National Instruments : NI Achieves Record Financial Performance for Q4 and Fiscal Year 2021 - Form 8-K

NI Achieves Record Financial Performance for Q4 and Fiscal Year 2021

NI Board of Directors authorizes $250 million share repurchase program

Q4 2021 Highlights

•

All-time record revenue of $421 million, up 14 percent year over year

•

All-time record orders up 19 percent year over year

•

Strong diluted GAAP EPS of $0.30

•

All-time record diluted non-GAAP EPS of $0.60

•

Cash and cash equivalents of $211 million as of December 31, 2021

•

Returned $66 million to stockholders through stock repurchase and dividends

AUSTIN, Texas - Jan. 27, 2022 - National Instruments Corporation (Nasdaq: NATI) today announced Q4 2021 revenue of $421 million, up 14 percent year over year and an all-time quarterly record.

In Q4 2021, the value of the company's total orders were up 19 percent year over year, an all-time quarterly record. Geographic order growth for Q4 2021 compared with Q4 2020 was up 34 percent in the Americas, down 2 percent in APAC and up 20 percent in EMEA.

In Q4, GAAP gross margin was 71 percent and non-GAAP gross margin was 74 percent. Total Q4 GAAP operating expenses were $247 million, up 1 percent year over year. Total Q4 non-GAAP operating expenses were $214 million, up 9 percent year over year. GAAP operating margin was 12 percent in Q4, with GAAP operating income of $50 million. Non-GAAP operating margin was 23 percent in Q4, with non-GAAP operating income of $96 million, up 22 percent year over year.

GAAP net income for Q4 was $40 million, with diluted earnings per share ("EPS") of $0.30, and non-GAAP net income was $80 million, with non-GAAP diluted EPS of $0.60.

"We delivered the strongest non-GAAP financial performance in our company's history in the fourth quarter with all-time record orders, revenue, operating income, and earnings. We believe 2021 is an inflection point for our business and a direct reflection of the strategic changes we've made over the last several years," said Eric Starkloff, NI president and CEO. "The areas where we have focused showed momentum throughout the year with growth across all business units and all regions. We believe we are focused on the right market opportunities and enter 2022 in a position of strength and poised to accelerate growth."

"As we close out the year, I am proud of our performance with revenue and EPS at the high end of guidance. We will continue to be intentional with investments that we believe will accelerate revenue and strengthen our competitive advantage, while continuing to scale our cost structure to increase profitability," said Karen Rapp, NI CFO. "We remain confident in our ability to achieve our 2023 financial model a year ahead of schedule. Our strong balance sheet gives us confidence in the ability to leverage inorganic opportunities to enhance our technology capabilities and expertise while also returning excess cash to stockholders."

As of December 31, 2021, NI had $211 million in cash with $143 million in cash generated from operations in 2021. During Q4, NI paid $36 million in dividends and repurchased approximately 740,000 shares of our common stock at an average price of $40.52 per share. For the year, we returned over $198 million to our stockholders through dividends and stock repurchases, including the repurchase of 1.3 million shares at an average price of $41.06 per share. The NI Board of Directors approved a dividend of $0.28 per share payable on February 28, 2022, to stockholders of record on February 7, 2022. This represents an increase of 4 percent per share.

The NI Board of Directors also authorized a new stock repurchase program for up to $250 million of its common stock. The new stock repurchase program is effective immediately and is in addition to the previously authorized stock repurchase program.

The company'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 company's GAAP and non-GAAP results are included as part of this news release.

FY 2021 Highlights

•

All-time record revenue of $1.47 billion, up 14 percent year over year

•

GAAP gross margin of 71 percent

•

Non-GAAP gross margin of 75 percent

•

Strong diluted GAAP EPS of $0.67

•

Record diluted non-GAAP EPS of $1.68

•

Returned $198 million to stockholders through stock repurchase and dividends

In 2021, GAAP operating expenses were $931 million, up 6 percent year over year, and non-GAAP operating expenses were $824 million, up 9 percent year over year. GAAP net income in 2021 was $89 million, down 38 percent year over year, and non-GAAP net income was $224 million, up 37 percent year over year.

