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National Instruments Corp. (NATI)
Q1 2010 Earnings Call
April 27, 2010 5:00 pm ET
Alec Davern - Chief Financial Officer
Dr. James Truchard - President, Chief Executive Officer and Co-Founder
David Hugley - General Counsel
John Graff - Vice President of Marketing & Investor Relations
Anthony LeGree - JPMorgan
Mark Douglas - Longbow Research
Rob Mason - Robert W Baird
Ajit Pai - Thomas Weisel Partners
Previous Statements by NATI
» National Instruments Corp. Q4 2009 Earnings Call Transcript
» National Instruments Q3 2009 Earnings Call Transcript
» National Instruments Corporation Q2 2009 Earnings Call Transcript
With us today are David Hugley, General Counsel; Alec Davern, CFO; Dr. James Truchard, President, CEO and Co-Founder; and John Graff, Vice President of Marketing and Investor Relations.
For opening remarks and introductions, I would now like to turn the call over to Mr. David Hugley; please go ahead.
Good afternoon. During the course of this conference call we shall make forward-looking statements regarding the future financial performance of the company, including statements regarding future revenue growth, gross margins, the strong economic recovery, future operating leverage, new products, and our revenue and earnings per share guidance.
We wish to caution you that such statements are just predictions and that actual events or results may differ materially. We refer you to the documents the company files regularly with the Securities and Exchange Commission, including the company's most recent quarterly report on Form 10-K, filed February, 17, 2010. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in our forward-looking statements.
With that, I will now turn it over to the Chief Executive Officer of National Instruments Corporation, Dr. James Truchard.
Dr. James Truchard
Thank you, David. Good afternoon and thank you for joining us. Our key points today are record first quarter orders with 25% year-over-year growth, strong growth of large orders and gross margins at the highest levels since the IPL in 1995.
This time last year we were experiencing one of the most challenging financial periods in the company’s history. I am pleased that 2010 began with an all-time record for orders in the first quarter, and our waitlist is the validation of the strength to our business model.
Throughout the downturn we stayed true to our long-term regime and we were able to sustain profitability while continuing to invest in strategic initiatives that keep us at the forefront of innovation. I continue to be very optimistic about our position in the industry and I believe these investments will allow us to take further advantage of the recovery as we continue through 2010.
In our call today, Alec Davern, our CFO, will review our financials. John Graff, our Vice President of Marketing, will discuss our business, and I will close with a few comments before we open up for your questions. Alec.
Good afternoon. Today we reported Q1 revenue of $191 million, which is an increase of 21% year-over-year, and a 5% sequential decrease from Q4. As discussed in our press release, the sequential decrease in revenue was exaggerated by a shipping error on March 31, which resulted in $5 million of shipments not meeting the cutoff time for revenue recognition in Q1.
The error occurred because certain product shipments which were processed throughout the day on March 31, were not transferred to the company’s freight carriers until two hours after the company’s revenue recognition cutoff time, due to a delay in completion of export documents. As a result, these shipments were not recorded as revenue in Q1 financial results. This is an embarrassing error and we are taking steps to ensure it’s not repeated. The related revenue and profit will be recorded in Q2.
Despite this timing issue, Q1 was a good quarter with orders up 25% year-over-year, inline with the mid point of our revenue guidance range for Q1, and up 1.5% over Q1 2008. So while we did not have a first quarter record for revenue in Q1, we did have a first quarter record for orders.
Net income for Q1 was $18.4 million, with GAAP fully diluted earnings per share of $0.23, matching our first quarter record the company set in Q1 2007. Non-GAAP net income was $22 million, with non-GAAP fully diluted earnings per share of $0.28, matching our first quarter record the company set in Q1 2008. The approximate impact of the March 31 shipping error on our reported earnings per share was approximately $0.05 per share. A reconciliation of our GAAP and non-GAAP results is included in our earnings press release.
Our business built momentum in Q1 and there are some clear positives to take away. First, we had record orders for the first quarter with 25% year-over-year growth; second, we continue to drive strong gross margins; and third, we generated $42 million in cash flow from operations, a new first quarter record.
From an orders point of view, our estimate control business saw a 50% year-over-year increase in Q1, while orders from our virtual instrumentation and graphical systems design products grew $24 year-over-year. After the very significant declines we saw in instrument control during the recession, instrument control orders made a strong recovery, and in Q1 we’re down only 15% over the two years since Q1 2008.
Traditionally our instrument control revenues have been highly correlated to the overall test and measurement industry, and the current trends indicate that the industry continued it’s strong recovery in Q1. Orders for our virtual instrumentation and graphical system design products continue to grow and are now back over Q1 2008 levels. During Q1 year-over-year auto growth in US dollars was 22% in Europe, 33% in Asia and 22% in the Americas.