NATI National Instruments Corporation

Company to host virtual investor conference August 4

Q2 2020 Summary

• Revenue of $301 million, down 10 percent year over year and down 8 percent year over year on an organic basis
• GAAP gross margin of 71 percent
• Non-GAAP gross margin of 74 percent
• Fully diluted GAAP EPS of $0.08 and fully diluted non-GAAP EPS of $0.26
• GAAP net income of $11 million and non-GAAP net income of $34 million
• EBITDA of $33 million for second quarter
• Cash and short-term investments of $608 million as of June 30, 2020, a significant portion of which was used to fund the OptimalPlus acquisition on July 2, 2020

H1 2020 Summary

• Revenue of $611 million, down 5 percent, and down 3 percent on an organic basis, as compared to the first six months of 2019
• GAAP net income of $144 million, which includes $123 million gain, net of tax, related to AWR divestment
• Non-GAAP net income of $68 million

National Instruments (Nasdaq: NATI) today announced Q2 2020 revenue of $301 million, down 10 percent year over year and down 3 percent sequentially. Organic revenue, which we define as GAAP revenue excluding the impact of acquisitions and divestitures completed within the past twelve months, declined 8 percent year over year.

In Q2 2020 the value of the company's organic orders, which we define as the value of the company's orders excluding the impact of acquisitions and divestitures noted above, was down 6 percent year over year; organic orders over $20,000 were up 4 percent year over year; and organic orders under $20,000 were down 21 percent year over year. For Q2, on an organic order basis, the Americas region had year over year order growth of 1 percent, EMEA orders were down 23 percent, and in APAC orders were flat during the quarter. We previously included order value and net sales attributable to our operations in India within the EMEA region. In the second quarter of 2020, we began including these amounts within the APAC geographic region, to reflect recent changes within our organizational structure. India represents approximately 2 percent of our total orders.

Geographic revenue in U.S. dollar terms for Q2 2020 compared with Q2 2019 was down 6 percent in the Americas, down 7 percent in APAC and down 19 percent in EMEA. Excluding the impact of foreign currency exchange, revenue was down 5 percent in the Americas, down 4 percent in APAC and down 17 percent in EMEA. Historical revenue from these three regions can be found on NI’s investor website at www.ni.com/nati.

In Q2, GAAP gross margin was 71 percent and non-GAAP gross margin was 74 percent. Total GAAP operating expenses were $199 million, down 9 percent year over year. Total non-GAAP operating expenses were down 11 percent year over year at $181 million. GAAP operating margin was 5 percent in Q2, with GAAP operating income of $16 million. Non-GAAP operating margin was 14 percent in Q2, with non-GAAP operating income of $44 million.

GAAP net income for Q2 was $11 million, with fully diluted earnings per share (EPS) of $0.08, and non-GAAP net income was $34 million, with non-GAAP fully diluted EPS of $0.26, at the midpoint of our guidance. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $33 million for Q2.

For the first half of 2020, revenue was $611 million, down 5 percent year over year and on an organic basis, revenue was down 3 percent year over year. The value of the company's first half 2020 total organic orders was also down 3 percent year over year.

“I am proud of the ability of our employees to adapt as the COVID-19 pandemic continues globally. We delivered results within expectations shared June 9, 2020 and our operational continuity ensured we were able to meet customer demand,” said Eric Starkloff, NI CEO. “The core strengths of NI are clear — our broad customer base, diversity of business, and the value our customers see in our software-connected systems. I believe we are in a stronger position strategically as compared to past industrial recessions with a focus on the parts of the market where our customers continue to invest.”

“Although economic uncertainty remains, I am confident in our strategy and ability to maintain stability in the short-term while staying focused on our long-term growth ambitions,” said Karen Rapp, NI CFO. “We will continue to be diligent in managing expenses through the second half of 2020. We believe our strong balance sheet and cash position provides us the capability to keep our capital allocation priorities unchanged as we stay committed to shareholder value."