Q1 2022 Guidance

•

GAAP revenue to be in the range of $385 million to $415 million, up 19 percent year over year at the midpoint

•

GAAP diluted EPS to be in the range of $0.13 to $0.27, up 17 cents year over year at the midpoint

•

Non-GAAP diluted EPS expected to be in the range of $0.35 to $0.49, up 31 percent year over year at the midpoint

Conference Call Information

NI management will discuss Q4 2021 results today, January 27, at 4:00 p.m. CT at www.ni.com/call or dial [phone] and enter confirmation code 4276084. The call and an accompanying slide presentation will be webcast on the investor website, www.ni.com/nati, under "Events & Presentations." Replay is available by calling [phone], confirmation code 4276084 , shortly after the call through January 31, at 11:59 p.m. CT.

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 the Private Securities Litigation Reform Act of 1995 including without limitation those statements about our expectations of accelerating growth and progress to meet or exceed long-term financial model, our continued momentum across regions and business units, our opportunities to drive growth, profitability and efficiency in our business, confidence in our software strategy, our ability to drive growth through strategic changes made to our business, including the transition to subscription-based licensing model for software offerings, confidence in our investment strategy, our ability to successfully integrate acquisitions and execute our growth strategy, our ability to achieve sustainable customer demand through focus on secular growth opportunities, and our guidance and expectations for our Q1 2022 revenue, diluted EPS, backlog, lead times and gross margin. These statements are subject to a number of risks and uncertainties, and actual results may differ materially from any future results expressed or implied by the forward-looking statements. Risks and uncertainties include without limitation: the 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; cyber-attacks; the dependency of our product revenue on certain industries and the risk of contractions in such industries; fluctuations in demand for our products including orders from our large customers; 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; component shortages; 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 and technical personnel; the 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 ability to achieve the benefits of employee restructuring plans; our exposure to large orders; our ability to effectively manage our operating expenses and meet budget; expense overruns; manufacturing inefficiencies and the level of capacity utilization; fluctuations in our quarterly results due to factors outside of our control; our outstanding debt; 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; adverse effects of price changes; and changes in accounting principles. 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, 2020, 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.

About NI

At NI, we bring together the 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, ni.com and Engineer Ambitiously are trademarks of National Instruments. 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)
		December 31,			December 31,
		2021			2020
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	211,106			$	260,232
Short-term investments			-				59,923
Accounts receivable, net			341,275				266,869
Inventories, net			289,243				194,012
Prepaid expenses and other current assets			90,225				68,470
Total current assets			931,849				849,506
Property and equipment, net			253,668				254,399
Goodwill			583,589				467,547
Intangible assets, net			212,521				172,719
Operating lease right-of-use assets			58,641				67,674
Other long-term assets			74,717				72,643
Total assets			2,114,985				1,884,488
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities			83,218				51,124
Accrued compensation			111,261				87,068
Deferred revenue			137,818				132,151
Operating lease liabilities			13,137				15,801
Other taxes payable			59,109				48,129
Debt - current			-				5,000
Other current liabilities			40,671				42,578
Total current liabilities			445,214				381,851
Debt - non-current			300,000				92,036
Deferred income taxes			14,249				25,288
Income tax payable - non-current			54,195				61,623
Deferred revenue - non-current			32,822				36,335
Operating lease liabilities - non-current			30,468				35,854
Other long-term liabilities			14,340				26,630
Total liabilities			891,288				659,617
Stockholders' equity:
Preferred stock			-				-
Common stock			1,323				1,312
Additional paid-in capital			1,129,647				1,033,284
Retained earnings			112,858				211,101
Accumulated other comprehensive loss			(20,131	)			(20,826	)
Total stockholders' equity			1,223,697				1,224,871
Total liabilities and stockholders' equity		$	2,114,985			$	1,884,488

