes;~~

~~additional unanticipated costs related to our acquisitions; or~~

~~increased component costs resulting from vendors increasing their sales price.~~

~~Our Financial Performance is Subject to Risks Associated with Changes in the Value of the U.S. Dollar versus Local Currencies~~. The vast majority of our sales outside of the U.S. are denominated in local currencies, and accordingly, the U.S. dollar equivalent of these sales is affected by changes in the foreign currency exchange rates. If the local currencies in which we sell our products strengthen against the U.S. dollar, we have in the past, and in the future may need to, lower our prices in the local currency to remain competitive in our international markets. This could have a material adverse effect on our gross and net profit margins. If the local currencies in which we sell our products weaken against the U.S. dollar and if the local sales prices cannot be raised due to competitive pressures, we will experience a deterioration of our gross and net profit margins. We cannot predict to what degree or how long the recent volatility in the foreign currency exchange markets will continue. In the past, we have noted that significant volatility in foreign currency exchange rates in the markets in which we do business has had a significant impact on the revaluation of our foreign currency denominated firm commitments, on our ability to forecast our U.S. dollar equivalent net sales and expenses and on the effectiveness of our hedging programs. In the past, these dynamics have also adversely affected our net sales growth in international markets and may pose similar challenges in the future. See “Results of Operations” in this Form 10-Q for further discussion on the effect that changes in the foreign currency exchange rates have had on our operating results. See “Current business outlook” in this Form 10-Q for information regarding recent business conditions.

In addition, the announcement of Brexit in June 2016 caused significant short-term volatility in the foreign currency markets. During 2017, the British Parliament voted in favor of allowing the government to begin the formal process of Brexit and discussions with the E.U. began on March 29, 2017. The continuing uncertainty regarding the negotiations between the U.K and E.U. may lead to broader negative business sentiment resulting in less demand for our products which would negatively impact our net sales and results of operations.

Our Current Domestic Cash Position May Not Be Sufficient to Fund our Domestic Cash Needs in the Next Twelve Months and We May Need to Borrow Additional Amounts Under our Loan Agreement, Seek Funding from External Sources or Repatriate Foreign Earnings. Our Loan Agreement with Wells Fargo Bank provides for a $125 million unsecured revolving line of credit. Proceeds of loans made under the Loan Agreement may be used for working capital and other general corporate purposes. (See “Note 13—Debt” in Notes to Consolidated Financial Statements for additional discussion of the Loan Agreement). We may choose to borrow additional funds against our line of credit in future periods to have sufficient domestic cash to fund continued dividends to our stockholders, to fund potential acquisitions, to purchase shares under our board authorized share repurchase program or other domestic general corporate purposes without the need to repatriate foreign cash, as we intend to permanently reinvest our undistributed earnings for the foreseeable future. Future dividends are subject to approval and declaration by our Board of Directors, and our share repurchase program does not obligate us to acquire any specific number of shares.

We may also seek to pursue additional financing or to raise additional funds by selling equity or debt to the public or in private transactions. If we elect to raise additional funds, we may not be able to obtain such funds on a timely basis or on acceptable terms, if at all. If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of our existing stockholders would be reduced. In addition, the equity or debt securities that we issue may have rights, preferences or privileges senior to those of our common stock. We may also choose to repatriate foreign earnings which would be subject to the U.S. federal statutory tax rate of 35% and therefore would likely have a material adverse effect on our effective tax rate and on our net income and earnings per share. We could also choose to reduce certain expenditures or payments of dividends or suspend our program to repurchase shares of our common stock.

~~We are Subject to Various Risks Associated with International Operations and Foreign Economies.~~ ~~Our international sales are subject to inherent risks, including, but not limited to:~~

~~fluctuations in foreign currencies relative to the U.S. dollar;~~

~~unexpected changes to currency policy or currency restrictions in foreign jurisdictions;~~

~~delays in collecting trade receivable balances from customers in developing economies;~~

~~unexpected changes in regulatory requirements;~~

~~difficulties and the high tax costs associated with the repatriation of earnings;~~

~~fluctuations in local economies;~~

~~disparate and changing employment laws in foreign jurisdictions;~~

~~difficulties in staffing and managing foreign operations;~~

~~costs and risks of localizing products for foreign countries;~~

~~unexpected changes in regulatory requirements;~~

~~government actions throughout the world;~~

~~tariffs and other trade barriers; and,~~

~~the burdens of complying with a wide variety of foreign laws.~~

~~Moreover, there can be no assurance that our international sales will continue at existing levels or grow in accordance with our efforts to increase foreign market penetration.~~

In many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by U.S. regulations applicable to us such as the Foreign Corrupt Practices Act. Although we have policies and procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors and agents, including those based in or from countries where practices which violate such U.S. laws may be customary, will not take actions in violation of our policies. Any violation of foreign or U.S. laws by our employees, contractors or agents, even if such violation is prohibited by our policies, could have a material adverse effect on our business. We must also comply with various import and export regulations. The application of these various regulations depends on the classification of our products which can change over time as such regulations are modified or interpreted. As a result, even if we are currently in compliance with applicable regulations, there can be no assurance that we will not have to incur additional costs or take additional compliance actions in the future. Failure to comply with these regulations could result in fines or termination of import and export privileges, which could have a material adverse effect on our operating results. Additionally, the regulatory environment in some countries is very restrictive as their governments try to protect their local economy and value of their local currency against the U.S. dollar.

Orders With a Value of Greater than One Million Dollars Expose Us to Significant Additional Business and Legal Risks that Could Have a Material Adverse Impact on our Business, Results of Operations and Financial Condition. We continue to make a concentrated effort to increase our net sales through the pursuit of orders with a value greater than $1.0 million. These types of orders expose us to significant additional business and legal risks compared to smaller orders. Our very large customers frequently require contract terms that vary substantially from our standard terms of sale. At times these orders include terms that impose critical delivery commitments and severe contractual liabilities if we fail to provide the required quantity of products at the required delivery times, impose product acceptance requirements and product performance evaluation requirements which create uncertainty with respect to the timing of our ability to recognize revenue from such orders, allow the customers to cancel or delay orders without liability, require us to develop specific product mitigation plans for product delivery constraints caused by unexpected or catastrophic situations to help assure quick production recovery, and that require most favored customer pricing, significant discounts, extended payment terms and volume rebates. At times these customers require broad indemnity obligations and large direct and consequential damage provisions in the event we breach our contracts with them. At times these contracts have supply constraint requirements which mandate that we allocate large product inventories for a specific contract. These inventory requirements expose us to higher risks of inventory obsolescence and can adversely impact our ability to provide adequate product supply to other customers.

While we attempt to limit the number of contracts that contain the non-standard terms of sale described above and attempt to contractually limit our potential liability under such contracts, we have been and expect to be required to agree to some or all of such provisions to secure orders from these customers and to continue to grow our business. These arrangements expose us to significant additional legal and operational risks which could result in a material adverse impact on our business, results of operations and financial condition. In addition, these larger orders are more volatile, are subject to greater discount variability and may contract at a faster pace during an economic downturn. We attempt to manage these risks but there can be no assurance that we will be successful in our efforts.

