NATI National Instruments Corporation

Strong execution in challenging macro environment

Q2 2023 Summary

• Record GAAP revenue for a second quarter of $417 million, up 5 percent year over year
• Solid Q2 GAAP operating margin of 10%
• Record Q2 Non-GAAP operating margin of 22%
• Strong diluted GAAP EPS of $0.23 and diluted non-GAAP EPS of $0.51

National Instruments Corporation (Nasdaq: NATI) today announced Q2 2023 revenue of $417 million, up 5 percent year over year, a record for a second quarter.

In Q2, the total value of the company's orders was down 17 percent year over year. Orders were down 20 percent in the Americas, down 26 percent in APAC, and flat in EMEA year over year.

In Q2, GAAP gross margin was 72 percent and non-GAAP gross margin was 74 percent. Total GAAP operating expenses were $257 million and non-GAAP operating expenses were $218 million. GAAP operating income for Q2 was $41 million with non-GAAP operating income of $91 million. In Q2, GAAP operating margin was 10 percent with non-GAAP operating margin of 22 percent.

In Q2, GAAP net income for Q2 was $30 million and non-GAAP net income was $68 million, with GAAP diluted EPS of $0.23 and non-GAAP diluted EPS of $0.51.

“I am pleased with our results in the second quarter. We delivered record revenue for a second quarter, along with strong operating margin and EPS, which demonstrates the operating leverage we have developed through our ongoing transformation. Revenue was up 5 percent year-over-year and was bolstered by our strong backlog, even as orders weakened more than we initially anticipated throughout the quarter,” said Eric Starkloff, NI President and CEO. “Despite the challenging macro environment, we executed our strategy. Our performance is a testament to our continued focus on high growth subsegments and global execution.”

"Our focus on operational execution and expense management continued, resulting in second quarter GAAP operating margin up over 450 bps and non-GAAP operating margin up over 600 bps as compared to the same quarter last year," said Daniel Berenbaum, NI CFO. "While we still see difficulty in obtaining reliable supply of a few specific parts, a general easing of supply chain constraints combined with the laser-focus of our team enabled more shipments from our strong backlog, offsetting a difficult bookings environment."

As of June 30, 2023, NI had $139 million in cash and cash equivalents. During the second quarter, NI paid $37 million in dividends. The NI Board of Directors approved a quarterly dividend of $0.28 per share payable on August 29, 2023, to stockholders of record on August 8, 2023.

NI's non-GAAP results exclude, as applicable, the impact of purchase accounting fair value adjustments, stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction and integration costs, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, restructuring charges, tax reform charges, disposal gains on buildings and related charitable contributions, tax effects related to businesses held for sale, gain on sale of businesses, and capitalization and amortization of internally developed software costs. Reconciliations of the NI's GAAP and non-GAAP results are included as part of this news release.

YTD 2023 Summary

• Record GAAP revenue of $854 million, up 9 percent year over year
• Strong GAAP operating margin of 11% and record non-GAAP operating margin of 23%
• Strong diluted GAAP EPS of $0.58, up 107 percent year over year and record diluted non-GAAP EPS of $1.13, up 47 percent year over year

Non-GAAP Presentation

To supplement NI’s financial statements presented on a GAAP basis, NI has provided non-GAAP financial information, including non-GAAP revenue or net sales, gross profit, gross margin, operating expenses, operating income, operating margin, provision for income taxes, net income, net margin and diluted EPS. A reconciliation of the adjustments to GAAP results is included in the tables below. Non-GAAP financial information is not meant as a substitute for GAAP results, but is included because management believes such information is useful to our investors for informational and comparative purposes. In addition, certain non-GAAP financial information is used internally by management to evaluate and manage the company. The non-GAAP financial information used by NI may differ from that used by other companies. These non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP.