National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data, unaudited)
		Three Months Ended			Years Ended
		December 31,			December 31,
		2021			2020			2021			2020
Net sales:
Product		$	377,303			$	327,714			$	1,304,609			$	1,137,603
Software maintenance			43,338				40,124				165,072				149,068
Total net sales			420,641				367,838				1,469,681				1,286,671
Cost of sales:
Product			119,857				105,625				406,342				359,861
Software maintenance			3,739				3,571				14,621				11,260
Total cost of sales			123,596				109,196				420,963				371,121
Gross profit			297,045				258,642				1,048,718				915,550
			71%				70%				71%				71%
Operating expenses:
Sales and marketing			122,304				134,570				467,352				465,509
Research and development			92,301				73,733				335,986				280,381
General and administrative			32,543				36,883				127,215				129,863
Total operating expenses			247,148				245,186				930,553				875,753
Gain on sale of business			-				-				-				159,753
Operating income			49,897				13,456				118,165				199,550
Other income (expense)			(4,739	)			1,797				(14,590	)			(788	)
Income before income taxes			45,158				15,253				103,575				198,762
Provision for income taxes			4,822				10,515				14,260				55,103
Net income		$	40,336			$	4,738			$	89,315			$	143,659
Basic earnings per share		$	0.31			$	0.04			$	0.68			$	1.10
Diluted earnings per share		$	0.30			$	0.04			$	0.67			$	1.09
Weighted average shares outstanding -
Basic			132,215				131,277				132,311				131,082
Diluted			133,225				131,732				133,562				131,799
Dividends declared per share		$	0.27			$	0.26			$	1.08			$	1.04

National Instruments
Condensed Consolidated Statements of Cash Flows
(in thousands)
		Years Ended December 31,
		2021			2020
		(unaudited)
Cash flow from operating activities:
Net income		$	89,315			$	143,659
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			99,402				87,064
Stock-based compensation			74,583				58,376
Disposal gain on sale of business/asset			-				(159,753	)
Loss from equity-method investees			5,719				2,942
Deferred income taxes			(15,796	)			7,771
Net change in operating assets and liabilities			(110,020	)			40,708
Net cash provided by operating activities			143,203				180,767
Cash flow from investing activities:
Acquisitions, net of cash received			(222,783	)			(334,981	)
Proceeds from sale of assets/business, net of cash divested			-				160,266
Capital expenditures			(40,975	)			(49,652	)
Capitalization of internally developed software			(1,464	)			(4,054	)
Additions to other intangibles			(2,751	)			(1,441	)
Acquisitions of equity-method and other investments			(15,753	)			(9,761	)
Purchases of short-term investments			-				(206,330	)
Sales and maturities of short-term investments			60,297				384,652
Net cash used by investing activities			(223,429	)			(61,301	)
Cash flow from financing activities:
Proceeds from term loan			-				170,000
Payments of term loan			(98,750	)			(71,250	)
Proceeds from revolving line of credit			300,000				20,000
Payments of revolving line of credit			-				(20,000	)
Debt issuance costs			(1,993	)			(1,893	)
Proceeds from issuance of common stock			32,518				31,947
Repurchase of common stock			(55,000	)			(48,713	)
Dividends paid			(143,113	)			(136,545	)
Net cash provided by (used by) financing activities			33,662				(56,454	)
Impact of changes in exchange rates on cash			(2,562	)			2,604
Net change in cash and cash equivalents			(49,126	)			65,616
Cash and cash equivalents at beginning of period			260,232				194,616
Cash and cash equivalents at end of period		$	211,106			$	260,232

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 costs, disposal gains on sale of business/assets and related charitable contributions, tax effects related to businesses held-for-sale, capitalization and amortization of internally developed software costs, and restructuring charges that were recorded in the line items indicated below (unaudited) (in thousands):

