NI Reports Record Third Quarter Revenue, up 17 Percent YOY

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At NI, we bring together 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.

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National Instruments
Condensed Consolidated Balance Sheets
(in thousands)
	September 30,			December 31,
		2022			2021
	(unaudited)
Assets
Cash and cash equivalents	$	149,002		$	211,106
Accounts receivable, net		380,792			341,275
Inventories, net		373,544			289,243
Prepaid expenses and other current assets		144,145			89,925
Total current assets		1,047,483			931,549
Property and equipment, net		254,127			253,668
Goodwill		593,148			575,992
Intangible assets, net		219,730			220,418
Operating lease right-of-use assets		59,906			58,641
Other long-term assets		71,140			74,717
Total assets	$	2,245,534		$	2,114,985

Liabilities and Stockholders' Equity
Accounts payable and accrued expenses	$	96,848		$	83,218
Accrued compensation		61,166			111,261
Deferred revenue - current		118,257			137,818
Operating lease liabilities - current		13,288			13,137
Other taxes payable		61,002			59,109
Debt, current		25,000			—
Other current liabilities		52,079			40,671
Total current liabilities		427,640			445,214
Deferred income taxes		13,725			14,249
Income tax payable - non-current		40,646			54,195
Deferred revenue - non-current		50,177			32,822
Operating lease liabilities - non-current		32,027			30,468
Debt - non-current		542,768			300,000
Other long-term liabilities		15,066			14,340
Total liabilities	$	1,122,049		$	891,288

Stockholders' equity:
Common stock		1,306			1,323
Additional paid-in capital		1,183,329			1,129,647
Retained earnings		(18,135	)		112,858
Accumulated other comprehensive loss		(43,015	)		(20,131	)
Total stockholders' equity		1,123,485			1,223,697
Total liabilities and stockholders' equity	$	2,245,534		$	2,114,985

National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data, unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2022			2021			2022			2021

Net sales:
Product	$	389,620		$	325,724		$	1,088,110		$	927,307
Software maintenance		38,308			41,438			120,589			121,733
Total net sales		427,928			367,162			1,208,699			1,049,040

Cost of sales:
Product		139,823			99,072			378,154			286,485
Software maintenance		3,879			3,643			12,249			10,882
Total cost of sales		143,702			102,715			390,403			297,367

Gross profit		284,226			264,447			818,296			751,673
		66.4%			72.0%			67.7%			71.7%
Operating expenses:
Sales and marketing		119,951			117,065			365,015			345,048
Research and development		82,861			82,165			250,610			243,685
General and administrative		34,617			31,037			104,569			94,672
Total operating expenses		237,429			230,267			720,194			683,405
Gain on sale of assets		33,636			—			33,636			—
Operating income		80,433			34,180			131,738			68,268
Other expense		(5,150	)		(1,820	)		(8,622	)		(9,851	)
Income before income taxes		75,283			32,360			123,116			58,417
Provision for income taxes		13,376			5,183			23,539			9,438
Net income	$	61,907		$	27,177		$	99,577		$	48,979

Basic earnings per share	$	0.47		$	0.20		$	0.75		$	0.37
Diluted earnings per share	$	0.47		$	0.20		$	0.75		$	0.37

Weighted average shares outstanding -
Basic		132,044			133,031			132,040			132,657
Diluted		132,581			133,686			133,001			133,829

Dividends declared per share	$	0.28		$	0.27		$	0.84		$	0.81


Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
	Nine Months Ended September 30,
		2022			2021

Cash flow from operating activities:
Net income	$	99,577		$	48,979
Adjustments to reconcile net income to net cash provided by operating activities:
Disposal gains on sale of assets		(33,636	)		—
Depreciation and amortization		68,828			73,418
Stock-based compensation		60,843			56,064
Loss from equity-method investees		(483	)		5,082
Deferred income taxes		928			(2,030	)
Net change in operating assets and liabilities		(204,987	)		(95,477	)
Net cash (used in) provided by operating activities		(8,930	)		86,036

