NI Reports Record Revenue for a Second Quarter

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LabVIEW, NI (ni.com) develops high-performance automated test and automated measurement systems to help you solve your engineering challenges now and into the future. Our open, software-defined platform uses modular hardware and an expansive ecosystem to help you turn powerful possibilities into real solutions. (NATI-F)

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National Instruments
Condensed Consolidated Balance Sheets
(in thousands)
	June 30,			December 31,
	2021			2020
	(unaudited)
Assets
Cash and cash equivalents	$	250,421		$	260,232
Short-term investments	14,110			59,923
Accounts receivable, net	258,641			266,869
Inventories, net	211,023			194,012
Prepaid expenses and other current assets	80,121			68,470
Total current assets	814,316			849,506
Property and equipment, net	250,761			254,399
Goodwill	483,136			467,547
Intangible assets, net	149,126			172,719
Operating lease right-of-use assets	57,812			67,674
Other long-term assets	76,878			72,643
Total assets	$	1,832,029		$	1,884,488

Liabilities and Stockholders' Equity
Accounts payable and accrued expenses	$	56,477		$	51,124
Accrued compensation	68,932			87,068
Deferred revenue - current	125,986			132,151
Operating lease liabilities - current	13,389			15,801
Other taxes payable	39,339			48,129
Debt, current	—			5,000
Other current liabilities	26,854			42,578
Total current liabilities	330,977			381,851
Deferred income taxes	28,359			25,288
Income tax payable - non-current	54,195			61,623
Deferred revenue - non-current	34,624			36,335
Operating lease liabilities - non-current	29,512			35,854
Debt, noncurrent	100,000			92,036
Other long-term liabilities	18,710			26,630
Total liabilities	$	596,377		$	659,617
Stockholders' equity:
Common stock	1,330			1,312
Additional paid-in capital	1,087,622			1,033,284
Retained earnings	161,475			211,101
Accumulated other comprehensive loss	(14,775		)	(20,826		)
Total stockholders' equity	1,235,652			1,224,871
Total liabilities and stockholders' equity	$	1,832,029		$	1,884,488

National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data, unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020

Net sales:
Product	$	306,490		$	266,261		$	601,583		$	540,239
Software maintenance	40,206			35,068			80,295			70,470
Total net sales	346,696			301,329			681,878			610,709

Cost of sales:
Product	95,722			83,795			187,379			165,866
Software maintenance	3,516			2,106			7,273			3,796
Total cost of sales	99,238			85,901			194,652			169,662

Gross profit	247,458			215,428			487,226			441,047
	71.4%			71.5%			71.5%			72.2%
Operating expenses:
Sales and marketing	111,199			105,419			227,983			221,165
Research and development	81,434			64,225			161,520			135,846
General and administrative	30,277			29,369			63,636			55,549
Total operating expenses	222,910			199,013			453,139			412,560
Gain on sale of business/assets	—			—			—			159,753
Operating income	24,548			16,415			34,087			188,240
Other expense	(2,963		)	(1,143		)	(8,031		)	(583		)
Income before income taxes	21,585			15,272			26,056			187,657
Provision for income taxes	4,279			4,383			4,254			44,113
Net income	$	17,306		$	10,889		$	21,802		$	143,544

Basic earnings per share	$	0.13		$	0.08		$	0.17		$	1.10
Diluted earnings per share	$	0.13		$	0.08		$	0.16		$	1.09

Weighted average shares outstanding -
Basic	132,498			131,014			131,996			130,813
Diluted	133,539			131,602			133,157			131,499

Dividends declared per share	$	0.27		$	0.26		$	0.54		$	0.52

Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
	Six Months Ended June 30,
	2021			2020

Cash flow from operating activities:
Net income	$	21,802		$	143,544
Adjustments to reconcile net income to net cash provided by operating activities:
Disposal gains on sale of business/asset	—			(159,753		)
Depreciation and amortization	50,024			38,341
Stock-based compensation	37,208			27,335
Loss from equity-method investees	5,360			1,932
Deferred income taxes	1,301			2,711
Net change in operating assets and liabilities	(63,372		)	47,388
Net cash provided by operating activities	52,323			101,498