As of June 30, 2020, NI had $608 million in cash and short-term investments. During the second quarter of 2020, NI amended and restated its credit agreement to provide for an initial credit facility of $145 million, with the potential to request, subject to the terms and conditions of the credit agreement, including obtaining commitments from existing lenders or new lenders, additional term loan or revolving commitments of up to $105 million in the aggregate. During the second quarter, NI paid $34 million in dividends and repurchased approximately 500,000 shares of our common stock at an average price of $34.08 per share. The NI Board of Directors approved a quarterly dividend of $0.26 per share payable on September 8, 2020, to stockholders of record on August 17, 2020.

The company’s non-GAAP results exclude, as applicable, the impact of purchase accounting adjustments, stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction and integration costs, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, restructuring charges, tax reform charges, disposal gains on buildings and related charitable contributions, tax effects related to businesses held for sale, gain on sale of businesses, and capitalization and amortization of internally developed software costs. Reconciliations of the company’s GAAP and non-GAAP results are included as part of this news release.

Guidance

NI currently expects Q3 GAAP revenue to be in the range of $283 million to $323 million and Q3 non-GAAP revenue, which adjusts for the impact of purchase price accounting related to OptimalPlus, to be in the range of $285 million to $325 million. The company currently expects that GAAP fully diluted EPS will be in the range of -$0.09 to $0.05 for Q3, with non-GAAP fully diluted EPS expected to be in the range of $0.14 to $0.28.

Virtual NATI Investor Conference

The NI leadership team will host a “virtual” investor conference on Tuesday, August 4 at 9:00 a.m. Attendees will hear more about our long-term strategy for growth, value of our software-connected systems, industry focus, and our financial model. To register, please visit ni.com/nati.

Conference Call Information

Interested parties can listen to the Q2 2020 earnings conference call with NI management today, July 30, at 4:00 p.m. CT at ni.com/call or by dialing 855-212-2361 and entering confirmation code 3473967 ten minutes prior to the call start time. Replay information is available by calling (855) 859-2056 and entering confirmation code 3473967, shortly after the call through August 2 at 10:00 p.m. CT or by visiting the company’s website at ni.com/call.

Non-GAAP Presentation

In addition to disclosing results determined in accordance with GAAP, NI discloses certain non-GAAP operating results and non-GAAP information that exclude certain charges. In this news release, the company has presented its revenue, gross profit, gross margin, operating expenses, operating income, operating margin, income before income taxes, provision for income taxes, net income and basic and fully diluted EPS for the three and six months ended June 30, 2020 and 2019, on a GAAP and non-GAAP basis. NI is also providing guidance on its non-GAAP fully diluted EPS.

When presenting non-GAAP information, the company includes a reconciliation of the non-GAAP results to the GAAP results. Management believes that including the non-GAAP results assists investors in assessing the company’s operational performance and its performance relative to its competitors. The company presents these non-GAAP results as a complement to results provided in accordance with GAAP, and these results should not be regarded as a substitute for GAAP. Management uses these non-GAAP measures to manage and assess the profitability and performance of its business and does not consider purchase accounting adjustments, stock-based compensation expense, amortization of acquisition-related intangibles, acquisition-related transaction and integration costs, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, restructuring charges, tax reform charges, disposal gains on buildings and related charitable contributions, tax effects related to businesses held for sale, gain on sale of businesses, and capitalization and amortization of internally developed software costs in managing its operations. Specifically, management uses non-GAAP measures to plan and forecast future periods; to establish operational goals; to compare with its business plan and individual operating budgets; to measure management performance for the purposes of executive compensation, including payments to be made under bonus plans; to assist the public in measuring the company’s performance relative to the company’s long-term public performance goals; to allocate resources; and, relative to the company’s historical financial performance, to enable comparability between periods. Management also considers such non-GAAP results to be an important supplemental measure of its performance.