~~Revenue Derived from Large Orders Could Adversely Affect our Gross Margin and Could Lead to Greater Variability in our Quarterly Results.~~ We define our large order business as orders with a value greater than $100,000. These orders have been and may continue to be more sensitive to changes in the global industrial economy, subject to greater discount variability, lower gross margins, and such orders may be pushed-out or reduced at a faster pace during an economic downturn compared to orders valued at less than $100,000. To the extent that the amount of our net sales derived from large orders increases in future periods, either in absolute dollars or as a percentage of our overall business, our gross margins could decline, and we could experience greater volatility and see a greater negative impact from future downturns in the global industrial economy. This dynamic may also have an impact on the historical seasonal pattern of our net sales and our results of operations. These types of orders also make managing inventory levels more difficult as we have in the past and may have to in the future build large quantities of inventory in anticipation of future demand that may not materialize.

~~Our Product Revenues are Dependent on Certain Industries and Contractions in these Industries Could Have a Material Adverse Effect on Our Results of Operations.~~ Sales of our products are dependent on customers in certain industries, particularly the telecommunications, semiconductor, consumer electronics, automotive, energy, automated test equipment, defense and aerospace industries. As we have experienced in the past, and as we may continue to experience in the future, downturns characterized by diminished product demand in any one or more of these industries may result in decreased sales and a material adverse effect on our operating results. We cannot predict when and to what degree contractions in these industries may occur; however, any sharp or prolonged contraction in one or more of these industries could have a material adverse effect on our business and results of operations.

~~We Make Significant Investments in New Products that May Not Be Successful or Achieve Expected Returns.~~ We plan to continue to make significant investments in research, development, and marketing for new and existing products and technologies. For example, we recently launched LabVIEW NXG, the next generation of our flagship software application. We have made and will continue to make significant investments in software development related to the new and enhanced features of this product. These investments involve a number of risks as the commercial success of such efforts depend on many factors, including our ability to anticipate and respond to innovation, achieve the desired technological fit, and be effective with our marketing and distribution efforts. If our existing or potential customers do not perceive our latest product offerings as providing significant new functionality or value, or if we are late to market with a new product or technology, we may not achieve our expected return on our investments or be able recover the costs expended to develop new product offerings, which could have a material adverse effect on our operating results. Even if our new products are profitable, our operating margins for new products may not be as high as the margins we have experienced historically.

~~Our Success Depends on New Product Introductions and Market Acceptance of Our Products.~~ The market for our products is characterized by rapid technological change, evolving industry standards, changes in customer needs and frequent new product introductions, and is therefore highly dependent upon timely product innovation. Our success is dependent on our ability to successfully develop and introduce new and enhanced products on a timely basis to replace declining revenues from older products, and on increasing penetration in domestic and international markets. As has occurred in the past and as may be expected to occur in the future, we have experienced significant delays between the announcement and the commercial availability of new products. Any significant delay in releasing new products could have a material adverse effect on the ultimate success of a product and other related products and could impede continued sales of predecessor products, any of which could have a material adverse effect on our operating results. There can be no assurance that we will be able to introduce new products in accordance with announced release dates, that our new products will achieve market acceptance or that any such acceptance will be sustained for any significant period. Failure of our new products to achieve or sustain market acceptance could have a material adverse effect on our operating results.

~~Our Reported Financial Results May be Adversely Affected by Changes in Accounting Principles Generally Accepted in the U.S.~~ We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting principles are subject to interpretation by the Financial Accounting Standards Board (“FASB”) and the Securities and Exchange Commission. A change in these policies or interpretations could have a significant effect on our reported financial results, may retroactively affect previously reported results, could cause unexpected financial reporting fluctuations, and may require us to make costly changes to our operational processes and accounting systems. For example, in May 2014, the FASB issued ASU 2014-09, ~~Revenue from Contracts with Customers~~ which supersedes nearly all existing U.S. GAAP revenue recognition guidance and which will be effective for us for our fiscal year beginning January 1, 2018. (See “Note 1 – Operations and summary of significant accounting policies” for additional discussion of the accounting changes).

~~We Operate in Intensely Competitive Markets.~~ The markets in which we operate are characterized by intense competition from numerous competitors, some of which are divisions of large corporations having far greater resources than we have, and we may face further competition from new market entrants in the future. A key competitor is Keysight Technologies Inc. (“Keysight”) which was part of Agilent until November 2014. Keysight offers hardware and software products that provide solutions that directly compete with our virtual instrumentation products including its own line of PXI based hardware. Keysight is aggressively advertising and marketing products that are competitive with our products. Because of Keysight’s strong position in the instrumentation business, changes in its marketing strategy or product offerings could have a material adverse effect on our operating results.

~~We believe our ability to compete successfully depends on a number of factors both within and outside our control, including, but not limited to:~~

~~general market and economic conditions;~~

~~our ability to maintain and grow our business with our current largest customer;~~

~~our ability to meet the volume and service requirements of our large customers;~~

~~success in developing and selling new products;~~

~~industry consolidation, including acquisitions by us or our competitors;~~

~~capacity utilization and the efficiency of manufacturing operations;~~

~~timing of our new product introductions;~~

~~new product introductions by competitors;~~

~~the ability of competitors to more fully leverage low cost geographies for manufacturing or distribution;~~

~~product pricing, including the impact of currency exchange rates;~~

~~effectiveness of sales and marketing resources and strategies;~~

~~adequate manufacturing capacity and supply of components and materials;~~

~~strategic relationships with our suppliers;~~

~~product quality and performance;~~

~~protection of our products by effective use of intellectual property laws;~~

~~the financial strength of our competitors;~~

~~the outcome of any future litigation or commercial dispute;~~

~~barriers to entry imposed by competitors with significant market power in new markets; and,~~

~~government actions throughout the world.~~

~~There can be no assurance that we will be able to compete successfully in the future.~~

~~Our Quarterly Results are Subject to Fluctuations Due to Various Factors that May Adversely Affect Our Business and Result of Operations.~~ ~~Our quarterly operating results have fluctuated in the past and may fluctuate significantly in the future due to a number of factors, including, but not limited to:~~

~~fluctuations in foreign currency exchange rates;~~

~~changes in global economic conditions;~~

~~changes in the amount of revenue derived from very large orders (including orders from our largest customer) and the pricing, margins, and other terms of such orders;~~

~~changes in the capacity utilization including at our facility in Malaysia;~~

~~changes in the mix of products sold;~~

~~the availability and pricing of components from third parties (especially limited sources);~~

~~the difficulty in maintaining margins, including the higher margins traditionally achieved in international sales;~~

~~changes in pricing policies by us, our competitors or suppliers;~~

~~the timing, cost or outcome of any future intellectual property litigation or commercial disputes;~~

~~delays in product shipments caused by human error or other factors; or,~~

~~disruptions in transportation channels.~~

~~Our Revenues are Subject to Seasonal Variations.~~ In previous years, our revenues have been characterized by seasonality, with revenues typically growing from the first quarter to the second quarter, being relatively constant from the second quarter to the third quarter, growing in the fourth quarter compared to the third quarter and declining in the first quarter of the following year from the fourth quarter of the preceding year. This historical trend has been affected and may continue to be affected in the future by broad fluctuations in the global industrial economy as well as the timing of new product introductions or any acquisitions. In addition, revenue derived from very large orders, including those from our largest customer, have had a significant impact on our historical seasonal trends as these orders may be more sensitive to changes in the global industrial economy, may be subject to greater volatility in timing and amount, greater discount variability, lower gross margins, and may contract at a faster pace during economic downturns.

