National Instruments Corporation (NATI)

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National Instruments Corp. (NATI)

Q4 2011 Earnings Call

January 31, 2012 05:00 p.m. ET


David Hugley – Vice President, Corporate Counsel and Secretary

Dr. James Truchard – President, CEO, and Cofounder

Alex Davern – CFO, COO, and Executive Vice President

Eric Starkloff – Vice President, Marketing


Mark Douglass – Longbow Research

Anthony Luscri – JPMorgan

Ajit Pai – Stifel Nicolaus & Company

Rick Eastman – Robert W. Baird



Good day everyone and welcome to the National Instruments’ Fourth Quarter 2011 Earnings Conference Call. Today’s call is being recorded. You may refer to your press packet for the replay dial in number and pass code. With us today are David Hugley, Vice President, General Counsel and Secretary; Alex Davern, Chief Operating Officer; Dr. James Truchard, President, CEO and Co-Founder, and Eric Starkloff, Vice President of Marketing.

For opening remarks I would now like to turn the call over to David Hugley, Vice President, Corporate Counsel and Secretary. Please go ahead sir.

David Hugley

Good afternoon. During the course of this conference call, we shall make forward-looking statements including statements regarding future revenue growth opportunities, guidance for our Q1 revenue and earnings per share and success in large accounts. 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 annual report on Form 10-K filed February 18, 2011 and our most recent 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 Executive Officer National Instruments Corporation, Dr. James Truchard.

James Truchard

Thank you David. Good afternoon and thank you for joining us. Our key points for 2011 are, record annual revenue of $1 billion, record non-GAAP annual profits, and record annual revenue for LabView, PXI, and CompactRIO products.

Despite recent economic challenges we executed well this quarter as we set a new record for quarterly and annual revenue and past the $1 billion annual revenue mark for the first time in our company history.

In 2011 we stayed through to our long term vision, improved our capacity to deliver new technologies to our customers and balance our long term investments with strong annual revenue growth. Despite the slowing global economy I continue to be optimistic about our ability to stay at the forefront of innovation and drive long term growth.

In our call today, Alex Davern our Chief Operation Officer will review our results. Eric Starkloff our Vice President of Marketing will discuss our business and I will close with a few comments before we open up for your questions. Alex?

Alex Davern

Good afternoon. Today before I start with the quarterly numbers I’d just like to take a moment to celebrate 2011 as the year that NI crossed $1 billion mark in revenue. Very few companies ever get to this point and we are proud of the hard work of all our employees past and present, which has allowed us to not only pass this milestone, but to do it in a way that positions us for continued sustained growth. Now, back to numbers.

Our revenue for Q4 was a new quarterly record at $278 million, up 11% year-over-year. Non-GAAP revenue was $280 million, up $30 million or 12% year-over-year. Acquisitions contributed $11 million of non-GAAP revenue in the quarter, and our organic revenue growth rate was 8% year-over-year.

The new quarter deferred revenue was up by $7 million. Today we also reported a new annual revenue record with non-GAAP revenue for 2011 of $1,042 million up, $169 million or 19% year-over-year. Acquisitions contributed non-GAAP revenue of $22 million for the year, and our year-over-year organic revenue growth rate was 17%.

The strong organic revenue growth is all the more impressive as it comes on top of a 29% year-over-year organic revenue growth we generated in the recover year of 2010. Deferred revenue was up $18 million for the full year. Non-GAAP gross margin in Q4 was 77% flat for Q3, from a year-over-year perspective non-GAAP gross margin was down 1% due to a drop in the proportion of revenue coming from Europe and a reduction in our inventory days during the quarter.

For the full year our non-GAAP gross margin was a new post IPO high at 77.7%. This is a real tribute to the focused investments we have made in sustainable differentiation. Total non-GAAP operating expenses were $171 million up 20% year-over-year in Q4. As we adjusted to lower unexpected revenues, our year-over-year growth in non-GAAP operating expenses moderated from 30% in Q3 to 20% in Q4.

For the full year non-GAAP operating income also set a new record at $164 million up 9% year-over-year. This represents the non GAAP operating margin at 16% down from 17% in 2010. While our investments in 2011 have put some pressure on short term margins, we feel confident that we have positioned us well for long term growth.

Net income for Q4 was $24.3 million with fully diluted earnings per share of $0.20 and non-GAAP net income was $32.5 million with non-GAAP fully diluted earnings per share of $0.27. Our reconciliation of our GAAP and non GAAP results is included in our earnings press release.

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