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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended: June 30, 2023
or
☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________________ to ________________
Commission file number: 000-25426
NATIONAL INSTRUMENTS CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware | | 74-1871327 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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11500 North MoPac Expressway | | |
Austin, | | 78759 |
Texas | | |
(Address of principal executive offices) | | (Zip code) |
Registrant's telephone number, including area code: (512) 683-0100
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading symbol(s) | Name of exchange on which registered |
Common Stock, $0.01 par value | NATI | The Nasdaq Stock Market LLC |
Preferred Share Purchase Rights | N/A | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
| | | | | |
Class | Outstanding at July 24, 2023 |
Common Stock, $0.01 par value | 132,797,497 |
NATIONAL INSTRUMENTS CORPORATION
INDEX
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| Page No. |
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| June 30, 2023 (unaudited) and December 31, 2022 | |
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| (unaudited) for the three and six months ended June 30, 2023 and 2022 | |
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| (unaudited) for the three and six months ended June 30, 2023 and 2022 | |
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| (unaudited) for the six months ended June 30, 2023 and 2022 | |
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| (unaudited) for the three and six months ended June 30, 2023 and 2022 | |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NATIONAL INSTRUMENTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| | | | | | | | | | | |
| June 30, | | December 31, |
| 2023 | | 2022 |
Assets | (unaudited) | | |
Cash and cash equivalents | $ | 139,243 | | | $ | 139,799 | |
| | | |
Accounts receivable, net | 389,926 | | | 445,279 | |
Inventories, net | 401,626 | | | 388,164 | |
Prepaid expenses and other current assets | 123,949 | | | 115,677 | |
Total current assets | 1,054,744 | | | 1,088,919 | |
Property and equipment, net | 283,907 | | | 265,380 | |
Goodwill | 638,459 | | | 615,734 | |
Intangible assets, net | 192,904 | | | 200,850 | |
Operating lease right-of-use assets | 68,062 | | | 59,176 | |
| | | |
Other long-term assets | 124,918 | | | 128,479 | |
Total assets | $ | 2,362,994 | | | $ | 2,358,538 | |
Liabilities and stockholders' equity | | | |
Accounts payable | $ | 60,514 | | | $ | 54,639 | |
Accrued compensation | 49,575 | | | 71,422 | |
Deferred revenue - current | 158,247 | | | 137,208 | |
Operating lease liabilities - current | 16,608 | | | 13,834 | |
Other taxes payable | 55,622 | | | 67,615 | |
Debt, current | 25,000 | | | 25,000 | |
Accrued expenses and other current liabilities | 58,833 | | | 153,157 | |
Total current liabilities | 424,399 | | | 522,875 | |
| | | |
Deferred income taxes | 5,983 | | | 1,676 | |
Income tax payable - non-current | 22,581 | | | 40,646 | |
Deferred revenue - non-current | 60,094 | | | 63,066 | |
Operating lease liabilities - non-current | 36,486 | | | 30,588 | |
Debt, non-current | 564,373 | | | 516,637 | |
Other long-term liabilities | 31,558 | | | 26,926 | |
Total liabilities | 1,145,474 | | | 1,202,414 | |
Commitments and contingencies | | | |
Stockholders' equity: | | | |
Preferred stock: par value $0.01; 5,000,000 shares authorized; none issued and outstanding | — | | | — | |
Common stock: par value $0.01; 360,000,000 shares authorized; 132,797,497 shares and 131,004,965 shares issued and outstanding, respectively | 1,328 | | | 1,310 | |
Additional paid-in capital | 1,251,971 | | | 1,207,420 | |
Retained deficit | (11,295) | | | (14,741) | |
Accumulated other comprehensive loss | (24,484) | | | (37,865) | |
Total stockholders’ equity | 1,217,520 | | | 1,156,124 | |
Total liabilities and stockholders’ equity | $ | 2,362,994 | | | $ | 2,358,538 | |
The accompanying notes are an integral part of the financial statements.