~~Our Acquisitions are Subject to a Number of Related Costs and Challenges that Could Have a Material Adverse Effect on Our Business and Results of Operations.~~ In recent years, we have completed several acquisitions. Achieving the anticipated benefits of an acquisition depends upon whether the integration of the acquired business, products or technology is accomplished efficiently and effectively. In addition, successful acquisitions generally require, among other things, integration of product offerings, manufacturing operations and coordination of sales and marketing and R&D efforts. These difficulties can become more challenging due to the need to coordinate geographically separated organizations, the complexities of the technologies being integrated, and the necessities of integrating personnel with disparate business backgrounds and combining different corporate cultures. The integration of operations following an acquisition also requires the dedication of management resources, which may distract attention from our day-to-day business and may disrupt key R&D, marketing or sales efforts. Our inability to successfully integrate any of our acquisitions could harm our business. The existing products previously sold by entities we have acquired may be of a lesser quality than our products or could contain errors that produce incorrect results on which users rely or cause failure or interruption of systems or processes that could subject us to liability claims that could have a material adverse effect on our operating results or financial position. Furthermore, products acquired in connection with acquisitions may not gain acceptance in our markets, and we may not achieve the anticipated or desired benefits of such transactions.

Our Tax Returns and Other Tax Matters are Subject to Examination by the U.S. Internal Revenue Service and Other Tax Authorities and Governmental Bodies and the Results of These Examinations Could Have a Material Adverse Effect on Our Financial Condition. We account for uncertainty in income taxes recognized in our financial statements using prescribed recognition thresholds and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on our tax returns. These uncertain tax positions are subject to examination by the U.S. Internal Revenue Service and other tax authorities. There can be no assurance as to the outcome of any future examinations. If the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our operating results, cash flows, and financial condition could be materially adversely affected. Our tax years 2008 through 2017 remain open to examination by the major taxing jurisdictions to which we are subject.

~~Tax Law Changes in Hungary Could Have a Negative Impact on our Effective Tax Rate, Earnings and Results of Operations~~. The profit from our Hungarian operations benefit from the fact that it is subject to an effective income tax rate that is lower than the U.S. federal statutory tax rate of 35%. Our earnings in Hungary are subject to a statutory tax rate of 9%. In addition, effective January 1, 2010, certain qualified research and development expenses in Hungary became eligible for an enhanced tax deduction. These tax benefits may not be available in future years due to changes in political conditions in Hungary or changes in tax laws in Hungary or in the U.S. The reduction or elimination of these benefits in Hungary or future changes in U.S. law pertaining to the taxation of foreign earnings could result in an increase in our future effective income tax rate which could have a material adverse effect on our operating results. (See “Note 9 – Income taxes” of Notes to Consolidated Financial Statements for additional discussion regarding the impact of these matters on our income taxes).

~~Our Income Tax Rate could be Adversely Affected by the Expiration of a Tax Holiday in Malaysia.~~ Profits from our manufacturing facility in Penang, Malaysia are free of tax under a 15 year tax holiday effective January 1, 2013. If we fail to satisfy the conditions of the tax holiday, this tax benefit may be terminated early. The expiration of the tax holiday in Malaysia or future changes in U.S. law pertaining to the taxation of foreign earnings could have a material adverse effect on our operating results. (See “Note 9 – Income taxes” of Notes to Consolidated Financial Statements for additional discussion regarding the impact of this tax holiday on our income taxes).

~~Our Manufacturing Capacity, and a Substantial Majority of our Warehousing and Distribution Capacity is Located Outside of the U.S.~~ We manufacture substantially all of our product volume at our facilities in Debrecen, Hungary and Penang, Malaysia. In order to enable timely shipment of products to our customers we maintain the substantial majority of our inventory at our international locations. In addition to being subject to the risks of maintaining such a concentration of manufacturing capacity and global inventory, these facilities and their operations are also subject to risks associated with doing business internationally, including, but not limited to:

~~the volatility of the Hungarian forint and the Malaysian ringgit relative to the U.S. dollar;~~

~~changing and potentially unstable political environments;~~

~~significant and frequent changes in corporate tax laws;~~

~~difficulty in managing manufacturing operations in foreign countries;~~

~~challenges in expanding capacity to meet increased demand;~~

~~difficulty in achieving or maintaining product quality;~~

~~interruption to transportation flows for delivery of components to us and finished goods to our customers;~~

~~restrictive labor codes; and,~~

~~increasing labor costs.~~

No assurance can be given that our efforts to mitigate these risks will be successful. Any failure to effectively deal with the risks above could result in an interruption in the operations of our facilities in Hungary or Malaysia which could have a material adverse effect on our operating results.

~~Our centralization of inventory and distribution from a limited number of shipping points is subject to inherent risks, including:~~

~~burdens of complying with additional or more complex VAT and customs regulations; and,~~

~~concentration of inventory increasing the risks associated with fire, natural disasters and logistics disruptions to customer order fulfillment.~~

~~Any failure or delay in distribution from our facilities in Hungary and Malaysia could have a material adverse effect on our operating results.~~

~~Our Manufacturing Facility in Penang, Malaysia Could Adversely Affect our Gross Margin, Results of Operations and Earnings if Anticipated Demand is Not Achieved.~~ Our facility in Malaysia is intended to support our long term manufacturing and warehousing capacity needs. If demand for our products does not grow as expected or if it contracts in future periods, we will have excess warehousing and manufacturing capacity which will cause an increase in overhead that will likely negatively impact our gross margins and results of operations in future periods.

~~Our Business is Dependent on Key Suppliers and Distributors and Disruptions in these Businesses Could Adversely Affect our Business and Results of Operations.~~ Our manufacturing processes use large volumes of high-quality components and subassemblies supplied by outside sources. Several of these components are only available through limited sources. Limited source components purchased include custom ASICs, chassis and other components. We have in the past experienced delays and quality problems in connection with limited source components, and there can be no assurance that these problems will not recur in the future. Accordingly, our failure to receive components from limited suppliers could result in a material adverse effect on our net sales and operating results. In the event that any of our limited source suppliers experience significant financial or operational difficulties due to adverse global economic conditions or otherwise, our business and operating results would likely be adversely impacted until we are able to secure another source for the required materials.