Forward-Looking Statements

This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act that are subject to risks and uncertainties. These statements include those set forth above relating to our ability to execute on our strategy. 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 which could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. Risks and uncertainties include without limitation: the global shortage of key components; effect of the global economic and geopolitical conditions; our international operations and foreign economies; adverse public health matters, including epidemics and pandemics such as the COVID-19 pandemic; our ability to effectively manage our partners and distribution channels; interruptions in our technology systems or cyber-attacks on our systems; the dependency of our product revenue on certain industries and the risk of contractions in such industries; concentration of credit risk and uncertain conditions in the global financial markets; our ability to compete in markets that are highly competitive; our ability to release successful new products or achieve expected returns; the risk that our manufacturing capacity and a substantial majority of our warehousing and distribution capacity are located outside of the U.S.; our dependence on key suppliers and distributors; longer delivery lead times from our suppliers; risk of product liability claims; dependence on our proprietary rights and risks of intellectual property litigation; the continued service of key management, technical personnel and operational employees; our ability to comply with environmental laws and associated costs; our ability to maintain our website; the risks of bugs, vulnerabilities, errors or design flaws in our products; our restructuring activities; our exposure to large orders; our shift to more system orders; our ability to effectively manage our operating expenses and meet budget; fluctuations in our financial results due to factors outside of our control; our outstanding debt; the interest rate risk associated with our variable rate indebtedness; seasonal variation in our revenues; our ability to comply with laws and regulations; changes in tax rates and exposure to additional tax liabilities; our ability to make certain acquisitions or dispositions, integrate the companies we acquire or separate the companies we sold and/or enter into strategic relationships; risks related to currency fluctuations; provisions in charter documents and Delaware law that delay or prevent our acquisition; the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed transaction that could cause the parties to terminate the merger agreement entered into in connection with the proposed transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the risk that the parties to the merger agreement may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all; risks related to disruption of management time from ongoing business operations due to the proposed transaction; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of our common stock; the risk of any unexpected costs or expenses resulting from the proposed transaction; the risk of any litigation relating to the proposed transaction; the risk that the proposed transaction and its announcement could have an adverse effect on the ability of the Company to retain customers and retain and hire key personnel and maintain relationships with customers, suppliers, employees, stockholders and other business relationships and on its operating results and business generally; and the risk the pending proposed transaction could distract management of the Company. In addition, our ability to declare and/or pay declared dividends is subject to compliance with the terms of our existing credit agreement. The Company directs readers to its Form 10-K for the year ended December 31, 2022 and the other documents it files with the SEC for other risks associated with the Company’s future performance. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in our forward-looking statements. All information in this release is as of the date above. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

About NI

At NI, we bring together people, ideas and technology so forward thinkers and creative problem solvers can take on humanity’s biggest challenges. From data and automation to research and validation, we provide the tailored, software-connected systems engineers and enterprises need to Engineer Ambitiously™ every day.

National Instruments, NI and ni.com and Engineer Ambitiously are trademarks of National Instruments Corporation. Other product and company names listed are trademarks or trade names of their respective companies. (NATI-F)

National Instruments

Condensed Consolidated Balance Sheets

(in thousands)

 

June 30,

December 31,

 

 

2023

 

 

2022

 

 

(unaudited)

 

Assets

 

 

Cash and cash equivalents

$

139,243

 

$

139,799

 

Accounts receivable, net

 

389,926

 

 

445,279

 

Inventories, net

 

401,626

 

 

388,164

 

Prepaid expenses and other current assets

 

123,949

 

 

115,677

 

Total current assets

 

1,054,744

 

 

1,088,919

 

Property and equipment, net

 

283,907

 

 

265,380

 

Goodwill

 

638,459

 

 

615,734

 

Intangible assets, net

 

192,904

 

 

200,850

 

Operating lease right-of-use assets

 

68,062

 

 

59,176

 

Other long-term assets

 

124,918

 

 

128,479

 

Total assets

$

2,362,994

 

$

2,358,538

 

 

 

 

Liabilities and Stockholders' Equity

 

 

Accounts payable and accrued expenses

$

60,514

 

$

54,639

 

Accrued compensation

 

49,575

 

 

71,422

 

Deferred revenue - current

 

158,247

 

 

137,208

 

Operating lease liabilities - current

 

16,608

 

 

13,834

 

Other taxes payable

 

55,622

 

 

67,615

 

Debt, current

 

25,000

 

 

25,000

 

Other current liabilities

 

58,833

 

 

153,157

 

Total current liabilities

 

424,399

 

 

522,875

 

Deferred income taxes

 

5,983

 

 

1,676

 

Income tax payable - non-current

 

22,581

 

 

40,646

 

Deferred revenue - non-current

 

60,094

 

 

63,066

 

Operating lease liabilities - non-current

 

36,486

 

 

30,588

 

Debt - non-current

 

564,373

 

 

516,637

 

Other long-term liabilities

 

31,558

 

 

26,926

 

Total liabilities

$

1,145,474

 

$

1,202,414

 

 

 

 

Stockholders' equity:

 

 

Common stock

 

1,328

 

 

1,310

 

Additional paid-in capital

 

1,251,971

 

 

1,207,420

 

Retained earnings

 

(11,295

)

 

(14,741

)

Accumulated other comprehensive loss

 

(24,484

)

 

(37,865

)

Total stockholders' equity

 

1,217,520

 

 

1,156,124

 

Total liabilities and stockholders' equity

$

2,362,994

 