NATIONAL INSTRUMENTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | |
| | June 30, | | June 30, | | |
| | 2023 | | 2022 | | 2023 | | 2022 | | |
| | | | | | | | | | |
Net sales: | | | | | | | | | | |
Product | | $ | 379,436 | | | $ | 354,805 | | | $ | 779,835 | | | $ | 698,489 | | | |
Software maintenance | | 37,368 | | | 40,710 | | | 73,794 | | | 82,281 | | | |
Total net sales | | 416,804 | | | 395,515 | | | 853,629 | | | 780,770 | | | |
| | | | | | | | | | |
Cost of sales: | | | | | | | | | | |
Product | | 113,625 | | | 123,307 | | | 241,181 | | | 238,332 | | | |
Software maintenance | | 4,862 | | | 4,167 | | | 10,012 | | | 8,370 | | | |
Total cost of sales | | 118,487 | | | 127,474 | | | 251,193 | | | 246,702 | | | |
| | | | | | | | | | |
Gross profit | | 298,317 | | | 268,041 | | | 602,436 | | | 534,068 | | | |
| | | | | | | | | | |
Operating expenses: | | | | | | | | | | |
Sales and marketing | | 123,101 | | | 124,908 | | | 240,443 | | | 245,064 | | | |
Research and development | | 83,801 | | | 85,589 | | | 170,438 | | | 167,750 | | | |
General and administrative | | 50,504 | | | 36,772 | | | 93,719 | | | 69,949 | | | |
| | | | | | | | | | |
Total operating expenses | | 257,406 | | | 247,269 | | | 504,600 | | | 482,763 | | | |
| | | | | | | | | | |
Operating income | | 40,911 | | | 20,772 | | | 97,836 | | | 51,305 | | | |
| | | | | | | | | | |
Other expense | | (8,500) | | | (3,505) | | | (11,519) | | | (3,473) | | | |
Income before income taxes | | 32,411 | | | 17,267 | | | 86,317 | | | 47,832 | | | |
Provision for income taxes | | 1,919 | | | 4,833 | | | 8,896 | | | 10,162 | | | |
| | | | | | | | | | |
Net income | | $ | 30,492 | | | $ | 12,434 | | | $ | 77,421 | | | $ | 37,670 | | | |
| | | | | | | | | | |
Basic earnings per share | | $ | 0.23 | | | $ | 0.09 | | | $ | 0.59 | | | $ | 0.29 | | | |
| | | | | | | | | | |
Weighted average shares outstanding - basic | | 132,369 | | | 131,973 | | | 131,850 | | | 132,039 | | | |
| | | | | | | | | | |
Diluted earnings per share | | $ | 0.23 | | | $ | 0.09 | | | $ | 0.58 | | | $ | 0.28 | | | |
| | | | | | | | | | |
Weighted average shares outstanding - diluted | | 134,171 | | | 132,708 | | | 133,693 | | | 132,948 | | | |
| | | | | | | | | | |
Dividends declared per share | | $ | 0.28 | | | $ | 0.28 | | | $ | 0.56 | | | $ | 0.56 | | | |
The accompanying notes are an integral part of these financial statements.
NATIONAL INSTRUMENTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | | |
Net income | | $ | 30,492 | | | $ | 12,434 | | | $ | 77,421 | | | $ | 37,670 | |
Other comprehensive income (loss), before tax and net of reclassification adjustments: | | | | | | | | |
Foreign currency translation adjustment | | 1,227 | | | (9,640) | | | 6,116 | | | 8,027 | |
| | | | | | | | |
Unrealized gain on derivative instruments | | 10,843 | | | 6,161 | | | 9,167 | | | (13,446) | |
Other comprehensive income (loss), before tax | | 12,070 | | | (3,479) | | | 15,283 | | | (5,419) | |
Tax expense related to items of other comprehensive income | | 2,286 | | | 1,507 | | | 1,902 | | | 1,930 | |
Other comprehensive income (loss), net of tax | | 9,784 | | | (4,986) | | | 13,381 | | | (7,349) | |
Comprehensive income | | $ | 40,276 | | | $ | 7,448 | | | $ | 90,802 | | | $ | 30,321 | |
The accompanying notes are an integral part of these financial statements.