In some countries, we use distributors to support our sales channels. In the event that any of our distributors experience significant financial or operational difficulties due to adverse global economic conditions or if we experience disruptions in the use of these distributors, our business and operating results would likely be adversely impacted until we are able to secure another distributor or establish direct sales capabilities in the affected market.

~~We May Experience Component Shortages that May Adversely Affect Our Business and Result of Operations.~~ As has occurred in the past and as may be expected to occur in the future, supply shortages of components used in our products, including limited source components, can result in significant additional costs and inefficiencies in manufacturing. If we are unsuccessful in resolving any such component shortages in a timely manner, we will experience a significant impact on the timing of revenue, a possible loss of revenue, or an increase in manufacturing costs, any of which would have a material adverse impact on our operating results.

~~Concentrations of Credit Risk and Uncertain Conditions in the Global Financial Markets May Adversely Affect Our Business and Result of Operations.~~ By virtue of our holdings of cash, investment securities and foreign currency derivatives, we have exposure to many different counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks and investment banks. Many of these transactions expose us to credit risk in the event of a default of our counterparties. We continue to monitor the stability of the financial markets, particularly those in the emerging markets. We can give no assurance that we will not be negatively impacted by any adverse outcomes in those markets. There can be no assurance that any losses or impairments to the carrying value of our financial assets as a result of defaults by our counterparties would not materially and adversely affect our business, financial position and results of operations.

~~We Rely on Management Information Systems and Interruptions in our Information Technology Systems or Cyber-Attacks on our Systems Could Adversely Affect our Business.~~ We rely on the efficient and uninterrupted operation of complex information technology systems and networks to operate our business. During the past year, we devoted significant resources to the consolidation and migration of our existing ERP systems into a global single instance of the ERP software. During the remainder of 2017, we plan to continue to devote resources to completing this transition. Although the transition has proceeded to date without any material disruption in our business systems, the possibility exists that our migration to the new ERP system could adversely affect our operating results, internal controls over financial reporting, and other business processes. We rely on a primary global center for our management information systems and on multiple systems in branches not covered by our global center. As with any information system, unforeseen issues may arise that could affect our ability to receive adequate, accurate and timely financial information, which in turn could inhibit effective and timely decisions. Furthermore, it is possible that our global center for information systems or our branch operations could experience a complete or partial shutdown. A significant system or network disruption could be the result of new system implementations, computer viruses, cyber-attacks, security breaches, facility issues or energy blackouts. Threats to our information technology security can take a variety of forms and individuals or groups of hackers or sophisticated organizations including state-sponsored organizations, may take steps that pose threats to our customers and our infrastructure. If we were to experience a shutdown, disruption or attack, it would adversely impact our product shipments and net sales, as order processing and product distribution are heavily dependent on our management information systems. Such an interruption could also result in a loss of our intellectual property or the release of sensitive competitive information or partner, customer or employee personal data. Any loss of such information could harm our competitive position, result in a loss of customer confidence, and cause us to incur significant costs to remedy the damages caused by the disruptions or security breaches. In addition, changing laws and regulations governing our responsibility to safeguard private data could result in a significant increase in operating or capital expenditures needed to comply with these new laws or regulations. Accordingly, our operating results in such periods would be adversely impacted. From time to time, we have experienced attempts to breach our security and attempts

~~to introduce malicious software into our information technology systems; however, such attacks have not previously resulted in any material damage to us.~~

We are continually working to maintain reliable systems to control costs and improve our ability to deliver our products in our markets worldwide. Our efforts include, but are not limited to the following: firewalls, antivirus protection, patches, log monitors, routine backups with offsite retention of storage media, system audits, data partitioning and routine password modifications. Our internal information technology systems environment continues to evolve and our business policies and internal security controls may not keep pace as new threats emerge. No assurance can be given that our efforts to continue to enhance our systems will be successful.

~~We are Subject to Risks Associated with Our Website.~~ We devote significant resources to maintaining our website, ni.com, as a key marketing, sales and support tool and expect to continue to do so in the future. During the past year, we devoted significant resources to implementing new platforms for ni.com and these efforts will continue during the remainder of 2017. There can be no assurance that we will be successful in our attempt to leverage the web to increase sales. Failure to properly maintain our website may interrupt normal operations, including our ability to provide quotes, process orders, ship products, provide services and support to our customers, bill and track our customers, fulfill contractual obligations and otherwise run our business, which would have a material adverse effect on our results of operations. We host our website internally. Any failure to successfully maintain our website or any significant downtime or outages affecting our website could have a material adverse impact on our operating results.

~~Our Products are Complex and May Contain Bugs or Errors.~~ As has occurred in the past and as may be expected to occur in the future, our new software products or new operating systems of third parties on which our products are based often contain bugs or errors that can result in reduced sales or cause our support costs to increase, either of which could have a material adverse impact on our operating results.

~~Compliance With Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 is Costly and Challenging~~. As required by Section 302 of the Sarbanes-Oxley Act of 2002, this Form 10-Q contains our management’s certification of adequate disclosure controls and procedures as of September 30, 2017. Our most recent annual report on Form 10-K also contains a report by our management on our internal control over financial reporting including an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2016. Our most recent annual report on Form 10-K also contains an attestation and report by our external auditors with respect to the effectiveness of our internal control over financial reporting under Section 404. While these assessments and reports did not reveal any material weaknesses in our internal control over financial reporting, compliance with Sections 302 and 404 is required for each future fiscal year end. We expect that the ongoing compliance with Sections 302 and 404 will continue to be both very costly and very challenging and there can be no assurance that material weaknesses will not be identified in future periods. Any adverse results from such ongoing compliance efforts could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

~~Adoption of Complex Health Care Legislation and Related Regulations and Financial Reform Have Increased our Operating Costs and Adversely Affected Our Result of Operations.~~ The adoption of the Patient Protection and Affordable Care Act and the related reconciliation measure, the Health Care and Education Reconciliation Act of 2010, and the regulations resulting from such legislation have increased the costs of providing health care to our employees as well as caused us to incur additional administrative burdens and costs to comply with certain provisions of this legislation. Additionally, the Dodd-Frank Wall Street Reform and Consumer Protection Act has resulted in increased costs to us as a result of fees as well as incremental efforts we have had to undertake to comply with provisions of this law which are applicable to our derivative contracts or other financial instruments. In addition to the fees and efforts we have already incurred and undertaken to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act, we may incur additional costs in future periods as new rules are published and become effective.

~~Our Business Depends on Our Proprietary Rights and We Have Been Subject to Intellectual Property Litigation.~~ Our success depends on our ability to obtain and maintain patents and other proprietary rights relative to the technologies used in our principal products. Despite our efforts to protect our proprietary rights, unauthorized parties may have in the past infringed or violated certain of our intellectual property rights. We from time to time engage in litigation to protect our intellectual property rights. In monitoring and policing our intellectual property rights, we have been and may be required to spend significant resources. We from time to time may be notified that we are infringing certain patent or intellectual property rights of others. There can be no assurance that any future intellectual property dispute or litigation will not result in significant expense, liability, injunction against the sale of some of our products, and a diversion of management’s attention, any of which may have a material adverse effect on our operating results.