Cash flow from investing activities:
Acquisitions, net of cash received		(72,802	)		(19,784	)
Capital expenditures		(39,193	)		(26,147	)
Proceeds from sale of assets		40,987			—
Capitalization of internally developed software		(388	)		(1,246	)
Additions to other intangibles		(3,165	)		(2,317	)
Acquisitions of equity-method investments		—			(15,753	)
Sales and maturities of short-term investments		—			59,714
Net cash used in investing activities		(74,561	)		(5,533	)

Cash flow from financing activities:
Proceeds from revolving loan facility		268,000			100,000
Payments on revolving loan facility		(498,000	)		—
Proceeds from term loan		500,000			—
Payments on term loan		—			(98,750	)
Debt issuance costs		(2,348	)		(1,993	)
Proceeds from issuance of common stock		25,444			25,438
Repurchase of common stock		(151,831	)		(25,000	)
Dividends paid		(111,161	)		(107,397	)
Net cash provided by (used in) financing activities		30,104			(107,702	)

Impact of changes in exchange rates on cash		(8,717	)		(2,336	)

Net change in cash and cash equivalents		(62,104	)		(29,535	)
Cash and cash equivalents at beginning of period		211,106			260,232
Cash and cash equivalents at end of period	$	149,002		$	230,697

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 and integration costs, capitalization and amortization of internally developed software costs, restructuring charges, gains on sale of assets, and other that were recorded in the line items indicated below (unaudited) (in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,

		2022			2021			2022			2021
Stock-based compensation
Cost of sales	$	1,300		$	1,183		$	3,775		$	3,487
Sales and marketing		7,148			6,332			21,439			18,949
Research and development		6,163			5,811			18,522			17,704
General and administrative		5,429			5,530			17,107			16,050
Provision for income taxes		(3,039	)		(2,798	)		(7,687	)		(10,036	)
Total	$	17,001		$	16,058		$	53,156		$	46,154

Amortization of acquisition-related intangibles and fair value adjustments
Net sales	$	371		$	421		$	1,114		$	1,971
Cost of sales		6,806			4,194			17,025			12,691
Sales and marketing		5,712			2,331			17,423			6,859
Research and development		—			—			(320	)		—
Other expense (income)		482			529			1,500			1,476
Provision for income taxes		(2,272	)		(917	)		(5,802	)		(2,870	)
Total	$	11,099		$	6,558		$	30,940		$	20,127

Acquisition transaction and integration costs, restructuring charges, and other
Net sales	$	(411	)	$	—		$	(411	)	$	—
Cost of sales		6,604			(7	)		8,548			(50	)
Sales and marketing		2,819			584			5,464			6,071
Research and development		453			386			1,555			1,422
General and administrative		1,461			850			4,479			7,388
Gain on sale of assets		(33,636	)		—			(33,636	)		—
Other expense (income)		(3,153	)		316			(5,285	)		4,322
Provision for income taxes		5,850			(238	)		4,494			(3,701	)
Total	$	(20,013	)	$	1,891		$	(14,792	)	$	15,452

(Capitalization) and amortization of internally developed software costs
Cost of sales	$	1,160		$	5,532		$	5,090		$	18,633
Research and development		(202	)		(525	)		(388	)		(1,246	)
Provision for income taxes		(216	)		(1,192	)		(1,059	)		(3,792	)
Total	$	742		$	3,815		$	3,643		$	13,595

National Instruments
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2022			2021			2022			2021

Reconciliation of Gross Profit to Non-GAAP Gross Profit
Gross profit, as reported	$	284,226		$	264,447		$	818,296		$	751,673
Stock-based compensation		1,300			1,183			3,775			3,487
Amortization of acquisition-related intangibles and fair value adjustments		7,177			4,615			18,139			14,662
Acquisition transaction and integration costs, restructuring charges and other		6,193			(7	)		8,137			(50	)
Amortization of internally developed software costs		1,160			5,532			5,090			18,633
Non-GAAP gross profit	$	300,056		$	275,770		$	853,437		$	788,405
Non-GAAP gross margin		70.1%			75.0%			70.6%			75.0%

Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
Operating expenses, as reported	$	237,429		$	230,267		$	720,194		$	683,405
Stock-based compensation		(18,740	)		(17,673	)		(57,068	)		(52,703	)
Amortization of acquisition-related intangibles and fair value adjustments		(5,712	)		(2,331	)		(17,103	)		(6,859	)
Acquisition transaction and integration costs, restructuring charges and other		(4,733	)		(1,820	)		(11,498	)		(14,881	)
Capitalization of internally developed software costs		202			525			388			1,246
Non-GAAP operating expenses	$	208,446		$	208,968		$	634,913		$	610,208

