National Instruments Reports Record Revenue for a First Quarter of $312 Million
Net income up 34 percent year over year
Q1 2018 Highlights
| • | Revenue of $312 million, up 4 percent year over year |
| • | GAAP gross margin of 76 percent and non-GAAP gross margin of 77 percent |
| • | GAAP net income of $24 million, up 34 percent year over year |
| • | Non-GAAP net income of $34 million, up 26 percent year over year |
| • | Fully diluted GAAP EPS of $0.18 and fully diluted non-GAAP EPS of $0.26 |
| • | Cash and short-term investments of $415 million as of March 31, 2018 |
AUSTIN, Texas - April 26, 2018 - National Instruments (Nasdaq: NATI) today announced Q1 2018 revenue of $312 million, up 4 percent year over year.
In Q1 2018, the value of the company's total orders was up 5 percent year over year; orders under $20,000 were up 2 percent year over year; and orders over $20,000 were up 7 percent year over year.
GAAP net income for Q1 was $24 million, with fully diluted earnings per share (EPS) of $0.18, and non-GAAP net income was $34 million, with non-GAAP fully diluted EPS of $0.26. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $46 million for Q1.
In Q1, GAAP gross margin was 76 percent and non-GAAP gross margin was 77 percent. Total GAAP operating expenses were $209 million, up 4 percent year over year. Total non-GAAP operating expenses were up 4 percent year over year at $199 million. GAAP operating margin was 9 percent in Q1, with GAAP operating income of $28 million, up 26 percent year over year. Non-GAAP operating margin was 13 percent in Q1, with non-GAAP operating income of $40 million, up 17 percent year over year.
"I am pleased with the strong software revenue growth this quarter. We believe our software-based platform is our most critical differentiator, and its continued growth signals strength in our market position," said Alex Davern, NI president and CEO. "I am also encouraged by the strong performance of our broad-based data acquisition portfolio. These products provide measurement capabilities to systems across many applications and industries, which has long been a strength of NI."
Karen Rapp, NI CFO, said, "I am pleased with our discipline to execute to our operating model that enabled us to deliver on our operating income target this quarter, despite lower than expected revenue. In Q2, we want to continue to deliver on our profit goals while continuing to increase our backlog to improve efficiency and visibility."
Geographic revenue in U.S. dollar terms for Q1 2018 compared with Q1 2017 was up 1 percent in the Americas, flat in APAC and up 11 percent in EMEIA. Excluding the impact of foreign currency exchange, revenue was up 1 percent in the Americas, down 4 percent in APAC and up 5 percent in EMEIA. Historical revenue from these three regions can be found on NI's investor website at ni.com/nati.
On January 1, 2018, NI adopted ASC Topic 606 for revenue recognition. See the schedule attached to this press release regarding the impact of adopting the new GAAP rules on NI's operating results for Q1 2018. NI does not expect these changes under ASC Topic 606 to have a significant impact on its financial results during the remainder of the year.
As of March 31, 2018, NI had $415 million in cash and short-term investments. During Q1, NI paid $30 million in dividends. The NI Board of Directors approved a dividend of $0.23 per share payable on June 4, 2018, to stockholders of record on May 14, 2018.
The company's non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction costs, and restructuring charges. Reconciliations of the company's GAAP and non-GAAP results are included as part of this news release.
Change in Non-GAAP Results Presentation
In the second quarter of 2018, NI began moving toward more frequent releases for many of its software products. Accordingly, the effects of software capitalization and software amortization will be excluded from its Non-GAAP results starting in Q2. Specifically, the company started applying agile development methodologies which are characterized by a more dynamic development process with more frequent and iterative revisions to a product release's features and functions as the software is being developed. Due to the shorter development cycle and focus on rapid production associated with agile development, NI expects that for a significant majority of its software development projects the costs incurred subsequent to the achievement of technological feasibility will be immaterial in future periods and it expects to record significantly less capitalized software development costs than under its historical software development approaches. NI also expects amortization of previously capitalized software development costs to steadily decline as previously capitalized software development costs become fully amortized over the next four years.
Beginning with the non-GAAP metrics included in its guidance for the three months ended June 30, 2018, NI has excluded the net effects of capitalization and amortization of software development costs from its non-GAAP operating results, along with its previously excluded non-GAAP items. NI believes these changes will be useful to investors as they will provide greater comparability between its R&D spend in future periods. Beginning with its non-GAAP operating results reported for the three months ended June 30, 2018, NI will provide a reconciliation of GAAP to Non-GAAP Cost of Sales, Gross Margin, R&D Expense, Operating Expenses, Operating Income, Income Before Taxes, Income Taxes and Net Income reflecting this revised calculation method.
Guidance
NI currently expects Q2 revenue to be in the range of $320 million to $350 million, which would be a new Q2 record at the midpoint. The company currently expects that GAAP fully diluted EPS will be in the range of $0.15 to $0.29 for Q2, with non-GAAP fully diluted EPS expected to be in the range of $0.23 to $0.37.