~~Our Business Depends on the Continued Service of Our Key Management and Technical Personnel.~~ Our success depends upon the continued contributions of our key management, sales, marketing, research and development and operational personnel including Alex Davern, our President and Chief Executive Officer, and other members of our senior management and key technical personnel. In connection with his promotion to Chief Executive Officer in January 2017, we entered into an employment agreement with Mr. Davern. We have no other agreements providing for the employment of any of our key employees for any fixed term and our key employees may voluntarily terminate their employment with us at any time. The loss of the services of one or more of our key employees in the future could have a material adverse effect on our operating results. We also believe our future success will depend upon our ability to attract and retain additional highly skilled management, technical, marketing, research and development, and operational personnel with experience in managing large and rapidly changing companies, as well as training, motivating and supervising employees. The market for hiring and retaining certain technical personnel, including software engineers, has become more competitive and intense in recent years. Failure to attract and retain a sufficient number of qualified technical personnel, including software engineers or retain our key personnel could have a material adverse effect on our operating results.

~~Our Operations are Subject to a Variety of Environmental Regulations and Costs that May Have a Material Adverse Effect on our Business and Results of our Operations.~~ We must comply with many different governmental regulations related to the use, storage, discharge and disposal of toxic, volatile or otherwise hazardous chemicals used in our operations in the U.S., Hungary, and Malaysia. Although we believe that our activities conform to presently applicable environmental regulations, our failure to comply with present or future regulations could result in the imposition of fines, suspension of production or a cessation of operations. Any such environmental regulations could require us to acquire costly equipment or to incur other significant expenses to comply with such regulations. Any failure by us to control the use of or adequately restrict the discharge of hazardous substances could subject us to future liabilities.

~~We Are Subject to the Risk of Product Liability Claims.~~ Our products are designed to provide information upon which users may rely. Our products are also used in “real time” applications requiring extremely rapid and continuous processing and constant feedback. Such applications give rise to the risk that a failure or interruption of the system or application could result in economic damage, bodily harm or property damage. We attempt to assure the quality and accuracy of the processes contained in our products, and to limit our product liability exposure through contractual limitations on liability, limited warranties, express disclaimers and warnings as well as disclaimers contained in our “shrink wrap” and electronically displayed license agreements with end-users. If our products contain errors that produce incorrect results on which users rely or cause failure or interruption of systems or processes, customer acceptance of our products could be adversely affected. Further, we could be subject to liability claims that could have a material adverse effect on our operating results or financial position. Although we maintain liability insurance for product liability matters, there can be no assurance that such insurance or the contractual limitations used by us to limit our liability will be sufficient to cover or limit any claims which may occur.

~~Provisions in Our Charter Documents and Delaware Law May Delay or Prevent an Acquisition of Us.~~ Our certificate of incorporation and bylaws and Delaware law contain provisions that could make it more difficult for a third party to acquire us without the consent of our Board of Directors. These provisions include a classified Board of Directors, prohibition of stockholder action by written consent, prohibition of stockholders to call special meetings and the requirement that the holders of at least 80% of our shares approve any business combination not otherwise approved by two-thirds of our Board of Directors. Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. In addition, our Board of Directors has the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer.

~~ITEM~~Item 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Unregistered Sales of Equity Securities and Use of Proceeds

~~At September 30, 2017, there were 1,134,247 shares available for repurchase under our repurchase plan approved on April 21, 2010. This repurchase plan does not have an expiration date.~~ Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following ~~table provides~~tables provide information as of ~~September 30, 2017~~March 31, 2022 with respect to the shares of our common stock that we repurchased under our stock repurchase programs during the ~~third~~first quarter of ~~2017.~~2022.

2019 Stock Buyback Program


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs (1)

January 1, 2022 to January 31, 2022	160,967	$	40.91	160,967	109,478

February 1, 2022 to February 28, 2022	109,478	$	41.35	109,478	—

March 1, 2022 to March 31, 2022	—	$	—	—	—
Total	270,445	$	41.10	270,445	—
(1) On April 21, 2010, our Board of Directors authorized a program to repurchase shares of our common stock from time to time, depending on market conditions and other factors. On October 23, 2019, our Board of Directors amended our stock repurchase program to increase the number of shares that may be repurchased by 3,000,000 shares. At March 31, 2022, there were 0 shares available for repurchase under our repurchase program. Such program does not have an expiration date.

2022 Stock Buyback Program


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum approximate dollar value of shares of common stock that may yet be purchased under the program

January 1, 2022 to January 31, 2022	—	$	—	—	250,000,000

February 1, 2022 to February 28, 2022	337,541	$	41.14	337,541	236,114,899

March 1, 2022 to March 31, 2022	164,066	$	39.34	164,066	229,659,880
Total	501,607	$	40.55	501,607	229,659,880
(1) On January 19, 2022, our Board of Directors approved a new stock repurchase plan for up to $250 million of our common stock, which is in addition to the existing program as described in the table above. The new stock repurchase plan does not have an expiration date.

Item 3. Defaults Upon Senior Securities

None.

~~Period~~

~~Total number of shares purchased~~

~~Average price paid per share~~

~~Total number of shares purchased as part of publicly announced plans or programs~~

~~Maximum number of shares that may yet be purchased under the plans or programs~~

~~July 1, 2017 to July 31, 2017~~

—

~~1,134,247~~

~~August 1, 2017 to August 31, 2017~~

—

~~1,134,247~~

~~September 1, 2017 to September 30, 2017~~

—

~~1,134,247~~

~~Total~~

—

~~1,134,247~~

Item 4. Mine Safety Disclosures

Not applicable.

~~ITEM~~Item 5. ~~OTHER INFORMATION~~Other Information

From time to time our directors, executive officers and other insiders may adopt stock trading plans pursuant to Rule 10b5-1(c) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Jeffrey L. Kodosky and James J. Truchard have made periodic sales of our stock pursuant to such plans.None.