This news release discloses the company’s EBITDA for the three and six months ended June 30, 2020 and 2019. The company believes that including the EBITDA results assists investors in assessing the company’s operational performance relative to its competitors. A reconciliation of EBITDA to GAAP net income is included with this news release. This news release also discloses the year-over-year change in the company's organic revenue for the three and six months ended June 30, 2020. The company believes that including its year-over-year change in organic revenue assists investors in assessing the company's operational performance. A reconciliation of its year-over-year change in organic revenue to its year-over-year change in GAAP revenue is included with this news release.

Forward-Looking Statements

This release contains “forward-looking statements” including statements regarding compared to the 2009 economic downturn, I believe we are in a stronger position strategically as compared to past industrial recessions with a focus on the parts of the market where our customers continue to invest; although economic uncertainty remains, I am confident in our strategy and ability to maintain stability in the short-term while staying focused on our long-term growth ambitions; we will continue to be diligent in managing expenses through the second half of 2020; we believe our strong balance sheet and cash position provides us the capability to keep our capital allocation priorities unchanged as we stay committed to shareholder value; expecting Q3 GAAP revenue to be in the range of $283 million to $323 million, expecting Q3 non-GAAP revenue to be in the range of $285 million to $325 million, and expecting that GAAP fully diluted EPS will be in the range of -$0.09 to $0.05 for Q3, with non-GAAP fully diluted EPS expected to be in the range of $0.14 to $0.28; and guidance regarding Q3 organic (non-GAAP) revenue. These statements are subject to a number of risks and uncertainties, including risks and uncertainties related to the COVID-19 virus and further economic and market disruptions resulting from COVID-19; further adverse changes or fluctuations in the global economy; further adverse fluctuations in our industry; foreign exchange fluctuations; changes in the current global trade regulatory environment; fluctuations in customer demands and markets; fluctuations in demand for NI products including orders from NI’s large customers; component shortages; delays in the release of new products; NI’s ability to effectively manage its operating expenses; manufacturing inefficiencies and the level of capacity utilization; the impact of any recent or future acquisitions or divestitures by NI (including the ability to successfully operate or integrate the acquired company’s business into NI, the ability to retain and integrate the acquired company’s employees into NI, and the ability to realize the expected benefits of the acquisition); expense overruns; and adverse effects of price changes or effective tax rates. Actual results may differ materially from the expected results. The company directs readers to its Form 10-K for the year ended Dec. 31, 2019, its Form 10-Q for the quarter ended March 31, 2020 and the other documents it files with the SEC for other risks associated with the company’s future performance. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in our forward-looking statements.

All information in this release is as of the date above. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

About NI

At NI, we bring together the 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. (NATI-F)

LabVIEW, National Instruments, NI and ni.com are trademarks of National Instruments. Other product and company names listed are trademarks or trade names of their respective companies.

 

National Instruments

Condensed Consolidated Balance Sheets

(in thousands)

 

 

June 30,

 

 

December 31,

 

 

2020

 

 

2019

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

$

471,205

 

$

194,616

 

Short-term investments

 

137,104

 

 

237,983

 

Accounts receivable, net

 

211,766

 

 

248,872

 

Inventories, net

 

209,928

 

 

200,410

 

Prepaid expenses and other current assets

 

65,817

 

 

65,477

 

Total current assets

 

1,095,820

 

 

947,358

 

 

 

 

 

 

Property and equipment, net

 

247,548

 

 

243,717

 

Goodwill

 

255,153

 

 

262,242

 

Intangible assets, net

 

68,975

 

 

84,083

 

Operating lease right-of-use assets

 

63,895

 

 

70,407

 

Restricted cash

 

70,000

 

 

—

 

Other long-term assets

 

48,424

 

 

44,082

 

Total assets

$

1,849,815

 

$

1,651,889

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and accrued expenses

$

53,247

 

$

52,192

 

Accrued compensation

 

44,431

 

 

47,732

 

Deferred revenue - current

 

113,785

 

 

131,445

 

Operating lease liabilities - current

 