$

2,358,538

 

National Instruments

Condensed Consolidated Statements of Income

(in thousands, except per share data, unaudited)

 

 

 

 

 

Three Months Ended

Six Months Ended

 

June 30,

June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

Net sales:

 

 

 

 

Product

$

379,436

 

$

354,805

 

$

779,835

 

$

698,489

 

Software maintenance

 

37,368

 

 

40,710

 

 

73,794

 

 

82,281

 

Total net sales

 

416,804

 

 

395,515

 

 

853,629

 

 

780,770

 

 

 

 

 

 

Cost of sales:

 

 

 

 

Product

 

113,625

 

 

123,307

 

 

241,181

 

 

238,332

 

Software maintenance

 

4,862

 

 

4,167

 

 

10,012

 

 

8,370

 

Total cost of sales

 

118,487

 

 

127,474

 

 

251,193

 

 

246,702

 

 

 

 

 

 

Gross profit

 

298,317

 

 

268,041

 

 

602,436

 

 

534,068

 

 

71.6%

67.8%

70.6%

68.4%

Operating expenses:

 

 

 

 

Sales and marketing

 

123,101

 

 

124,908

 

 

240,443

 

 

245,064

 

Research and development

 

83,801

 

 

85,589

 

 

170,438

 

 

167,750

 

General and administrative

 

50,504

 

 

36,772

 

 

93,719

 

 

69,949

 

Total operating expenses

 

257,406

 

 

247,269

 

 

504,600

 

 

482,763

 

Operating income

 

40,911

 

 

20,772

 

 

97,836

 

 

51,305

 

Other expense

 

(8,500

)

 

(3,505

)

 

(11,519

)

 

(3,473

)

Income before income taxes

 

32,411

 

 

17,267

 

 

86,317

 

 

47,832

 

Provision for income taxes

 

1,919

 

 

4,833

 

 

8,896

 

 

10,162

 

Net income

$

30,492

 

$

12,434

 

$

77,421

 

$

37,670

 

 

 

 

 

 

Basic earnings per share

$

0.23

 

$

0.09

 

$

0.59

 

$

0.29

 

Diluted earnings per share

$

0.23

 

$

0.09

 

$

0.58

 

$

0.28

 

 

 

 

 

 

Weighted average shares outstanding -

 

 

 

 

Basic

 

132,369

 

 

131,973

 

 

131,850

 

 

132,039

 

Diluted

 

134,171

 

 

132,708

 

 

133,693

 

 

132,948

 

 

 

 

 

 

Dividends declared per share

$

0.28

 

$

0.28

 

$

0.56

 

$

0.56

 

 

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

 

Six Months Ended June 30,

 

 

2023

 

 

2022

 

 

 

Cash flow from operating activities:

 

 

Net income

$

77,421

 

$

37,670

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation and amortization

 

45,541

 

 

45,742

 

Stock-based compensation

 

30,388

 

 

40,804

 

Loss from equity-method investees

 

(5,597

)

 

(131

)

Deferred income taxes

 

2,488

 

 

943

 

Net change in operating assets and liabilities

 

(75,368

)

 

(169,930

)

Net cash (used in) provided by operating activities

 

74,873

 

 

(44,902

)

 

 

 

Cash flow from investing activities:

 

 

Acquisitions, net of cash received

 

(23,024

)

 

(72,802

)

Capital expenditures

 

(35,477

)

 

(24,509

)

Capitalization of internally developed software

 

(925

)

 

(187

)

Additions to other intangibles

 

(3,811

)

 

(2,478

)

Net cash used in investing activities

 

(63,237

)

 

(99,976

)

 

 

 

Cash flow from financing activities:

 

 

Proceeds from revolving loan facility

 

120,000

 

 

175,000

 

Payments on revolving line of credit

 

(60,000

)

 

—

 

Proceeds from term loan

 

—

 

 

—

 

Payments on term loan

 

(12,500

)

 

—

 

Debt issuance costs

 

—

 

 

—

 

Proceeds from issuance of common stock

 

17,376

 

 

17,859

 

Repurchase of common stock

 

—

 

 

(70,000

)

Dividends paid

 

(73,975

)

 

(74,034

)

Other

 

(3,075

)

 

—

 

Net cash used in financing activities

 

(12,174

)

 

48,825

 

 

 

 

Impact of changes in exchange rates on cash

 

(18

)

 

(4,180

)

 

 

 

Net change in cash and cash equivalents

 

(556

)

 

(100,233

)

Cash and cash equivalents at beginning of period

 

139,799

 

 

211,106

 

Cash and cash equivalents at end of period

$

139,243

 