		Three Months Ended			Years Ended
		December 31,			December 31,
		2021			2020			2021			2020
Stock-based compensation
Cost of sales		$	1,092			$	979			$	4,580			$	3,766
Sales and marketing			6,284				5,462				25,233				22,288
Research and development			5,811				5,129				23,515				17,769
General and administrative			5,335				4,251				21,384				14,552
Provision for income taxes			(2,010	)			(445	)			(12,047	)			(8,705	)
Total		$	16,512			$	15,376			$	62,665			$	49,670
Amortization of acquisition-related intangibles and fair value adjustments
Net sales		$	352			$	1,961			$	2,324			$	3,260
Cost of sales			6,700				4,313				19,391				9,892
Sales and marketing			3,334				1,965				10,192				5,264
Research and development			320				9				320				94
General and administrative			-				846				-				846
Other expense (income)			531				124				2,007				487
Provision for income taxes			(1,626	)			(606	)			(4,071	)			(2,554	)
Total		$	9,611			$	8,612			$	30,163			$	17,289
Acquisition-related transaction and integration costs, restructuring charges, and other(1)(2)
Cost of sales		$	25			$	1,620			$	(25	)		$	1,626
Sales and marketing			1,687				23,309				7,759				32,079
Research and development			9,682				1,184				11,104				6,374
General and administrative (1)			865				8,685				8,254				21,279
Gain on sale of business/asset (2)			-				-				-				(159,753	)
Other expense (income)			-				191				4,322				589
Provision for income taxes			(2,708	)			(1,602	)			(6,837	)			32,364
Total		$	9,551			$	33,387			$	24,577			$	(65,442	)
(1): During the third quarter of 2020, we recognized $5 million of compensation expense related to the replacement of unvested options acquired from OptimalPlus. These amounts were accounted for as post-combination expense and will be recognized over the required service period
(2): During the first quarter of 2020, we recognized a gain of $160 million related to the divestiture of AWR, presented within "Gain on sale of business/assets".
(Capitalization) and amortization of internally developed software costs
Cost of sales		$	5,041			$	6,936			$	23,674			$	27,931
Research and development			(188	)			(1,248	)			(1,433	)			(4,043	)
Provision for income taxes			(1,085	)			(1,195	)			(4,877	)			(5,017	)
Total		$	3,768			$	4,493			$	17,364			$	18,871