13,583

 

 

13,431

 

Other taxes payable

 

39,477

 

 

40,607

 

Debt, current

 

3,500

 

 

—

 

Other current liabilities

 

66,818

 

 

20,716

 

Total current liabilities

 

334,841

 

 

306,123

 

 

 

 

 

 

Deferred income taxes

 

16,258

 

 

14,065

 

Liability for uncertain tax positions

 

6,808

 

 

6,652

 

Income tax payable - non-current

 

61,628

 

 

69,151

 

Deferred revenue - non-current

 

32,468

 

 

33,480

 

Operating lease liabilities - non-current

 

34,655

 

 

40,650

 

Debt, noncurrent

 

85,020

 

 

—

 

Other long-term liabilities

 

8,498

 

 

5,418

 

Total liabilities

$

580,176

 

$

475,539

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock

 

1,314

 

 

1,305

 

Additional paid-in capital

 

993,058

 

 

953,578

 

Retained earnings

 

299,132

 

 

242,537

 

Accumulated other comprehensive loss

 

(23,865

)

 

(21,070

)

Total stockholders' equity

 

1,269,639

 

 

1,176,350

 

Total liabilities and stockholders' equity

$

1,849,815

 

$

1,651,889

 

 

National Instruments

Condensed Consolidated Statements of Income

(in thousands, except per share data, unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

Product

$

266,261

 

$

299,798

 

$

540,239

 

$

577,500

 

Software maintenance

 

35,068

 

 

34,433

 

 

70,470

 

 

67,805

 

Total net sales

 

301,329

 

 

334,231

 

 

610,709

 

 

645,305

 

 

 

 

 

 

 

 

 

 

Cost of sales:

 

 

 

 

 

 

 

 

Product

 

83,795

 

 

81,741

 

 

165,866

 

 

155,929

 

Software maintenance

 

2,106

 

 

2,025

 

 

3,796

 

 

3,912

 

Total cost of sales

 

85,901

 

 

83,766

 

 

169,662

 

 

159,841

 

 

 

 

 

 

 

 

 

 

Gross profit

 

215,428

 

 

250,465

 

 

441,047

 

 

485,464

 

 

 

71.5%

 

74.9%

 

72.2%

 

75.2%

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

105,419

 

 

120,868

 

 

221,165

 

 

238,419

 

Research and development

 

64,225

 

 

68,257

 

 

135,846

 

 

134,423

 

General and administrative

 

29,369

 

 

29,044

 

 

55,549

 

 

56,927

 

Total operating expenses

 

199,013

 

 

218,169

 

 

412,560

 

 

429,769

 

Gain on sale of business

 

—

 

 

—

 

 

159,753

 

 

—

 

Operating income

 

16,415

 

 

32,296

 

 

188,240

 

 

55,695

 

Other income (expense):

 

(1,143

)

 

555

 

 

(583

)

 

3,131

 

Income before income taxes

 

15,272

 

 

32,851

 

 

187,657

 

 

58,826

 

Provision for income taxes

 

4,383

 

 

4,159

 

 

44,113

 

 

6,914

 

Net income

$

10,889

 

$

28,692

 

$

143,544

 

$

51,912

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.08

 

$

0.22

 

$

1.10

 

$

0.39

 

Diluted earnings per share

$

0.08

 

$

0.22

 

$

1.09

 

$

0.39

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding -

 

 

 

 

 

 

 

 

Basic

 

131,014

 

 

132,062

 

 

130,813

 

 

132,156

 

Diluted

 

131,602

 

 

132,973

 

 

131,499

 

 

133,172

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

$

0.26

 

$

0.25

 

$

0.52

 

$

0.50

 

 

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

 

 

Six Months Ended June 30,

 

 

2020

 

 

2019

 

 

 

Cash flow from operating activities:

 

 

 

 

 

Net income

$

143,544

 

 

$

51,912

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Disposal gain on sale of business

 

(159,753

)

 

 

—

 