Item 6. Exhibits



~~ITEM 6~~EXHIBITS		~~EXHIBITS~~
3.1(1)		Certificate of Incorporation, as amended, of the ~~Company.~~Company , effective May 14, 2013
3.2(2)		Amended and Restated Bylaws of the ~~Company.~~Company, effective August 1, 2021
~~3.3(3)~~		~~Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of the Company.~~
~~4.1(4)~~		~~Specimen of Common Stock certificate of the Company.~~
~~10.1(4)~~		~~Form of Indemnification Agreement.~~































~~10.2(5)~~31.1*		1994 Employee Stock Purchase Plan, as amended.*
~~10.3(6)~~	National Instruments Corporation Annual Incentive Program, as amended.*
~~10.4(7)~~	2005 Incentive Plan.*
~~10.5(8)~~	2005 Form of Restricted Stock Unit Award Agreement (Non-Employee Director).*
~~10.6(9)~~	2005 Form of Restricted Stock Unit Award Agreement (Performance Vesting).*
~~10.7(10)~~	2005 Form of Restricted Stock Unit Award Agreement (Current Employee).*
~~10.8(11)~~	2005 Form of Restricted Stock Unit Award Agreement (Newly Hired Employee).*
~~10.9(12)~~	2010 Incentive Plan.*
~~10.10(13)~~	2010 Form of Restricted Stock Unit Award Agreement (Non-Employee Director).*
~~10.11(14)~~	2010 Form of Restricted Stock Unit Award Agreement (Performance Vesting).*
~~10.12(15)~~	2010 Form of Restricted Stock Unit Award Agreement (Current Employee).*
~~10.13(16)~~	2010 Form of Restricted Stock Unit Award Agreement (Newly Hired Employee).*
~~10.14(17)~~	2010 Form of Restricted Stock Unit Award Agreement (Performance Vesting).*
~~10.15(18)~~	RSU Vesting Acceleration Agreement between the Company and Alexander M. Davern, effective as of October 28, 2014.*
~~10.16(19)~~	~~Loan Agreement, dated as of May 9, 2013, by and among National Instruments Corporation, the guarantors from time to time party thereto and Wells Fargo Bank, National Association, as lender.~~
~~10.17(20)~~	2015 Equity Incentive Plan.*
~~10.18(21)~~	2015 Form of Restricted Stock Unit Award Agreement (Non-Employee Director).*
~~10.19(22)~~	2015 Form of Restricted Stock Unit Award Agreement (Performance Vesting).*
~~10.20(23~~	2015 Form of Restricted Stock Unit Award Agreement (Current Employee).*
~~10.21(24)~~	2015 Form of Restricted Stock Unit Award Agreement (Newly Hired Employee).*
~~10.22(25)~~	2015 Form of Restricted Stock Unit Award Agreement (Performance Vesting – Threshold Performance Goal).*
~~10.23(26)~~	2015 Form of Restricted Stock Unit Award Agreement (Employee-Time Based Vesting).*
~~10.24(27)~~	Performance Cash Incentive Plan.*
~~10.25(28)~~	~~First Amendment to Loan Agreement, dated as of October 29, 2015, by and among National Instruments Corporation, the guarantors party thereto and Wells Fargo Bank, National Association, as lender~~
~~10.26(29)~~	RSU Vesting Acceleration Agreement between the Company and Eric H. Starkloff, effective as of February 26, 2016.*
~~10.27(30)~~	RSU Vesting Acceleration Agreement between the Company and Scott A. Rust, effective as of February 26, 2016.*
~~10.28(31)~~	~~Employment Agreement between the Company and Alexander M. Davern, dated August 29, 2016 and effective January 1, 2017.*†~~
~~10.29(32)~~	Offer Letter between the Company and Karen Rapp dated March 22, 2017.*
~~31.1~~	Certification of Chief Executive Officer ~~Pursuant to 18 U.S.C. Section 1350, as Adopted~~ Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002
~~31.2~~31.2*		Certification of Chief Financial Officer ~~Pursuant to 18 U.S.C. Section 1350, as Adopted~~ Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002
~~32.1~~32.1**		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to ~~18 U.S.C. Section 1350, as Adopted Pursuant to~~ Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002
~~101.INS~~101*		Inline XBRL ~~Instance~~ Document Set for the condensed consolidated financial statements and accompanying notes in Part I, Item 1, "Financial Statements" of this Quarterly Report on Form 10-Q.
~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~



~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~
~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~
~~(1)~~
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
(1)		Incorporated by reference to the same-numbered exhibit filed with the Company’s Form 10-K for the fiscal year ended December 31, ~~2013.~~2013 filed on February 20, 2014 (File No. 000-25426).
(2)		Incorporated by reference to the same-numbered exhibit filed with the Company’s Form ~~10-K for the fiscal year ended December 31, 2007~~10-Q on August 2, 2021 (File No. 000-25426).
~~(3)~~		~~Incorporated by reference to the same-numbered exhibit filed with the Company’s Form 8-A on April 27, 2004 (File No. 000-25426).~~
~~(4)~~	~~Incorporated by reference to the Company’s Form S-1 (Reg. No. 33-88386) declared effective March 13, 1995.~~
~~(5)~~	~~Incorporated by reference to exhibit B of the Company’s Proxy Statement filed on March 30, 2017.~~
~~(6)~~	~~Incorporated by reference to the same-numbered exhibit filed with the Company’s Form 10-K for the fiscal year ended December 31, 2016.~~
~~(7)~~	~~Incorporated by reference to exhibit A of the Company’s Proxy Statement filed on April 4, 2005 (File No. 000-25426).~~
~~(8)~~	~~Incorporated by reference to exhibit 10.8 filed with the Company’s Form 10-Q on August 2, 2006 (File No. 000-25426).~~
~~(9)~~	~~Incorporated by reference to exhibit 10.9 filed with the Company’s Form 10-Q on August 2, 2006 (File No. 000-25426).~~
~~(10)~~	~~Incorporated by reference to exhibit 10.10 filed with the Company’s Form 10-Q on August 2, 2006 (File No. 000-25426).~~
~~(11)~~	~~Incorporated by reference to exhibit 10.11 filed with the Company’s Form 10-Q on August 2, 2006 (File No. 000-25426).~~
~~(12)~~	~~Incorporated by reference to exhibit 10.1 filed with the Company’s Form 8-K filed on May 17, 2010 (File No. 000-25426).~~
~~(13)~~	~~Incorporated by reference to exhibit 10.2 filed with the Company’s Form 8-K filed on June 24, 2010 (File No. 000-25426).~~
~~(14)~~	~~Incorporated by reference to exhibit 10.3 filed with the Company’s Form 8-K filed on June 24, 2010 (File No. 000-25426).~~
~~(15)~~	~~Incorporated by reference to exhibit 10.4 filed with the Company’s Form 8-K filed on June 24, 2010 (File No. 000-25426).~~
~~(16)~~	~~Incorporated by reference to exhibit 10.5 filed with the Company’s Form 8-K filed on June 24, 2010 (File No. 000-25426).~~
~~(17)~~	~~Incorporated by reference to exhibit 10.1 filed with the Company’s Form 8-K filed on April 25, 2014.~~
~~(18)~~	~~Incorporated by reference to exhibit 10.16 filed with the Company’s Form 10-K for the fiscal year ended December 31, 2014.~~
~~(19)~~	~~Incorporated by reference to exhibit 10.1 filed with the Company’s Form 8-K filed on May 13, 2013.~~
~~(20)~~	~~Incorporated by reference to exhibit B of the Company’s Proxy Statement filed on April 1, 2015.~~
~~(21)~~	~~Incorporated by reference to exhibit 10.18 filed with the Company’s Form 10-Q filed on July 31, 2015.~~
~~(22)~~	~~Incorporated by reference to exhibit 10.19 filed with the Company’s Form 10-Q filed on July 31, 2015.~~
~~(23)~~	~~Incorporated by reference to exhibit 10.20 filed with the Company’s Form 10-Q filed on July 31, 2015.~~
~~(24)~~	~~Incorporated by reference to exhibit 10.21 filed with the Company’s Form 10-Q filed on July 31, 2015.~~
~~(25)~~	~~Incorporated by reference to exhibit 10.22 filed with the Company’s Form 10-Q filed on July 31, 2015.~~
~~(26)~~	~~Incorporated by reference to exhibit 10.1 filed with the Company’s Form 8-K filed on December 16, 2016.~~
~~(27)~~	~~Incorporated by reference to exhibit C of the Company’s Proxy Statement filed on April 1, 2015.~~
~~(28)~~	~~Incorporated by reference to exhibit 10.1 filed with the Company’s Form 8-K filed on October 30, 2015.~~
~~(29)~~	~~Incorporated by reference to exhibit 10.25 filed with the Company’s Form 10-Q filed on May 2, 2016.~~
~~(30)~~	~~Incorporated by reference to exhibit 10.26 filed with the Company’s Form 10-Q filed on May 2, 2016.~~
~~(31)~~	~~Incorporated by reference to exhibit 10.27 filed with the Company’s Form 10-Q filed on October 31, 2016.~~
~~(32)~~	~~Incorporated by reference to exhibit 10.29 filed with the Company’s Form 10-Q filed on May 1, 2017.~~
*	~~Management Contract or Compensatory Plan or Arrangement~~



