National Instruments reports record Q2 revenue and operating income

For the first half of 2010, the company reported a 30% percent increase in revenue.

Rick Nelson, Editor-in-Chief -- EDN, July 28, 2010

National Instruments reported quarterly revenue for Q2 2010 of $212 million, representing a 39% year-over-year increase and an 11% percent sequential increase. For the first half of 2010, the company reported a 30% percent increase in revenue and a 15% percent increase in non-GAAP operating expenses, compared to the first half of 2009. GAAP operating expenses grew by 14% in the first half of 2010, compared to the first half of 2009. Growing non-GAAP expenses at half the rate of revenue delivers on the goal expressed by the company at the 2009 NIWeek Investor Conference.

Net income for Q2 2010 was $24.6 million, with GAAP fully diluted earnings per share (EPS) of $0.31. Non-GAAP net income was $28.3 million, with non-GAAP fully diluted EPS of $0.36. Operating income set a record for a second quarter, and operating margins improved significantly over last year. Included in both GAAP and non-GAAP earnings for Q2 is a net loss on foreign exchange of $2.2 million, or $0.02 per share, as a result of the dramatic weakening of European currencies in May and June. The company had not anticipated this loss when giving guidance in April. The company's non-GAAP results exclude the impact of both stock-based compensation and the amortization of acquisition-related intangibles. Reconciliations of the company's GAAP and non-GAAP results are included as part of this news release.

In Q2, GAAP gross margin increased 3.6 percentage points year-over-year to 77.0%. Non-GAAP gross margin increased by 3.4 percentage points year-over-year to 77.6%.

"While the economy remains uncertain, our outstanding performance in the first half of the year and our strong Q3 guidance give us confidence that we will be able to deliver record annual revenue and record annual profitability in 2010," said Dr. James Truchard, co-founder, president, and CEO. "We plan to maintain a disciplined approach to expense management as we increase our investments to drive long-term profitable growth through strategic R&D and sales initiatives."

NI virtual instrumentation and graphical system design product sales were up 38% year-over-year. NI instrument control product sales were up 54% year-over-year but remain 17% below Q2 2008 levels. Product revenue was $195 million, up 39% from Q2 2009, and software maintenance revenue was $17 million, up 37% year-over-year. Geographically, revenue in U.S. dollar terms for Q2 2010 compared to Q2 2009 was up 32% percent in the Americas, up 28% in Europe, and 66% in Asia. In local currency terms, revenue was up 19% in Europe and up 52% in Asia.

As of June 30, NI had a record $316 million in net cash and short-term investments, up $21 million from March 31, 2010. During Q2 2010, the company paid $10 million in dividends. National Instruments announced that its board of directors declared a dividend of $0.13 per share on its common stock payable on Aug. 30, 2010, to shareholders of record on Aug. 9, 2010.

"At our 2009 NIWeek Investor Conference we set the goal of increasing expenses at 50% of revenue growth, until we returned record revenue," said Alex Davern, CFO. "Given that we are back to record revenue and profitability, we will be presenting a more balanced investment plan at our investor conference next week.  Going forward we will be increasing our strategic investments and plan to increase expenses at a rate closer to that of revenue growth, while continuing to drive towards our long-term operating profit goal."