NATIONAL INSTRUMENTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | | | | | | | | |
| | Six Months Ended |
| | June 30, |
| | 2023 | | 2022 |
Cash flow from operating activities: | | | | |
Net income | | $ | 77,421 | | | $ | 37,670 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| | | | |
Depreciation and amortization | | 45,541 | | | 45,742 | |
Stock-based compensation | | 30,388 | | | 40,804 | |
Gain from equity-method investees | | (5,597) | | | (131) | |
| | | | |
Deferred income taxes | | 2,488 | | | 943 | |
Changes in operating assets and liabilities | | (75,368) | | | (169,930) | |
Net cash provided by (used in) operating activities | | 74,873 | | | (44,902) | |
| | | | |
Cash flow from investing activities: | | | | |
Acquisitions, net of cash received | | (23,024) | | | (72,802) | |
Capital expenditures | | (35,477) | | | (24,509) | |
| | | | |
| | | | |
Capitalization of internally developed software | | (925) | | | (187) | |
Additions to other intangibles | | (3,811) | | | (2,478) | |
| | | | |
| | | | |
| | | | |
| | | | |
Net cash used in investing activities | | (63,237) | | | (99,976) | |
| | | | |
Cash flow from financing activities: | | | | |
Proceeds from revolving line of credit | | 120,000 | | | 175,000 | |
Payments on revolving line of credit | | (60,000) | | | — | |
| | | | |
| | | | |
| | | | |
Payments on term loan | | (12,500) | | | — | |
| | | | |
Proceeds from issuance of common stock | | 17,377 | | | 17,859 | |
Repurchase of common stock | | — | | | (70,000) | |
Dividends paid | | (73,975) | | | (74,034) | |
Payments for taxes related to net share settlement of equity awards | | (3,076) | | | — | |
Net cash (used in) provided by financing activities | | (12,174) | | | 48,825 | |
| | | | |
Effect of exchange rate changes on cash | | (18) | | | (4,180) | |
| | | | |
Net change in cash and cash equivalents | | (556) | | | (100,233) | |
Cash and cash equivalents at beginning of period | | 139,799 | | | 211,106 | |
Cash and cash equivalents at end of period | | $ | 139,243 | | | $ | 110,873 | |
The accompanying notes are an integral part of these financial statements.
NATIONAL INSTRUMENTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data and per share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | Common Stock Shares | | Common Stock Amount | | Additional-Paid in Capital | | Retained Deficit | | Accumulated Other Comprehensive Loss | | Total Stockholders' Equity |
Balance at March 31, 2023 | | 131,498,380 | | | $ | 1,315 | | | $ | 1,231,894 | | | $ | (4,627) | | | $ | (34,268) | | | $ | 1,194,314 | |
Net income | | — | | | — | | | — | | | 30,492 | | | — | | | 30,492 | |
Other comprehensive gain, net of tax | | — | | | — | | | — | | | — | | | 9,784 | | | 9,784 | |
Issuance of common stock under employee plans | | 1,351,884 | | | 14 | | | 8,407 | | | — | | | — | | | 8,421 | |
Payments for taxes related to net share settlement of equity awards | | (52,767) | | | (1) | | | (3,075) | | | — | | | — | | | (3,076) | |
Stock-based compensation | | — | | | — | | | 14,745 | | | — | | | — | | | 14,745 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Dividends paid (1) | | — | | | — | | | — | | | (37,160) | | | — | | | (37,160) | |
Balance at June 30, 2023 | | 132,797,497 | | | 1,328 | | | 1,251,971 | | | (11,295) | | | (24,484) | | | 1,217,520 | |
| | | | | | | | | | | | |
| | Common Stock Shares | | Common Stock Amount | | Additional-Paid in Capital | | Retained Deficit | | Accumulated Other Comprehensive Loss | | Total Stockholders' Equity |
Balance at December 31, 2022 | | 131,004,965 | | | 1,310 | | | 1,207,420 | | | (14,741) | | | (37,865) | | | 1,156,124 | |
Net income | | — | | | — | | | — | | | 77,421 | | | — | | | 77,421 | |
Other comprehensive gain, net of tax | | — | | | — | | | — | | | — | | | 13,381 | | | 13,381 | |
Issuance of common stock under employee plans | | 1,845,299 | | | 19 | | | 17,358 | | | — | | | — | | | 17,377 | |
Payments for taxes related to net share settlement of equity awards | | (52,767) | | | (1) | | | (3,075) | | | — | | | — | | | (3,076) | |
Stock-based compensation | | — | | | — | | | 30,268 | | | — | | | — | | | 30,268 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Dividends paid (1) | | — | | | — | | | — | | | (73,975) | | | — | | | (73,975) | |
Balance at June 30, 2023 | | 132,797,497 | | | $ | 1,328 | | | $ | 1,251,971 | | | $ | (11,295) | | | $ | (24,484) | | | $ | 1,217,520 | |
(1) Cash dividends declared per share of common stock were $0.28 for the three months ended June 30, 2023, and $0.56 for the six months ended June 30, 2023.