†			~~Confidential treatment has been granted for portions of this exhibit. These portions have been omitted and submitted separately with the Securities and Exchange Commission.~~

































*			Filed herewith
**			Furnished herewith

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: ~~October 31, 2017~~

April 29, 2022



NATIONAL INSTRUMENTS CORPORATION
By: /s/ Karen Rapp
Karen Rapp
EVP, Chief Financial Officer
(Principal Financial Officer)

໿



Delaware		74-1871327
(State or other jurisdiction of incorporation or organization)		~~74-1871327~~ (I.R.S. Employer Identification ~~Number)~~ No.)

11500 North MoPac Expressway ~~Austin, Texas~~	78759
Austin,
Texas
(~~address~~Address of principal executive offices)		(~~zip~~Zip code)


Title of each class	Trading symbol(s)	Name of exchange on which registered
Common Stock, $0.01 par value	NATI	Nasdaq Stock Market


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



Class			Outstanding at ~~October 24, 2017~~April 25, 2022
Common Stock, - $0.01 par value			~~130,745,022~~131,173,958


PART I. FINANCIAL INFORMATION				Page No.

Item 1			Financial Statements:

			Consolidated Balance Sheets
			March 31, 2022 (unaudited) and December 31, 2021	3

			Consolidated Statements of Income
			(unaudited) for the three months ended March 31, 2022 and 2021	4

			Consolidated Statements of Comprehensive Income
			(unaudited) for the three months ended March 31, 2022 and 2021	5

			Consolidated Statements of Cash Flows
			(unaudited) for the three months ended March 31, 2022 and 2021	6

~~PART I. FINANCIAL INFORMATION~~			~~Page No.~~

~~Item 1~~	~~Financial Statements:~~

	~~Consolidated Balance Sheets~~
	~~September 30, 2017 (unaudited) and December 31, 2016~~	3

	Consolidated Statements of ~~Income~~Stockholders' Equity	7
			(unaudited) for the three months ended March 31, 2022 and ~~nine month periods ended September 30, 2017 and 2016~~2021	4

			~~Consolidated Statements of Comprehensive Income~~
	~~(unaudited) for the three and nine month periods ended September 30, 2017 and 2016~~	5

	~~Consolidated Statements of Cash Flows~~
	~~(unaudited) for the three and nine month periods ended September 30, 2017 and 2016~~	6

	Notes to Consolidated Financial Statements	78

Item 2			Management's Discussion and Analysis of Financial Condition and Results of Operations	2632

Item 3			Quantitative and Qualitative Disclosures about Market Risk	4047

Item 4			Controls and Procedures	4148


PART II. OTHER INFORMATION

Item 1			Legal Proceedings	4149

Item 1A			Risk Factors	4149

Item 2			Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 3			Defaults Upon Senior Securities	50

Item 4			Mine Safety Disclosures	50

Item 5			Other Information	5051

Item 6			Exhibits	5152

			Signatures and Certifications	5453



	September 30,			December 31,
	2017			2016
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	294,194		$	285,283
Short-term investments	91,223			73,117
Accounts receivable, net	235,177			228,686
Inventories, net	184,641			193,608
Prepaid expenses and other current assets	50,325			53,953
Total current assets	855,560			834,647
Property and equipment, net	254,918			260,456
Goodwill	265,091			253,197
Intangible assets, net	122,681			108,663
Other long-term assets	32,878			39,601
Total assets	$	1,531,128		$	1,496,564
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities	$	51,274		$	48,800
Accrued compensation	45,231			27,743
Deferred revenue - current	120,271			115,577
Other current liabilities	17,802			32,997
Other taxes payable	30,832			34,958
Total current liabilities	265,410			260,075
Long-term debt	15,000			25,000
Deferred income taxes	37,074			45,386
Liability for uncertain tax positions	9,284			11,719
Deferred revenue - long-term	31,405			29,752
Other long-term liabilities	9,156			10,413
Total liabilities	367,329			382,345
Commitments and contingencies
Stockholders' equity:
Preferred stock: par value $0.01; 5,000,000 shares authorized; none issued and outstanding	—			—
Common stock: par value $0.01; 360,000,000 shares authorized; 130,745,022 shares and 129,202,979 shares issued and outstanding, respectively	1,307			1,292
Additional paid-in capital	816,152			771,346
Retained earnings	365,021			376,202
Accumulated other comprehensive loss	(18,681		)	(34,621		)
Total stockholders’ equity	1,163,799			1,114,219
Total liabilities and stockholders’ equity	$	1,531,128		$	1,496,564



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016

Net sales:
Product	$	291,891		$	278,521		$	853,219		$	816,486
Software maintenance	29,030			27,843			86,416			83,161
Total net sales	320,921			306,364			939,635			899,647

Cost of sales:
Product	81,641			74,734			235,989			225,261
Software maintenance	2,110			1,998			6,744			5,126
Total cost of sales	83,751			76,732			242,733			230,387

Gross profit	237,170			229,632			696,902			669,260

Operating expenses:
Sales and marketing	116,661			116,662			358,335			346,230
Research and development	56,526			59,066			171,701			178,244
General and administrative	26,468			24,537			78,400			74,308
Total operating expenses	199,655			200,265			608,436			598,782