$

110,873

 

The following tables provide details with respect to the amount of GAAP charges related to stock-based compensation, amortization of acquisition-related intangibles and fair value adjustments, acquisition-related transaction and integration costs, capitalization and amortization of internally developed software costs, restructuring charges, gains on sale of business/assets, and other that were recorded in the line items indicated below (unaudited) (in thousands)

 

 

 

 

 

 

Three Months Ended

Six Months Ended

 

June 30,

June 30,

 

 

 

 

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Stock-based compensation

 

 

 

 

Cost of sales

$

467

 

$

1,253

 

$

1,429

 

$

2,475

 

Sales and marketing

 

5,792

 

 

7,202

 

 

10,727

 

 

14,291

 

Research and development

 

5,146

 

 

6,271

 

 

10,264

 

 

12,359

 

General and administrative

 

3,424

 

 

5,951

 

 

7,967

 

 

11,680

 

Provision for income taxes

 

(6,020

)

 

(1,993

)

 

(7,821

)

 

(4,648

)

Total

$

8,809

 

$

18,684

 

$

22,566

 

$

36,157

 

 

 

 

 

 

Amortization of acquisition-related intangibles and fair value adjustments

 

 

 

 

Net sales

$

—

 

$

371

 

$

—

 

$

742

 

Cost of sales

 

8,402

 

 

6,415

 

 

15,062

 

 

10,218

 

Sales and marketing

 

4,694

 

 

5,573

 

 

9,267

 

 

11,712

 

Research and development

 

—

 

 

—

 

 

—

 

 

(320

)

Other (expense) income

 

320

 

 

503

 

 

753

 

 

1,019

 

Provision for income taxes

 

(2,014

)

 

(2,094

)

 

(3,505

)

 

(3,530

)

Total

$

11,402

 

$

10,768

 

$

21,577

 

$

19,841

 

 

 

 

 

 

Acquisition transaction and integration costs, restructuring charges, and other(1)

 

 

 

 

Cost of sales

$

982

 

$

1,159

 

$

2,502

 

$

1,944

 

Sales and marketing

 

3,225

 

 

2,339

 

 

9,169

 

 

2,646

 

Research and development

 

497

 

 

487

 

 

3,735

 

 

1,102

 

General and administrative

 

16,555

 

 

1,248

 

 

24,492

 

 

3,019

 

Other (expense) income

 

48

 

 

(265

)

 

(2,449

)

 

(2,132

)

Provision for income taxes

 

(4,569

)

 

(779

)

 

(8,867

)

 

(1,356

)

Total

$

16,738

 

$

4,189

 

$

28,582

 

$

5,223

 

(1) Includes costs related to our announced merger with Emerson Electric Co. incurred during the first and second quarter of 2023

 

 

 

 

 

(Capitalization) and amortization of internally developed software costs

 

 

 

 

Cost of sales

$

659

 

$

1,896

 

$

1,390

 

$

3,929

 

Research and development

 

—

 

 

—

 

 

(910

)

 

(187

)

Provision for income taxes

 

(153

)

 

(436

)

 

(132

)

 

(843

)

Total

$

506

 

$

1,460

 

$

348

 

$

2,899

 

National Instruments

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, unaudited)

 

 

 

 

 

 

Three Months Ended

Six Months Ended

 

June 30,

June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

Reconciliation of Gross Profit to Non-GAAP Gross Profit

 

 

 

Gross profit, as reported

$

298,317

 

$

268,041

 

$

602,436

 

$

534,068

 

Stock-based compensation

 

467

 

 

1,253

 

 

1,429

 

 

2,475

 

Amortization of acquisition-related intangibles and fair value adjustments

 

8,402

 

 

6,786

 

 

15,062

 

 

10,960

 

Acquisition transaction and integration costs, restructuring charges and other

 

982

 

 

1,159

 

 

2,502

 

 

1,944

 

Amortization of internally developed software costs

 

659

 

 

1,896

 

 

1,390

 

 

3,929

 

Non-GAAP gross profit

$

308,827

 

$

279,135

 

$

622,819

 

$

553,376

 

Non-GAAP gross margin

74.1%

70.5%

73.0%

70.8%

 

 

 

 

 

Reconciliation of Operating Expenses to Non-GAAP Operating Expenses

 

 

 

Operating expenses, as reported

$

257,406

 

$

247,269

 

$

504,600

 

$

482,763

 

Stock-based compensation

 

(14,362

)

 

(19,424

)

 

(28,958

)

 

(38,330

)

Amortization of acquisition-related intangibles and fair value adjustments

 

(4,694

)

 

(5,573

)

