National Instruments Corporation (NATI)

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National Instruments Corporation (NATI)

Preliminary Q4 2011 Results Call

January 03, 2012 5:00 pm ET


David Hugley, Vice President, General Counsel, and Secretary

Dr. James Truchard, President, CEO, and Cofounder

Alex Davern, CFO, COO, and Executive Vice President


Mark Douglass – Longbow Research

Anthony Luscri – JPMorgan

William Stein – Credit Suisse First Boston



Good day everyone and welcome to the National Instruments’ Conference Call. Today’s call is being recorded. On our call today will be David Hugley, General Counsel and Secretary; Alex Davern, Chief Operating Officer; and Dr. James Truchard, Chairman and CEO.

I would now like to turn the conference over to David Hugely. Please go ahead sir.

David Hugley

Good afternoon. In this conference call, we should make forward-looking statements regarding the future financial performance of the company, including statements regarding the following: our preliminary revenue, preliminary earnings per share, preliminary operating expenses, gaining market share and expected investments in our business.

We wish to caution you that such statements are just predictions and 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 Annual Report on Form 10-K for the year ended December 31, 2010 and our quarterly report on Form 10-Q filed October 27, 2011. 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 Operating Officer of National Instruments Corporation, Alex Davern.

Alex Davern

Good afternoon and thank you for joining us today at short notice. Today, I’ll provide a brief update on our business and then Dr. Truchard will close with some comments on our long-term strategy.

Today National Instruments released its preliminary results for the fourth quarter. Revenues are now expected to be 1% below the low end of the company’s guidance given on October 26. We now expect fourth quarter revenue to be approximately $277 million, up 11% year-over-year with non-GAAP revenue expected to be approximately $279 million.

As a result, we currently expect the GAAP fully diluted earnings per share will be in the range of $0.19 to $0.20 per share for Q4 with non-GAAP fully diluted earnings per share expected to be in the range of $0.26 to $0.27 per share.

Now, going into a little more detail on our preliminary revenue, while the company’s year-over-year order growth through our conference call on October 26 was in line with the midpoint of our original expectations, we did see a subsequent drop in the rate of year-over-year order growth.

Sequentially, the company saw the greatest reduction in year-over-year revenue growth in Europe, where revenue growth in U.S. dollars dropped from 25% year-over-year in Q3 to 3% in Q4. In Asia and in the Americas, year-over-year organic revenue growth in Q4 was approximately 10%. Excluding acquisitions, year-over-year revenue growth in the Americas was approximately 20% in Q4.

NI graphical system design products, which represent approximately 95% of the company’s product portfolio, had approximately 14% year-over-year revenue growth in Q4. Sales of NI instrument control products, which represented approximately 5% of NI revenue in the quarter, were down approximately 15% year-over-year in Q4, after being flat year-over-year in Q3.

Given the weak Q4 PMI data especially in Europe and the approximately 15% year-over-year decline we saw in our instrument control revenue, we believe that the overall test and measurement industry weaken considerably in Q4. We believe that that our ability to continue to grow our business despite the weakness of the global PMI, so that we’re finding new business and taking market share. From an order point of view, in Q4 orders over $20,000 grew approximately 10% year-over-year, while orders under $20,000 grew in the low single digits.

For Q4 2011, the company now expects total non-GAAP operating expenses to be approximately $172 million, plus or minus $2 million. This equates to a year-over-year increase of approximately 20%, down from the 30% year-over-year increase the company saw in Q3 2011. Due to the lower than expected profit in Q4, the company currently expects its non-GAAP effective tax rate to be approximately 26% in Q4. With $336 million in cash and cash equivalents at the end of September, the company’s balance sheet remains very strong.

Given the uncertain outlook for the industrial economy, the company is moderating its investment plans for 2012. Going forward, we will be both strategic and prudent in our business planning, managing our expenses carefully while keeping our eyes firmly fixed on long-term growth. The company will provide final results and detailed guidance for Q1 2012 in its Q4 conference call on January 31.

Also, I will be presenting in New York at the Needham Growth Stock Conference on Wednesday of next week and I look forward to seeing you there.

With that, I’ll hand it over to Dr. Truchard.

James Truchard

Thank you, Alex. Despite the slowdown in the industrial economy, our continued growth this quarter has been driven by the success of our long-term investments, especially in the area of modular instruments, PXI, LabVIEW, CompactRIO, and our Academic products.

We are especially pleased with our very strong sales of some of our significant new products we introduced in August at NI Week. We believe our expanded sales force helped drive business in new application areas, in particular I’d like to highlight the strong growth we have seen in areas like mobile devices, energy, life sciences where we have focused dedicated resources.

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