Operating income	37,515			29,367			88,466			70,478

Other income:
Interest income	657			276			1,509			787
Net foreign exchange gain (loss)	1,096			(760		)	1,624			(1,471		)
Other (loss) gain, net	(1,153		)	301			(957		)	(2,052		)
Income before income taxes	38,115			29,184			90,642			67,742
Provision for income taxes	4,726			4,695			13,949			14,155

Net income	$	33,389		$	24,489		$	76,693		$	53,587

Basic earnings per share	$	0.26		0.19			0.59			0.42

Weighted average shares outstanding - basic	130,660			128,815			130,103			128,233

Diluted earnings per share	$	0.25		$	0.19		$	0.59		0.42

Weighted average shares outstanding - diluted	131,617			129,047			131,050			128,738

Dividends declared per share	$	0.21		$	0.20		$	0.63		$	0.60


	March 31, 2022
	Common Stock Shares	Common Stock Amount		Additional-Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)		Total Stockholders' Equity
Balance at December 31, 2021	132,293,898	$	1,323	$	1,129,647	$	112,858	$	(20,131)	$	1,223,697
Net income	—	—		—		25,236		—		25,236
Other comprehensive loss, net of tax	—	—		—		—		(2,363)		(2,363)
Issuance of common stock under employee plans	354,618	4		9,240		—		—		9,244
Stock-based compensation	—	—		20,055		—		—		20,055

Repurchase of common stock	(772,052)	(8)		(6,593)		(24,854)		—		(31,455)


Dividends paid (1)	—	—		—		(36,976)		—		(36,976)
Balance at March 31, 2022	131,876,464	$	1,319	$	1,152,349	$	76,264	$	(22,494)	$	1,207,438


	As of March 31, 2022		As of December 31,
	(unaudited)		2021
Income taxes payable - current	$	19,925	$	14,457
Hedge payable - current	7,759		7,091
Other	23,470		19,123
Total	$	51,154	$	40,671


	Amount
	(In thousands)
Deferred Revenue at December 31, 2021	$	170,640
Deferral of revenue billed in current period, net of recognition	52,457
Recognition of revenue deferred in prior periods	(50,515)

Foreign currency translation impact	(2,175)
Balance as of March 31, 2022 (unaudited)	$	170,407



	As of September 30, 2017
(In thousands)	(Unaudited)
			Gross		Gross			Cumulative
	Adjusted Cost		Unrealized Gain		Unrealized Loss			Translation Adjustment			Fair Value
Corporate bonds	$	90,817	$	170	$	(76	)	$	(1,448	)	$	89,463
Time deposits	1,760		—		—			—			1,760
Short-term investments	$	92,577	$	170	$	(76	)	$	(1,448	)	$	91,223



(In thousands)	As of December 31, 2016
			Gross		Gross			Cumulative
	Adjusted Cost		Unrealized Gain		Unrealized Loss			Translation Adjustment			Fair Value
Corporate bonds	$	72,986	$	89	$	(182	)	$	(1,536	)	$	71,357
Time deposits	1,760		—		—			—			1,760
Short-term investments	$	74,746	$	89	$	(182	)	$	(1,536	)	$	73,117


	Fair Value Measurements at Reporting Date Using
(In thousands)	(Unaudited)
Description	March 31, 2022		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents available for sale:
Money Market Funds	$	2,042	$	2,042	$	—	$	—







Other assets:
Derivatives	14,852		—		14,852		0
Total Assets	$	16,894	$	2,042	$	14,852	$	—

Liabilities
Derivatives	$	(10,118)	$	—	$	(10,118)	$	—
Total Liabilities	$	(10,118)	$	—	$	(10,118)	$	—


(In thousands)	US Dollar Equivalent				(In thousands)	US Dollar Equivalent
	As of September 30, 2017		As of December 31,			As of March 31, 2022		As of December 31,
	(Unaudited)		2016			(Unaudited)		2021
Chinese yuan	$	27,760	$	27,414	Chinese yuan	$	87,871	$	99,066
Euro	158,490		123,522		Euro	121,396		145,351
Japanese yen	23,726		44,982		Japanese yen	33,460		43,128
Hungarian forint	48,722		57,077		Hungarian forint	46,749		54,939
British pound					British pound	23,981		25,947
Malaysian ringgit	32,438		42,510		Malaysian ringgit	24,161		29,624
Korean won					Korean won	10,923		21,180
Total forward contracts notional amount	$	291,136	$	295,505	Total forward contracts notional amount	$	348,541	$	419,235



	Asset Derivatives
	September 30, 2017			December 31, 2016
(In thousands)	(Unaudited)

	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts - ST forwards	Prepaid expenses and other current assets	$	3,695	Prepaid expenses and other current assets	$	9,378

Foreign exchange contracts - LT forwards	Other long-term assets	2,702		Other long-term assets	3,866
Total derivatives designated as hedging instruments		$	6,397		$	13,244

Derivatives not designated as hedging instruments

Foreign exchange contracts - ST forwards	Prepaid expenses and other current assets	$	177	Prepaid expenses and other current assets	$	1,869
Total derivatives not designated as hedging instruments		$	177		$	1,869

Total derivatives		$	6,574		$	15,113


	Three Months Ended March 31,
(In thousands)	(Unaudited)
Industry Grouping	2022		2021
Portfolio	$	126,582	$	112,352
Semiconductor & Electronics	103,012		98,930
Aerospace, Defense & Government	92,672		76,269
Transportation	62,990		47,631
Total net sales	$	385,256	$	335,182



	Three Months ended September 30, 2016		Change in Constant Dollars		Impact of changes in foreign currency exchange rates on net sales			Three Months ended September 30, 2017
(In millions)	GAAP Net Sales		Dollars	Percentage	Dollars		Percentage	GAAP Net Sales

Americas	$	129.7	3.2	2.5%	0.3		0.2%	133.2
EMEIA	$	92.2	1.3	1.4%	(0.2	)	(0.2)%	93.3
APAC	$	84.4	10.2	12.1%	(0.2	)	(0.2)%	94.5
Total net sales	$	306.3	14.7	4.8%	(0.1	)	(0.1)%	320.9


	Nine Months ended September 30, 2016		Change in Constant Dollars		Impact of changes in foreign currency exchange rates on net sales			Nine Months ended September 30, 2017
(In millions)	GAAP Net Sales		Dollars	Percentage	Dollars		Percentage	GAAP Net Sales

Americas	$	354.8	18.0	5.1%	0.4		—%	373.3
EMEIA	$	278.6	14.9	5.3%	(5.0	)	(1.8)%	288.6
APAC	$	266.2	12.8	4.8%	(1.2	)	(0.5)%	277.8
Total net sales	$	899.6	45.7	5.1%	(5.8	)	(0.6)%	939.6



	Three Months Ended September 30,		Nine Months Ended September 30,
	(Unaudited)		(Unaudited)

(In millions)	2017	2016	2017	2016

Gross Profit	$237.2	$229.6	$696.9	$669.3
% change compared with prior period	3.3%		4.1%
Gross Profit as a percentage of net sales	73.9%	75.0%	74.2%	74.4%