Depreciation and amortization

 

38,341

 

 

 

35,984

 

Stock-based compensation

 

27,335

 

 

 

24,662

 

Deferred income taxes

 

2,711

 

 

 

2,268

 

Net change in operating assets and liabilities

 

49,320

 

 

 

(26,189

)

Net cash provided by operating activities

 

101,498

 

 

 

88,637

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

Capital expenditures

 

(25,362

)

 

 

(26,048

)

Proceeds from sale of business, net of cash divested

 

160,266

 

 

 

—

 

Capitalization of internally developed software

 

(3,108

)

 

 

(4,497

)

Additions to other intangibles

 

(630

)

 

 

(487

)

Acquisitions of equity-method investments

 

—

 

 

 

(9,784

)

Purchases of short-term investments

 

(206,330

)

 

 

(91,777

)

Sales and maturities of short-term investments

 

306,955

 

 

 

117,108

 

Net cash provided by (used by) investing activities

 

231,791

 

 

 

(15,485

)

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

Proceeds from revolving loan facility

 

20,000

 

 

 

—

 

Proceeds from term loan

 

70,000

 

 

 

—

 

Debt issuance costs

 

(1,480

)

 

 

—

 

Proceeds from issuance of common stock

 

17,252

 

 

 

17,645

 

Repurchase of common stock

 

(23,680

)

 

 

(92,375

)

Dividends paid

 

(68,156

)

 

 

(66,067

)

Net cash provided by (used by) financing activities

 

13,936

 

 

 

(140,797

)

 

 

 

 

 

 

Impact of changes in exchange rates on cash

 

(636

)

 

 

20

 

 

 

 

 

 

 

Net change in cash, cash equivalents and restricted cash

 

346,589

 

 

 

(67,625

)

Cash, cash equivalents and restricted cash at beginning of period

 

194,616

 

 

 

259,386

 

Cash, cash equivalents and restricted cash at end of period

$

541,205

 

 

$

191,761

 

 

The following tables provide details with respect to the amount of GAAP charges related to stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction costs, capitalization and amortization of internally developed software costs, restructuring charges and gain on sale of business that were recorded in the line items indicated below (unaudited) (in thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

Stock-based compensation

 

 

 

 

 

 

 

 

Cost of sales

$

932

 

$

890

 

$

1,736

 

$

1,683

 

Sales and marketing

 

6,467

 

 

5,140

 

 

11,642

 

 

9,515

 

Research and development

 

4,428

 

 

4,379

 

 

7,947

 

 

7,929

 

General and administrative

 

3,404

 

 

3,219

 

 

6,008

 

 

5,535

 

Provision for income taxes

 

(2,905

)

 

(3,940

)

 

(4,406

)

 

(5,776

)

Total

$

12,326

 

 

9,688

 

 

22,927

 

 

18,886

 

 

 

 

 

 

 

 

 

 

Amortization of acquisition intangibles

 

 

 

 

 

 

 

 

Cost of sales

$

635

 

$

841

 

$

1,381

 

$

1,692

 

Sales and marketing

 

480

 

 

494

 

 

966

 

 

993

 

Research and development

 

28

 

 

28

 

 

55

 

 

56

 

Other expense (income)

 

117

 

 

162

 

 

241

 

 

162

 

Provision for income taxes

 

(133

)

 

(192

)

 

(290

)

 

(386

)

Total

$

1,127

 

$

1,333

 

$

2,353

 

$

2,517

 

 

 

 

 

 

 

 

 

 

Acquisition transaction costs, restructuring charges, and other

 

 

 

 

 

 

 

 

Cost of sales

$

—

 

$

—

 

$

20

 

$

—

 

Sales and marketing

 

1,239

 

 

3,153

 

 

7,612

 

 

5,296

 

Research and development

 

147

 

 

311

 

 

4,816

 

 

656

 

General and administrative

 

3,399

 

 

616

 

 

2,385

 

 

1,528

 

Gain on sale of business(1)

 

—

 

 

—

 

 

(159,753

)

 

—

 

Other expense (income)

 

—

 

 

—

 

 

128

 

 

—

 

Provision for income taxes

 

(78

)

 

(1,010

)

 

34,676

 

 

(1,850

)

Total

$

4,707

 

$

3,070

 

$

(110,116

)

$

5,630

 

(1): During the first quarter of 2020, the company recognized a gain of $160 million related to the divestiture of AWR, presented within "Gain on sale of business".