The accompanying notes are an integral part of these financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 |
| | (Unaudited) |
| | Common Stock Shares | | Common Stock Amount | | Additional-Paid in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income/(Loss) | | Total Stockholders' Equity |
Balance at March 31, 2022 | | 131,876,464 | | | $ | 1,319 | | | $ | 1,152,349 | | | $ | 76,264 | | | $ | (22,494) | | | $ | 1,207,438 | |
Net income | | — | | | — | | | — | | | 12,434 | | | — | | | 12,434 | |
Other comprehensive loss, net of tax | | — | | | — | | | — | | | — | | | (4,986) | | | (4,986) | |
Issuance of common stock under employee plans | | 1,426,756 | | | 14 | | | 8,601 | | | — | | | — | | | 8,615 | |
Stock-based compensation | | — | | | — | | | 20,609 | | | — | | | — | | | 20,609 | |
| | | | | | | | | | | | |
Repurchase of common stock | | (986,876) | | | (10) | | | (8,428) | | | (30,107) | | | — | | | (38,545) | |
| | | | | | | | | | | | |
Dividends paid (1) | | — | | | — | | | — | | | (37,058) | | | — | | | (37,058) | |
Balance at June 30, 2022 | | 132,316,344 | | | 1,323 | | | 1,173,131 | | | 21,533 | | | (27,480) | | | 1,168,507 | |
| | | | | | | | | | | | |
| | Common Stock Shares | | Common Stock Amount | | Additional-Paid in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Stockholders' Equity |
Balance at December 31, 2021 | | 132,293,898 | | | 1,323 | | | 1,129,647 | | | 112,858 | | | (20,131) | | | 1,223,697 | |
Net income | | — | | | — | | | — | | | 37,670 | | | — | | | 37,670 | |
Other comprehensive loss, net of tax | | — | | | — | | | — | | | — | | | (7,349) | | | (7,349) | |
Issuance of common stock under employee plans | | 1,781,374 | | | 18 | | | 17,841 | | | — | | | — | | | 17,859 | |
Stock-based compensation | | — | | | — | | | 40,664 | | | — | | | — | | | 40,664 | |
| | | | | | | | | | | | |
Repurchase of common stock | | (1,758,928) | | | (18) | | | (15,021) | | | (54,961) | | | — | | | (70,000) | |
| | | | | | | | | | | | |
Dividends paid (1) | | — | | | — | | | — | | | (74,034) | | | — | | | (74,034) | |
Balance at June 30, 2022 | | 132,316,344 | | | $ | 1,323 | | | $ | 1,173,131 | | | $ | 21,533 | | | $ | (27,480) | | | $ | 1,168,507 | |
(1) Cash dividends declared per share of common stock were $0.28 for the three months ended June 30, 2022, and $0.56 for the six months ended June 30, 2022.
The accompanying notes are an integral part of these financial statements.
NATIONAL INSTRUMENTS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Basis of presentation
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 31, 2022, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 21, 2023 (the "Form 10-K"). In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring items) considered necessary to state fairly our financial position at June 30, 2023 and December 31, 2022, the results of our operations and comprehensive income for the three and six months ended June 30, 2023 and 2022, our cash flows for the six months ended June 30, 2023 and 2022 and our statement of stockholders' equity for the three and six months ended June 30, 2023 and 2022. Our operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period presentation.
Summary of Significant Accounting Policies
There were no material changes to our significant accounting policies during the three and six months ended June 30, 2023 compared to the significant accounting policies described in our 2022 Form 10-K.
Other (Expense) Income
Other (expense) income, net consisted of the following amounts:
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
(In thousands) | (Unaudited) | (Unaudited) |
| 2023 | 2022 | 2023 | 2022 |
Interest income | $ | 426 | | $ | 58 | | $ | 751 | | $ | 104 | |
Interest expense | (9,741) | | (2,500) | | (18,088) | | (3,792) | |
Gain (loss) from equity-method investments | 819 | | (471) | | 5,597 | | 131 | |
Net foreign exchange gain (loss) | 721 | | (769) | | 420 | | (1,935) | |
Other | (725) | | 177 | | (199) | | 2,019 | |
Other expense, net | $ | (8,500) | | $ | (3,505) | | $ | (11,519) | | $ | (3,473) | |
|
Accrued Expenses and Other Current Liabilities
h
Accrued expenses and other current liabilities on our condensed consolidated balance sheet includes the following amounts (in thousands):
| | | | | | | | |
| As of June 30, 2023 | As of December 31, |
| (unaudited) | 2022 |
Income taxes payable - current | $ | — | | $ | 87,186 | |
Hedge payable - current | 6,242 | | 18,117 | |
Accrued liabilities | 31,779 | | 26,851 | |
Other | 20,812 | | 21,003 | |
Total | $ | 58,833 | | $ | 153,157 | |
Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net income by the weighted average number of common shares and common share equivalents outstanding (if dilutive) during each period. The number of common share equivalents, which includes time-based restricted stock units ("RSUs") and performance-based restricted stock units ("PRSUs"), is computed using the treasury stock method.