National Instruments
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, unaudited)
		Three Months Ended			Years Ended
		December 31,			December 31,
		2021			2020			2021			2020
Reconciliation of Net sales to Non-GAAP Net sales
Net sales, as reported		$	420,641			$	367,838			$	1,469,681			$	1,286,671
Impact of acquisition related fair value adjustments			352				1,961				2,324				3,260
Non-GAAP net sales		$	420,993			$	369,799			$	1,472,005			$	1,289,931
Reconciliation of Gross Profit to Non-GAAP Gross Profit
Gross profit, as reported		$	297,045			$	258,642			$	1,048,718			$	915,550
Stock-based compensation			1,092				979				4,580				3,766
Amortization of acquisition-related intangibles and fair value adjustments			7,052				6,274				21,715				13,152
Acquisition transaction and integration costs, restructuring charges and other			25				1,620				(25	)			1,626
Amortization of internally developed software costs			5,041				6,936				23,674				27,931
Non-GAAP gross profit		$	310,255			$	274,451			$	1,098,662			$	962,025
Non-GAAP gross margin			74%				74%				75%				75%
Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
Operating expenses, as reported		$	247,148			$	245,186			$	930,553			$	875,753
Stock-based compensation			(17,430	)			(14,842	)			(70,132	)			(54,609	)
Amortization of acquisition-related intangibles and fair value adjustments			(3,654	)			(2,820	)			(10,512	)			(6,204	)
Acquisition transaction and integration costs, restructuring charges and other			(12,234	)			(33,178	)			(27,117	)			(59,732	)
Capitalization of internally developed software costs			188				1,248				1,433				4,043
Non-GAAP operating expenses		$	214,018			$	195,594			$	824,225			$	759,251
Reconciliation of Operating Income to Non-GAAP Operating Income
Operating income, as reported		$	49,897			$	13,456			$	118,165			$	199,550
Stock-based compensation			18,522				15,821				74,712				58,375
Amortization of acquisition-related intangibles and fair value adjustments			10,706				9,094				32,227				19,356
Acquisition transaction and integration costs, restructuring charges and other			12,259				34,798				27,092				61,358
Net amortization of internally developed software costs			4,853				5,688				22,241				23,888
Gain on sale of business/assets			-				-				-				(159,753	)
Non-GAAP operating income		$	96,237			$	78,857			$	274,437			$	202,774
Non-GAAP operating margin			23%				21%				19%				16%
Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes
Provision for income taxes, as reported(1)		$	4,822			$	10,515			$	14,260			$	55,103
Stock-based compensation			2,010				445				12,047				8,705
Amortization of acquisition-related intangibles and fair value adjustments			1,626				606				4,071				2,554
Acquisition transaction and integration costs, restructuring charges and other			2,708				1,328				6,837				4,122
Net amortization of internally developed software costs			1,085				1,195				4,877				5,017
Gain on sale of business/assets			-				274				-				(36,486	)
Non-GAAP provision for income taxes(1)		$	12,251			$	14,363			$	42,092			$	39,015
(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			Years Ended
		December 31,			December 31,
		2021			2020			2021			2020
Net income, as reported		$	40,336			$	4,738			$	89,315			$	143,659
Adjustments to reconcile net income to non-GAAP net income:
Stock-based compensation			18,522				15,821				74,712				58,375
Amortization of acquisition-related intangibles and fair value adjustments			11,237				9,218				34,234				19,843
Acquisition transaction and integration costs, restructuring charges and other			12,259				34,989				31,414				61,947
Net amortization of internally developed software costs			4,853				5,688				22,241				23,888
Gain on sale of business/asset			-				-				-				(159,753	)
Income tax effects and adjustments(1)			(7,429	)			(3,848	)			(27,832	)			16,088
Non-GAAP net income		$	79,778			$	66,606			$	224,084			$	164,047
Non-GAAP net margin			18.9%				18.0%				15.2%				12.7%
Diluted EPS, as reported		$	0.30			$	0.04			$	0.67			$	1.09
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS
Stock-based compensation			0.14				0.12				0.56				0.44
Amortization of acquisition-related intangibles and fair value adjustments			0.09				0.07				0.26				0.15
Acquisition transaction and integration costs, restructuring charges and other			0.09				0.27				0.23				0.47
Net amortization of internally developed software costs			0.04				0.04				0.17				0.18
Gain on sale of business/asset			-				-				-				(1.21	)
Income tax effects and adjustments(1)			(0.06	)			(0.03	)			(0.21	)			0.12
Non-GAAP diluted EPS		$	0.60			$	0.51			$	1.68			$	1.24
(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
Basic			132,215				131,277				132,311				131,082
Diluted			133,225				131,732				133,562				131,799

Reconciliation of GAAP to Non-GAAP Diluted EPS Guidance
(unaudited)
		Three Months Ended
		March 31, 2022
		Low			High
GAAP Diluted EPS, guidance		$	0.13			$	0.27
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS:
Stock-based compensation			0.15				0.15
Amortization of acquisition-related intangibles and fair value adjustments			0.10				0.10
Acquisition transaction and integration costs, restructuring charges and other			0.01				0.01
Net amortization of internally developed software costs			0.01				0.01
Income tax effects and adjustments(1)			(0.05	)			(0.05	)
Non-GAAP Diluted EPS, guidance		$	0.35			$	0.49
(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.