 

Capitalization and amortization of internally developed software costs

 

 

 

 

 

 

 

 

Cost of sales

$

7,144

 

$

6,537

 

$

14,226

 

$

13,119

 

Research and development

 

(1,181

)

 

(2,218

)

 

(3,095

)

 

(4,497

)

Provision for income taxes

 

(1,252

)

 

(907

)

 

(2,337

)

 

(1,811

)

Total

$

4,711

 

$

3,412

 

$

8,794

 

$

6,811

 

 

National Instruments

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

Reconciliation of Gross Profit to Non-GAAP Gross Profit

 

 

 

 

Gross profit, as reported

$

215,428

 

$

250,465

 

$

441,047

 

$

485,464

 

Stock-based compensation

 

932

 

 

890

 

 

1,736

 

 

1,683

 

Amortization of acquisition intangibles

 

635

 

 

841

 

 

1,381

 

 

1,692

 

Acquisition transaction costs, restructuring charges and other

 

—

 

 

—

 

 

20

 

 

—

 

Amortization of internally developed software costs

 

7,144

 

 

6,537

 

 

14,226

 

 

13,119

 

Non-GAAP gross profit

$

224,139

 

$

258,733

 

$

458,410

 

$

501,958

 

Non-GAAP gross margin

 

74.4%

 

77.4%

 

75.1%

 

77.8%

 

 

 

 

 

 

 

 

 

Reconciliation of Operating Expenses to Non-GAAP Operating Expenses

 

 

 

 

Operating expenses, as reported

$

199,013

 

$

218,169

 

$

412,560

 

$

429,769

 

Stock-based compensation

 

(14,299

)

 

(12,738

)

 

(25,597

)

 

(22,979

)

Amortization of acquisition intangibles

 

(508

)

 

(522

)

 

(1,021

)

 

(1,049

)

Acquisition transaction costs, restructuring charges and other

 

(4,785

)

 

(4,080

)

 

(14,813

)

 

(7,480

)

Capitalization of internally developed software costs

 

1,181

 

 

2,218

 

 

3,095

 

 

4,497

 

Non-GAAP operating expenses

$

180,602

 

$

203,047

 

$

374,224

 

$

402,758

 

 

 

 

 

 

 

 

 

 

Reconciliation of Operating Income to Non-GAAP Operating Income

 

 

 

 

Operating income, as reported

$

16,415

 

$

32,296

 

$

188,240

 

$

55,695

 

Stock-based compensation

 

15,231

 

 

13,628

 

 

27,333

 

 

24,662

 

Amortization of acquisition intangibles

 

1,143

 

 

1,363

 

 

2,402

 

 

2,741

 

Acquisition transaction costs, restructuring charges and other

 

4,785

 

 

4,080

 

 

14,833

 

 

7,480

 

Net amortization of internally developed software costs

 

5,963

 

 

4,319

 

 

11,131

 

 

8,622

 

Gain on sale of business(1)

 

—

 

 

—

 

 

(159,753

)

 

—

 

Non-GAAP operating income

$

43,537

 

$

55,686

 

$

84,186

 

$

99,200

 

Non-GAAP operating margin

 

14.4%

 

16.7%

 

13.8%

 

15.4%

 

 

 

 

 

 

 

 

 

Reconciliation of Income before income taxes to Non-GAAP Income before income taxes

 

 

 

 

Income before income taxes, as reported

$

15,272

 

$

32,851

 

$

187,657

 