Cash flow from investing activities:
Acquisitions, net of cash received	(19,784		)	—
Capital expenditures	(17,411		)	(25,362		)
Proceeds from sale of assets/business, net of cash divested	—			160,266
Capitalization of internally developed software	(721		)	(3,108		)
Additions to other intangibles	(1,519		)	(630		)
Payments to acquire equity-method investments	(12,551		)	—
Purchases of short-term investments	—			(206,330		)
Sales and maturities of short-term investments	45,671			306,955
Net cash (used in) provided by investing activities	(6,315		)	231,791

Cash flow from financing activities:
Proceeds from revolving loan facility	100,000			20,000
Proceeds from term loan	—			70,000
Payments on term loan	(98,750		)	—
Debt issuance costs	(1,993		)	(1,480		)
Proceeds from issuance of common stock	17,239			17,252
Repurchase of common stock	—			(23,680		)
Dividends paid	(71,428		)	(68,156		)
Net cash (used in) provided by financing activities	(54,932		)	13,936

Impact of changes in exchange rates on cash	(887		)	(636		)

Net change in cash and cash equivalents	(9,811		)	346,589
Cash and cash equivalents at beginning of period	260,232			194,616
Cash and cash equivalents at end of period	$	250,421		$	541,205

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,

	2021			2020			2021			2020
Stock-based compensation
Cost of sales	$	1,191		$	932		$	2,305		$	1,736
Sales and marketing	6,922			6,467			12,617			11,642
Research and development	6,180			4,428			11,893			7,947
General and administrative	5,854			3,404			10,520			6,008
Provision for income taxes	(3,916		)	(2,905		)	(7,241		)	(4,406		)
Total	$	16,231		$	12,326		$	30,094		$	22,927

Amortization of acquisition-related intangibles and fair value adjustments
Net sales	$	738		$	—		$	1,551		$	—
Cost of sales	4,226			635			8,497			1,381
Sales and marketing	2,357			480			4,528			966
Research and development	—			28			—			55
Other expense	554			117			948			241
Provision for income taxes	(979		)	(133		)	(1,969		)	(290		)
Total	$	6,896		$	1,127		$	13,555		$	2,353

Acquisition transaction and integration costs, restructuring charges, and other ⁽¹⁾⁽²⁾
Cost of sales	$	(118	)	$	—		$	(43	)	$	20
Sales and marketing	839			1,239			5,487			7,612
Research and development	548			147			1,036			4,816
General and administrative	873			3,399			6,539			2,385
Gain on sale of business/assets	—			—			—			(159,753		)
Other expense	280			—			4,006			128
Provision for income taxes	(578		)	(78		)	(3,463		)	34,676
Total	$	1,844		$	4,707		$	13,562		$	(110,116	)
(1): During the first quarter of 2020, we recognized a gain of approximately $160 million related to the divestiture of AWR, presented within "Gain on sale of business/assets".
(2): During the first quarter of 2021, we recognized a $3.5 million impairment loss related to one of our equity-method investments.

Capitalization and amortization of internally developed software costs
Cost of sales	$	6,227		$	7,144		$	13,101		$	14,226
Research and development	(495		)	(1,181		)	(721		)	(3,095		)
Provision for income taxes	(1,204		)	(1,252		)	(2,600		)	(2,337		)
Total	$	4,528		$	4,711		$	9,780		$	8,794

National Instruments
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020

Reconciliation of Net sales to Non-GAAP Net sales
Net sales, as reported	$	346,696		$	301,329		$	681,878		$	610,709
plus: Impact of acquisition-related fair value adjustments		738			—			1,551			—
Non-GAAP net sales	$	347,434			301,329			683,429		$	610,709

Reconciliation of Gross Profit to Non-GAAP Gross Profit
Gross profit, as reported	$	247,458		$	215,428		$	487,226		$	441,047
Stock-based compensation		1,191			932			2,305			1,736
Amortization of acquisition-related intangibles and fair value adjustments		4,964			635			10,048			1,381
Acquisition transaction and integration costs, restructuring charges and other		(118	)		—			(43	)		20
Amortization of internally developed software costs		6,227			7,144			13,101			14,226
Non-GAAP gross profit	$	259,722		$	224,139		$	512,637		$	458,410
Non-GAAP gross margin	74.8%			74.4%			75.0%			75.1%

Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
Operating expenses, as reported	$	222,910		$	199,013		$	453,139		$	412,560
Stock-based compensation		(18,956	)		(14,299	)		(35,030	)		(25,597	)
Amortization of acquisition-related intangibles and fair value adjustments		(2,357	)		(508	)		(4,528	)		(1,021	)
Acquisition transaction and integration costs, restructuring charges and other		(2,260	)		(4,785	)		(13,062	)		(14,813	)
Capitalization of internally developed software costs		495			1,181			721			3,095
Non-GAAP operating expenses	$	199,832		$	180,602		$	401,240		$	374,224

