National Instruments Corporation (
Q3 2011 Earnings Call
October 26, 2011 5:00 PM ET
David Hugley – Vice President, General Counsel and Secretary
Alex Davern – Chief Operating Officer
Dr. James Truchard – President, CEO and Co-Founder
Pete Zogas – Senior Vice President, Sales and Marketing
Anthony Luscri – JPMorgan
William Stein – Credit Suisse
Rob Mason – Robert W. Baird
Mac Muirhead – Longbow Research
Previous Statements by NATI
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Good day, everyone. And welcome to the National Instruments Third 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 Pete Zogas, Senior Vice President of Sales and Marketing.
For opening remarks I would like to turn the call over to Mr. David Hugley, Vice President, Corporate Counsel and Secretary. Please go ahead, sir.
Good afternoon. During the course of this conference call we should make forward-looking statements including statements regarding future revenue growth opportunities and our guidance for Q4 revenue operating expense and earnings per share, our potential product releases 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 July 29, 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 of National Instruments Corporation, Dr. James Truchard.
Thank you, David. Good afternoon and thank you for joining us. Our key points today for the third quarter are, record quarterly revenue, record revenue for our CompactRIO and TXI products and the successful execution of our 2011 investment plan.
I am extremely pleased to report continued strong revenue growth and an all-time revenue record in Q3. We believe our ability to deliver record revenue despite the rapid decline in the global purchasing managers index in Q3 is a validation of the strength of our business model and our ability to execute.
In addition we’ve made significant progress on growing our large orders, demonstrating that the investment decision to grow system level businesses is paying off. I believe our strategic investment in innovation and customer adoption are key to our future growth and I continue to be optimistic about our position in the industry.
In our call today, Alex Davern, our Chief Operating Officer, will review our results. Pete Zogas, our Senior Vice President of Sales and Marketing, will discuss our business and I will close with a few comments before we open up for your questions. Alex?
Good afternoon. Q3 was a very successful quarter and there is some clear positives to take away. First we had record revenue with very strong year-over-year growth in orders over $20,000. Second, we have essentially concluded our 2011 investment plan. And third, for the year-to-date we have successfully kept our non-GAAP revenue and expense growth in balance growing revenue 22% and expenses 23% year-to-date.
Revenue for Q3 was $255 million, up 16% year-over-year and non-GAAP revenue for Q3 was $271 million, up 23% year-over-year. As described in our press release, for Q3 we have two adjustments between GAAP and non-GAAP revenue. The first is for $3 million and relates to the purchase accounting for deferred revenue for our AWR acquisition. This adjustment was included in the guidance we gave for Q3 and will continue for the next several quarters.
The second adjustment is a $13 million accrual which we have taken in Q3 related to our GSA contract with the U.S. Government. And I terminated this contract in May and this adjustment covers the expected costs to resolve a contract disagreement with the GSA. This dispute was discussed in our Form 10-Qs filed in both April and July.
From our product point of view, revenue for our traditional and control products, which now only represent 6% of revenue, was up 1% year-over-year in Q3 while revenue for all of our other products was up 24% year-over-year. Backlog increased slightly in Q3 compared to Q2 and our deferred revenue balance increased by $3.2 million sequentially.
Now turning to expenses. As we discussed on our last call, our decision to make significant investments in 2011, coupled with our strategy of recruiting the majority of engineers as they graduate from university in June, July and August has resulted in significant spike in our year-over-year growth of our total expenses in Q3. So in line with our investment plan, our non-GAAP operating expenses were up 30% year-over-year in Q3.
Overall head count was 6,130 up approximately 650 people or 12% since March and up 18% year-over-year. We believe these investments give us the ability to fully leverage the strategic advances we’ve made in our lab PXI data acquisition and CompactRIO platforms and are necessary to drive our long term growth.
When we look at the results for the broader time scale of the first nine months of the year, you can see the discipline that we have exercised this year in matching expense growth to revenue growth. Specifically for the first nine months of 2011, non-GAAP revenue is up 22% while non-GAAP operating expenses are up by 23%.