$

58,826

 

Stock-based compensation

 

15,231

 

 

13,628

 

 

27,333

 

 

24,662

 

Amortization of acquisition intangibles

 

1,260

 

 

1,525

 

 

2,643

 

 

2,903

 

Acquisition transaction costs, restructuring charges and other

 

4,785

 

 

4,080

 

 

14,961

 

 

7,480

 

Net amortization of internally developed software costs

 

5,963

 

 

4,319

 

 

11,131

 

 

8,622

 

Gain on sale of business(1)

 

—

 

 

—

 

 

(159,753

)

 

—

 

Non-GAAP income before income taxes

$

42,511

 

$

56,403

 

$

83,972

 

$

102,493

 

 

 

 

 

 

 

 

 

 

Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes

 

 

 

 

Provision for income taxes, as reported

$

4,383

 

$

4,159

 

$

44,113

 

$

6,914

 

Stock-based compensation

 

2,905

 

 

3,940

 

 

4,406

 

 

5,776

 

Amortization of acquisition intangibles

 

133

 

 

192

 

 

290

 

 

386

 

Acquisition transaction costs, restructuring charges and other

 

466

 

 

1,010

 

 

2,083

 

 

1,850

 

Net amortization of internally developed software costs

 

1,252

 

 

907

 

 

2,337

 

 

1,811

 

Gain on sale of business(1)

 

(388

)

 

$—

 

 

(36,759

)

 

$—

 

Non-GAAP provision for income taxes

$

8,751

 

$

10,208

 

$

16,470

 

$

16,737

 

(1): During the first quarter of 2020, the company recognized a gain of approximately $160 million related to the divestiture of AWR, presented within "Gain on sale of business".

 

Reconciliation of GAAP Net Income, Diluted EPS, and Revenue to Non-GAAP Net Income, Non-GAAP Diluted EPS, EBITDA, and Organic Revenue (Non-GAAP)

(in thousands, except per share data, unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

Net income, as reported

$

10,889

 

$

28,692

 

$

143,544

 

$

51,912

 

Adjustments to reconcile net income to non-GAAP net income:

 

 

 

 

 

 

 

 

Stock-based compensation, net of tax effect

 

12,326

 

 

9,688

 

 

22,927

 

 

18,886

 

Amortization of acquisition intangibles, net of tax effect

 

1,127

 

 

1,333

 

 

2,353

 

 

2,517

 

Acquisition transaction costs, restructuring charges and other, net of tax effect

 

4,319

 

 

3,070

 

 

12,878

 

 

5,630

 

Net amortization of internally developed software costs, net of tax effect

 

4,711

 

 

3,412

 

 

8,794

 

 

6,811

 

Gain on sale of business(1), net of tax effect

 

388

 

 

—

 

 

(122,994

)

 

—

 

Non-GAAP net income

$

33,760

 

$

46,195

 

$

67,502

 

$

85,756

 

Non-GAAP net margin

 

11.2%

 

13.8%

 

11.1%

 

13.3%

 

Diluted EPS, as reported

$

0.08

 

$

0.22

 

$

1.09

 

$

0.39

 

Adjustment to reconcile diluted EPS to non-GAAP diluted EPS

 

 

 

 

 

 

 

 

Impact of stock-based compensation, net of tax effect

 

0.09

 

 

0.07

 

 

0.17

 

 

0.14

 

Impact of amortization of acquisition intangibles, net of tax effect

 

0.01

 

 

0.01

 

 

0.02

 

 

0.02

 

Impact of acquisition transaction costs and restructuring charges, net of tax effect

 

0.04

 

 

0.02

 

 

0.10

 

 

0.04

 

Impact of net amortization of internally developed software costs, net of tax effect

 

0.04

 

 

0.03

 

 

0.07

 

 

0.05

 

Impact of gain on sale of business(1), net of tax effect

 

—

 

 

—

 

 

(0.94

)

 

—

 

Non-GAAP diluted EPS

$

0.26

 

$

0.35

 

$

0.51

 

$

0.64

 

(1): During the first quarter of 2020, the company recognized a gain of approximately $160 million related to the divestiture of AWR, presented within "Gain on sale of business".