The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the three and six months ended June 30, 2023 and 2022 are as follows (in thousands):
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| (Unaudited) | (Unaudited) |
| 2023 | 2022 | 2023 | 2022 |
Weighted average shares outstanding-basic | 132,369 | | 131,973 | | 131,850 | | 132,039 | |
Plus: Common share equivalents | | | | |
RSUs & PRSUs | 1,802 | | 735 | | 1,843 | | 909 | |
Weighted average shares outstanding-diluted | 134,171 | | 132,708 | | 133,693 | | 132,948 | |
Shares issuable upon vesting of RSU awards of 70,300 shares and 2,026,000 shares for the three months ended June 30, 2023 and 2022, respectively, and 68,600 shares and 1,324,000 shares for the six months ended June 30, 2023 and 2022, respectively, were excluded in the computations of diluted EPS because the effect of including the shares issuable upon vesting of RSU awards would have been anti-dilutive.
Note 2 - Revenue
Revenue Recognition
Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of our products or services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.
Disaggregation of Revenues
We disaggregate revenue from contracts with customers based on the timing of transfer of goods or services to customers (point-in-time or over time), geographic region based primarily on the billing location of the customer and customer industry grouping.
Total net sales based on the timing of transfer of goods or services to customers and geographic region are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | |
| | | (Unaudited) | |
| | 2023 | | 2022 |
(In thousands) | | | | | | | | |
Net sales: | | Point-in-Time(1) | Over Time | Total | | Point-in-Time(1) | Over Time | Total |
Americas | | $ | 160,298 | | $ | 27,210 | | $ | 187,508 | | | $ | 134,337 | | $ | 26,080 | | $ | 160,417 | |
EMEA | | 93,221 | | 18,731 | | 111,952 | | | 76,092 | | 20,591 | | 96,683 | |
APAC | | 105,833 | | 11,511 | | 117,344 | | | 127,858 | | 10,557 | | 138,415 | |
Total net sales(1) | | $ | 359,352 | | $ | 57,452 | | $ | 416,804 | | | $ | 338,287 | | $ | 57,228 | | $ | 395,515 | |
(1) Net sales contains hedging gains and losses, which do not represent revenues recognized from customers. Refer to Note 5 - Derivative instruments and hedging activities of Notes to Condensed Consolidated Financial Statements for more information on the impact of our hedging activities on our results of operations. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Six Months Ended June 30, | |
| | | (Unaudited) | |
| | 2023 | | 2022 |
(In thousands) | | | | | | | | |
Net sales: | | Point-in-Time(1) | Over Time | Total | | Point-in-Time(1) | Over Time | Total |
Americas | | $ | 312,640 | | $ | 52,854 | | $ | 365,494 | | | $ | 267,326 | | $ | 52,302 | | $ | 319,628 | |
EMEA | | 187,918 | | 36,215 | | 224,133 | | | 155,331 | | 41,720 | | 197,051 | |
APAC | | 241,481 | | 22,521 | | 264,002 | | | 242,853 | | 21,238 | | 264,091 | |
Total net sales(1) | | $ | 742,039 | | $ | 111,590 | | $ | 853,629 | | | $ | 665,510 | | $ | 115,260 | | $ | 780,770 | |
(1) Net sales contains hedging gains and losses, which do not represent revenues recognized from customers. Refer to Note 5 - Derivative instruments and hedging activities of Notes to Condensed Consolidated Financial Statements for more information on the impact of our hedging activities on our results of operations. |
The industry grouping used to disaggregate net sales is determined at the customer account level. Accounts assigned to one of our three industry-specific groupings are either designated as Semiconductor and Electronics, Transportation, or Aerospace, Defense and Government ("ADG"). We are able to leverage the investments in these areas to also serve a broad base of diverse customers in the other industries we serve, which are included in our Portfolio grouping. We periodically review and update the groupings of customers assigned to a particular industry grouping to ensure that our revenue disaggregation aligns with the way we currently manage our business. As part of this process, we reclassified certain customer accounts between industry groups during the first quarter of 2023. The prior period presented below has been recast to conform to the current period presentation.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | | | |
(In thousands) | | (Unaudited) | | | | |
Industry Grouping | | 2023 | | 2022 | | 2023 | | 2022 | | | | |
Portfolio | | $ | 134,706 | | | $ | 116,216 | | | $ | 270,615 | | | $ | 240,919 | | | | | |
