AUSTIN, USA: National Instruments reported quarterly revenue for Q3 2010 of $220 million, representing a 34 percent year-over-year increase and a 4 percent sequential increase.
For the first nine months of 2010, the company reported a 31 percent year-over-year increase in revenue and a significant year-over-year increase in operating margins. Also during the quarter, backlog increased by $7 million.
Net income for Q3 2010 was $28.1 million, with GAAP fully diluted earnings per share (EPS) of $0.36. Non-GAAP net income was $32.3 million, with non-GAAP fully diluted EPS of $0.41. GAAP and non-GAAP operating income set a record for a third quarter, and operating margins improved significantly over Q3 2009. The company's non-GAAP results exclude the impact of both stock-based compensation and the amortization of acquisition-related intangibles.
In Q3, GAAP gross margin increased 1.9 percentage points year-over-year to 76.5 percent. Non-GAAP gross margin increased by 1.7 percentage points year-over-year to 77.0 percent.
"I am extremely pleased with our Q3 performance and believe our long-term focus on innovation and operational excellence has helped differentiate NI from other players in the markets we serve," said Dr. James Truchard, co-founder, president and CEO. "I believe the many new opportunities created by our expanding product and services portfolio, together with the strong business momentum we saw in Q3, validate our strategy in the marketplace."
NI virtual instrumentation and graphical system design product sales were up 34 percent year-over-year. NI instrument control product sales were up 25 percent year-over-year but remain 11 percent below Q3 2008 levels. Product revenue was $203 million, up 34 percent year-over-year, and software maintenance revenue was $17 million, up 34 percent year-over-year.
Geographically, revenue in US dollar terms for Q3 2010 compared to Q3 2009 was up 29 percent in the Americas, up 28 percent in Europe and up 48 percent in Asia. In local currency terms, revenue was up 40 percent in Europe and up 45 percent in Asia.
As of Sept. 30, NI had a record $339 million in net cash and short-term investments, up $22 million from June 30.
During the quarter, the company paid $10 million in dividends and used approximately $11 million to repurchase 379,000 shares of its common stock at an average price of $28.87 per share. National Instruments announced that its board of directors approved a dividend of $0.13 per share payable on Nov. 29 to shareholders of record on Nov. 8.
In Q3, the global purchasing manager's index (PMI) averaged 53.5, down from a quarterly average of 56.7 in Q2. This moderation was in line with the company's expectation that the global PMI would move toward its long-term average of 51.7 in Q3 and Q4.
The company currently expects that the global PMI will continue to trend toward its historical average during Q4. Given the relatively low levels of global inventory, the company believes the industrial economy is positioned to manage the moderation of the global PMI, and that NI is positioned to grow revenue through this moderating trend.
"We are confident that we will deliver record revenue and profitability in 2010 and I would like to thank all of our employees for their hard work and commitment during the recession," said Alex Davern, EVP, COO and CFO. "We have delivered a rapid recovery in our profitability, and assuming 2011 is a normal revenue growth year we will be targeting only a modest increase in operating margins. We will instead be making significant focused investments in key regions and applications to support sustained growth of the company."
NI expects strong Q4 year-over-year revenue growth, with revenue expected to be between $230 million and $244 million. The company expects fully diluted GAAP EPS between $0.38 and $0.48, with non-GAAP fully diluted EPS expected to be between $0.43 and $0.53.