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - Diluted

 

131,602

 

 

132,973

 

 

131,499

 

 

133,172

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

Net income, as reported

$

10,889

 

$

28,692

 

$

143,544

 

$

51,912

 

Adjustments to reconcile net income to EBITDA:

 

 

 

 

 

 

 

 

Interest income, net

 

(945

)

 

(2,012

)

 

(3,168

)

 

(4,232

)

Tax expense

 

4,383

 

 

4,159

 

 

44,113

 

 

6,914

 

Depreciation and amortization

 

19,076

 

 

17,972

 

 

38,341

 

 

35,984

 

EBITDA

$

33,403

 

$

48,811

 

$

222,830

 

$

90,578

 

Weighted average shares outstanding - Diluted

 

131,602

 

 

132,973

 

 

131,499

 

 

133,172

 

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2020

 

2019

 

Percent Inc/(Dec)

 

2020

 

2019

 

Percent Inc/(Dec)

GAAP Revenue

$

301,329

 

$

334,231

 

 

(10)%

$

610,709

 

$

645,305

 

 

(5)%

less: Net sales from acquisitions or divestitures closed within the last twelve months

—

 

(7,961

)

 

 

(1,337

)

(15,562

)

 

 

Organic Revenue (non-GAAP)

$

301,329

 

$

326,270

 

 

(8)%

$

609,372

 

$

629,743

 

 

(3)%

 

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS Guidance

(unaudited)

 

 

Three Months Ended

 

 

September 30, 2020

 

 

 

 

 

 

 

 

 

 

Low

 

 

High

GAAP Diluted EPS, guidance

$

(0.09

)

$

0.05

Adjustment to reconcile diluted EPS to non-GAAP diluted EPS:

 

 

 

 

Impact of stock-based compensation, net of tax effect

 

0.09

 

 

0.09

 

Impact of amortization of acquisition intangibles and deferred revenue purchase accounting adjustments(1), net of tax effect

 

0.05

 

 

0.05

 

Impact of acquisition transaction and integration costs, restructuring charges, and other, net of tax effect

 

0.06

 

 

0.06

 

Impact of net amortization of software development costs, net of tax effect

 

0.03

 

 

0.03

 

Non-GAAP Diluted EPS, guidance

$

0.14

 

$

0.28

 

(1): The Company has not yet completed its preliminary purchase price allocation of certain acquired intangible assets and deferred revenue related to the OptimalPlus transaction. The amounts provided in the table above reflect the current best estimate based on a range of assumptions.

 

Reconciliation of GAAP Revenue to Non-GAAP Revenue and Organic Revenue (Non-GAAP), Guidance

(unaudited)

 

Three Months Ended

 

 

 

September 30,

 

 

 

 

2020

 

 

2019

 

Percent Inc/(Dec)

 

 

(midpoint)

 

 

 

 

GAAP Revenue, guidance

$

303,000

 

$

340,442

 

 

(11)%

plus: Impact of purchase accounting adjustments(1)

 

2,000

 

 

—

 

 

 

Non-GAAP Revenue, guidance

$

305,000

 

$

340,442

 

 

(10)%

less: Net sales from acquisitions closed within the last twelve months

 

(4,000

)

 

—

 

 

 

less: Net sales from divestitures closed within the last twelve months

 

—

 

 

(7,833

)

 

 

Organic Revenue (Non-GAAP), guidance

$

301,000

 

$

332,609

 

 

(10)%

(1): The Company has not yet completed its preliminary purchase price allocation of certain acquired intangible assets and deferred revenue related to the OptimalPlus transaction. The amounts provided in the table above reflect the current best estimate based on a range of assumptions.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200730006000/en/

Marissa Vidaurri Head of Investor Relations (512) 683-5215