Reconciliation of Operating Income to Non-GAAP Operating Income
Operating income, as reported	$	24,548		$	16,415		$	34,087		$	188,240
Stock-based compensation		20,147			15,231			37,335			27,333
Amortization of acquisition-related intangibles and fair value adjustments		7,321			1,143			14,576			2,402
Acquisition transaction and integration costs, restructuring charges and other		2,142			4,785			13,019			14,833
Net amortization of internally developed software costs		5,732			5,963			12,380			11,131
Gain on sale of business/assets		—			—			—			(159,753	)
Non-GAAP operating income	$	59,890		$	43,537		$	111,397		$	84,186
Non-GAAP operating margin	17.2%			14.4%			16.3%			13.8%

Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes ⁽¹⁾
Provision for income taxes, as reported	$	4,279		$	4,383		$	4,254		$	44,113
Stock-based compensation		3,916			2,905			7,241			4,406
Amortization of acquisition-related intangibles and fair value adjustments		979			133			1,969			290
Acquisition transaction and integration costs, restructuring charges and other		578			466			3,463			2,083
Net amortization of internally developed software costs		1,204			1,252			2,600			2,337
Gain on sale of business/assets		—			(388	)		—			(36,759	)
Non-GAAP provision for income taxes ⁽¹⁾	$	10,956		$	8,751		$	19,527		$	16,470
(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, Non-GAAP Diluted EPS, and EBITDA
(in thousands, except per share data, unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020

Net income, as reported	$	17,306		$	10,889		$	21,802		$	143,544
Adjustments to reconcile net income to non-GAAP net income:
Stock-based compensation	20,147			15,231			37,335			27,333
Amortization of acquisition-related intangibles and fair value adjustments	7,875			1,260			15,524			2,643
Acquisition transaction and integration costs, restructuring charges and other	2,422			4,785			17,025			14,981
Net amortization of internally developed software costs	5,732			5,963			12,380			11,131
Gain on sale of business/assets	—			—			—			(159,753		)
Income tax effects and adjustments ⁽¹⁾	(6,677		)	(4,368		)	(15,273		)	27,643
Non-GAAP net income	$	46,805		$	33,760		$	88,793		$	67,522
Non-GAAP net margin	13.5%			11.2%			13.0%			11.1%

Diluted EPS, as reported	$	0.13		$	0.08		$	0.16		$	1.09
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS
Stock-based compensation	0.15			0.12			0.28			0.21
Amortization of acquisition-related intangibles and fair value adjustments	0.06			0.01			0.12			0.02
Acquisition transaction and integration costs, restructuring charges and other	0.02			0.04			0.13			0.11
Net amortization of internally developed software costs	0.04			0.05			0.09			0.08
Gain on sale of business/assets	—			—			—			(1.21		)
Income tax effects and adjustments ⁽¹⁾	(0.05		)	(0.04		)	(0.11		)	0.21
Non-GAAP diluted EPS	$	0.35		$	0.26		$	0.67		$	0.51
(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.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2021		2020			2021		2020
Net income, as reported	$	17,306	$	10,889		$	21,802	$	143,544
Adjustments to reconcile net income to EBITDA:
Interest expense (income), net	1,110		(945		)	1,653		(3,168		)
Tax expense	4,279		4,383			4,254		44,113
Depreciation and amortization	26,152		19,076			50,024		38,341
EBITDA	$	48,847	$	33,403		$	77,733	$	222,830
Weighted average shares outstanding - Diluted	133,539		131,602			133,157		131,499

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS Guidance
(unaudited)
	Three Months Ended
	September 30, 2021

	Low			High
GAAP Diluted EPS, guidance	$	0.10		$	0.24
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS:
Stock-based compensation	0.14			0.14
Amortization of acquisition-related intangibles and fair value adjustments	0.06			0.06
Acquisition transaction and integration costs, restructuring charges, and other	0.01			0.01
Net amortization of software development costs	0.04			0.04
Income tax effects and adjustments ⁽¹⁾	(0.04		)	(0.04		)
Non-GAAP Diluted EPS, guidance	$	0.31		$	0.45
(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.

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