Non-GAAP Presentation
In addition to disclosing results determined in accordance with GAAP, NI discloses certain non-GAAP operating results and non-GAAP information that exclude certain charges. In this news release, the company has presented its gross profit, gross margin, operating expenses, operating income, operating margin, income before income taxes, provision for income taxes, net income and basic and fully diluted EPS for the three-month periods ending March 31, 2018 and 2017, on a GAAP and non-GAAP basis. NI is also providing guidance on its non-GAAP fully diluted EPS. The company is not able to provide guidance on its GAAP tax rate or a related reconciliation without unreasonable efforts since its future GAAP tax rate depends on its future stock price and related information that is not currently available.
When presenting non-GAAP information, the company includes a reconciliation of the non-GAAP results to the GAAP results. Management believes that including the non-GAAP results assists investors in assessing the company's operational performance and its performance relative to its competitors. The company presents these non-GAAP results as a complement to results provided in accordance with GAAP, and these results should not be regarded as a substitute for GAAP. Management uses these non-GAAP measures to manage and assess the profitability and performance of its business and does not consider stock-based compensation expense, amortization of acquisition-related intangibles, acquisition-related transaction costs, and restructuring charges in managing its operations. Specifically, management uses non-GAAP measures to plan and forecast future periods; to establish operational goals; to compare with its business plan and individual operating budgets; to measure management performance for the purposes of executive compensation, including payments to be made under bonus plans; to assist the public in measuring the company's performance relative to the company's long-term public performance goals; to allocate resources; and, relative to the company's historical financial performance, to enable comparability between periods. Management also considers such non-GAAP results to be an important supplemental measure of its performance.
This news release discloses the company's EBITDA for the three-month periods ending March 31, 2018 and 2017. The company believes that including the EBITDA results assists investors in assessing the company's operational performance relative to its competitors. A reconciliation of EBITDA to GAAP net income is included with this news release.
Conference Call Information and Availability of Presentation Materials
Interested parties can listen to the Q1 2018 earnings conference call with NI management today, Apr. 26, at 4:00 p.m. CT at ni.com/call. Replay information is available by calling (855) 859-2056, confirmation code 5171699, shortly after the call through Apr. 29 at 10:00 p.m. CT or by visiting the company's website at ni.com/call. Presentation materials referred to on the conference call can be found at ni.com/nati.
Forward-Looking Statements
This release contains "forward-looking statements" including statements regarding that our software-based platform is our most critical differentiator and its continued growth signals strength in our market position, being encouraged by the strong performance of our broad-based data acquisition portfolio, that in Q2 we want to continue to deliver on our profit goals while continuing to increase our backlog to improve efficiency and visibility, not expecting these changes under ASC Topic 606 to have a significant impact on its financial results during the remainder of the year, our Q2 revenue guidance, expecting that GAAP fully diluted EPS will be in the range of $0.15 to $0.29 for Q2, with non-GAAP fully diluted EPS expected to be in the range of $0.23 to $0.37, expecting that for a significant majority of its software development projects the costs incurred subsequent to the achievement of technological feasibility will be immaterial in future periods, expecting to record significantly less capitalized software development costs than under its historical software development approaches, expecting amortization of previously capitalized software development costs to steadily decline as previously capitalized software development costs become fully amortized over the next four years, believing these changes will be useful to investors as they will provide greater comparability between its R&D spend in future periods, and that beginning with its non-GAAP operating results reported for the three months ended June 30, 2018 NI will provide a reconciliation of GAAP to Non-GAAP Cost of Sales, Gross Margin, R&D Expense, Operating Expenses, Operating Income, Income Before Taxes, Income Taxes and Net Income reflecting this revised calculation method. These statements are subject to a number of risks and uncertainties, including the risk of adverse changes or fluctuations in the global economy, foreign exchange fluctuations, fluctuations in demand for NI products including orders from NI's large customers, component shortages, delays in the release of new products, NI's ability to effectively manage its operating expenses, manufacturing inefficiencies and the level of capacity utilization, the impact of any recent or future acquisitions by NI, expense overruns, adverse effects of price changes or effective tax rates. Actual results may differ materially from the expected results.
NI directs readers to its Form 10-K for the year ended Dec. 31, 2017 and the other documents it files with the SEC for other risks associated with the NI's future performance.
About NI
NI (ni.com) empowers engineers and scientists with a software-centric platform that incorporates modular hardware and an expansive ecosystem. This proven approach puts users firmly in control of defining what they need to accelerate their system design within test, measurement and control. NI's solution helps build high-performance systems that exceed requirements, quickly adapt to change and ultimately improve the world. (NATI-F)
LabVIEW, National Instruments, NI and ni.com are trademarks of National Instruments. Other product and company names listed are trademarks or trade names of their respective companies.