 

(9,267

)

 

(11,392

)

Acquisition transaction and integration costs, restructuring charges and other

 

(20,277

)

 

(4,074

)

 

(37,396

)

 

(6,767

)

Capitalization of internally developed software costs

 

—

 

 

—

 

 

910

 

 

187

 

Non-GAAP operating expenses

$

218,073

 

$

218,198

 

$

429,889

 

$

426,461

 

 

 

 

 

 

Reconciliation of Operating Income to Non-GAAP Operating Income

 

 

 

Operating income, as reported

$

40,911

 

$

20,772

 

$

97,836

 

$

51,305

 

Stock-based compensation

 

14,829

 

 

20,677

 

 

30,387

 

 

40,805

 

Amortization of acquisition-related intangibles and fair value adjustments

 

13,096

 

 

12,359

 

 

24,329

 

 

22,352

 

Acquisition transaction and integration costs, restructuring charges and other

 

21,259

 

 

5,233

 

 

39,898

 

 

8,711

 

Net amortization of internally developed software costs

 

659

 

 

1,896

 

 

480

 

 

3,742

 

Non-GAAP operating income

$

90,754

 

$

60,937

 

$

192,930

 

$

126,915

 

Non-GAAP operating margin

21.8%

15.4%

22.6%

16.2%

 

 

 

 

 

Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes(1)

 

 

 

Provision for income taxes, as reported

$

1,919

 

$

4,833

 

$

8,896

 

$

10,162

 

Stock-based compensation

 

6,020

 

 

1,993

 

 

7,821

 

 

4,648

 

Amortization of acquisition-related intangibles and fair value adjustments

 

2,014

 

 

2,094

 

 

3,505

 

 

3,530

 

Acquisition transaction and integration costs, restructuring charges and other

 

4,569

 

 

779

 

 

8,867

 

 

1,356

 

Net amortization of internally developed software costs

 

153

 

 

436

 

 

132

 

 

843

 

Non-GAAP provision for income taxes(1)

$

14,675

 

$

10,135

 

$

29,221

 

$

20,539

 

(1): The income tax effect related to each non-GAAP item is calculated based on the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current and deferred tax impact of those adjustments.

Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Net Income and Non-GAAP Diluted EPS

(in thousands, except per share data, unaudited)

 

 

 

 

 

 

Three Months Ended

Six Months Ended

 

June 30,

June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

Net income, as reported

$

30,492

 

$

12,434

 

$

77,421

 

$

37,670

 

Adjustments to reconcile net income to non-GAAP net income:

 

 

 

 

Stock-based compensation

 

14,829

 

 

20,677

 

 

30,387

 

 

40,805

 

Amortization of acquisition-related intangibles and fair value adjustments

 

13,416

 

 

12,862

 

 

25,082

 

 

23,371

 

Acquisition transaction and integration costs, restructuring charges and other

 

21,307

 

 

4,968

 

 

37,449

 

 

6,579

 

Net amortization of internally developed software costs

 

659

 

 

1,896

 

 

480

 

 

3,742

 

Income tax effects and adjustments(1)

 

(12,756

)

 

(5,302

)

 

(20,325

)

 

(10,377

)

Non-GAAP net income

$

67,947

 

$

47,535

 

$

150,494

 

$

101,790

 

Non-GAAP net margin

16.3%

12.0%

17.6%

13.0%

 

Diluted EPS, as reported

$

0.23

 

$

0.09

 

$

0.58

 

$

0.28

 

Adjustment to reconcile diluted EPS to non-GAAP diluted EPS

 

 

 

 

Stock-based compensation

 

0.11

 

 

0.16

 

 

0.23

 

 

0.31

 

Amortization of acquisition-related intangibles and fair value adjustments

 

0.10

 

 

0.10

 

 

0.19

 

 

0.18

 

Acquisition transaction and integration costs, restructuring charges and other

 

0.16

 

 

0.04

 

 

0.28

 

 

0.05

 

Net amortization of internally developed software costs

 

0.01

 

 

0.01

 

 

—

 

 

0.03

 

Income tax effects and adjustments(1)

 

(0.10

)

 

(0.04

)

 

(0.15

)

 

(0.08

)

Non-GAAP diluted EPS

$

0.51

 

$

0.36

 

$

1.13

 

$

0.77

 

(1): The income tax effect related to each non-GAAP item is calculated based on the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current and deferred tax impact of those adjustments.

Weighted average shares outstanding - Diluted

 

134,171

 

 

132,708

 

 

133,693

 

 

132,948

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230727176881/en/

Marissa Vidaurri Vice President of Investor Relations (512) 683-5215