Reconciliation of Operating Income to Non-GAAP Operating Income ⁽¹⁾
Operating income, as reported	$	80,433		$	34,180		$	131,738		$	68,268
Stock-based compensation		20,040			18,856			60,843			56,190
Amortization of acquisition-related intangibles and fair value adjustments		12,889			6,946			35,242			21,521
Acquisition transaction and integration costs, restructuring charges and other		10,926			1,813			19,635			14,831
Net amortization of internally developed software costs		958			5,007			4,702			17,387
Gain on sale of assets		(33,636	)		—			(33,636	)		—
Non-GAAP operating income	$	91,610		$	66,802		$	218,524		$	178,197
Non-GAAP operating margin		21.4%			18.2%			18.1%			17.0%

Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes ⁽²⁾
Provision for income taxes, as reported	$	13,376		$	5,183		$	23,539		$	9,438
Stock-based compensation		3,039			2,798			7,687			10,036
Amortization of acquisition-related intangibles and fair value adjustments		2,272			917			5,802			2,870
Acquisition transaction and integration costs, restructuring charges and other		1,967			238			3,323			3,701
Net amortization of internally developed software costs		216			1,192			1,059			3,792
Gain on sale of assets		(7,817	)		—			(7,817	)		—
Non-GAAP provision for income taxes ⁽²⁾	$	13,053		$	10,328		$	33,593		$	29,837
(1): During the third quarter of 2022, the company recognized a gain of $34 million related to the sale of land and office buildings, presented within "Gain on sale of assets".
(2): 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						Nine Months Ended
	September 30,						September 30,
		2022			2021			2022			2021

Net income, as reported	$	61,907		$	27,177		$	99,577		$	48,979
Adjustments to reconcile net income to non-GAAP net income:
Stock-based compensation		20,040			18,856			60,843			56,190
Amortization of acquisition-related intangibles and fair value adjustments		13,371			7,475			36,742			22,997
Acquisition transaction and integration costs, restructuring charges and other		7,773			2,129			14,350			19,153
Net amortization of internally developed software costs		958			5,007			4,702			17,387
Gain on sale of assets ⁽¹⁾		(33,636	)		—			(33,636	)		—
Income tax effects and adjustments ⁽²⁾		323			(5,145	)		(10,054	)		(20,399	)
Non-GAAP net income	$	70,736		$	55,499		$	172,524		$	144,307
Non-GAAP net margin		16.5%			15.1%			14.3%			13.7%

Diluted EPS, as reported	$	0.47		$	0.20		$	0.75		$	0.37
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS
Stock-based compensation		0.15			0.14			0.46			0.42
Amortization of acquisition-related intangibles and fair value adjustments		0.10			0.06			0.28			0.17
Acquisition transaction and integration costs, restructuring charges and other		0.05			0.02			0.11			0.14
Net amortization of internally developed software costs		0.01			0.04			0.03			0.13
Gain on sale of assets ⁽¹⁾		(0.25	)		—			(0.25	)		—
Income tax effects and adjustments ⁽²⁾		—			(0.04	)		(0.08	)		(0.15	)
Non-GAAP diluted EPS	$	0.53		$	0.42		$	1.30		$	1.08
(1): During the third quarter of 2022, the company recognized a gain of $34 million related to the sale of land and office buildings, presented within "Gain on sale of assets".
(2): 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 - Diluted		132,581			133,686			133,001			133,829

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS Guidance
(unaudited)
	Three Months Ended
	December 31, 2022

	Low			High
GAAP Diluted EPS, guidance	$	0.22		$	0.36
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 ⁽¹⁾		0.13			0.13
Income tax effects and adjustments ⁽²⁾		(0.06	)		(0.06	)
Non-GAAP Diluted EPS, guidance	$	0.54		$	0.68
(1): Includes $10 million of pre-tax charitable contribution using a portion of the proceeds received from real estate sales completed in the third quarter of 2022.
(2): 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.

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