Semiconductor & Electronics | | 91,584 | | | 116,370 | | | 205,341 | | | 220,395 | | | | | |
Aerospace, Defense & Government | | 111,895 | | | 99,521 | | | 225,010 | | | 194,024 | | | | | |
Transportation | | 78,619 | | | 63,408 | | | 152,663 | | | 125,432 | | | | | |
Total net sales | | $ | 416,804 | | | $ | 395,515 | | | $ | 853,629 | | | $ | 780,770 | | | | | |
Information about Contract Balances
Amounts billed in advance of services being provided are accounted for as deferred revenue. Nearly all of our deferred revenue balance is related to extended hardware and software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 90 days of contract inception. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers or to provide customers with financing.
Changes in deferred revenue, current and non-current, during the six months ended June 30, 2023 were as follows:
| | | | | |
| |
(In thousands) | Amount |
Balance as of December 31, 2022 | $ | 200,274 | |
Deferral of revenue billed in current period, net of recognition | 88,220 | |
Recognition of revenue deferred in prior periods | (72,909) | |
Acquisitions/Divestitures | 2,414 | |
Foreign currency translation impact | 342 | |
Balance as of June 30, 2023 (unaudited) | $ | 218,341 | |
For the six months ended June 30, 2023, revenue recognized from performance obligations satisfied in prior periods (for example, due to changes in transaction price) was not material. Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables. Unbilled receivables which are anticipated to be invoiced in the next twelve months are included in "Other current assets" on the condensed consolidated balance sheet. Based on the nature of our contracts with customers, we do not typically recognize unbilled receivables related to revenues recognized in excess of amounts billed. For the six months ended June 30, 2023 and December 31, 2022, the amounts recorded that were related to unbilled receivables were not material.
Unsatisfied Performance Obligations
Revenue expected to be recognized in any future period related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less and contracts where revenue is recognized as invoiced, was approximately $111 million as of June 30, 2023. Because we typically invoice customers at contract inception, this amount is included in our current and non-current deferred revenue balances and primarily relates to multi-year payments for hardware service and software service offerings. As of June 30, 2023, we expect to recognize approximately 25% of the revenue related to these unsatisfied performance obligations during the remainder of 2023, 43% during 2024, and 32% thereafter.
Assets Recognized from the Costs to Obtain a Contract with a Customer
We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs meet the requirements to be capitalized. Capitalized incremental costs related to initial contracts and renewals are amortized over the same period because the commissions paid on both the initial contract and renewals are commensurate with one another. Total capitalized costs to obtain a contract were not material during the periods presented and are included in other long-term assets on our condensed consolidated balance sheets.
Note 3 – Investments
Equity-Method Investments
The carrying value of our equity method investments was $29 million and $29 million as of June 30, 2023 and December 31, 2022, respectively. During the three months ended June 30, 2023 and 2022, net sales to our equity-method investees were approximately $0.3 million and $1.3 million, respectively. During the six months ended June 30, 2023 and 2022, net sales to our equity-method investees were approximately $0.8 million and $2.8 million, respectively. During the three and six months ended June 30, 2023 and 2022, purchases from our equity-method investees were not material.
Our proportionate share of the income/(loss) from equity-method investments is included within "Other expense." Refer to Note 17 - Acquisitions of Notes to Condensed Consolidated Financial Statements for additional discussion on a step acquisition of one of our existing equity-method investments, SET GmbH ("SET"), during the first quarter of 2023.
Note 4 – Fair value measurements
We define fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market that market participants may use when pricing the asset or liability.
We follow a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value measurement is determined based on the lowest level input that is significant to the fair value measurement. The three values of the fair value hierarchy are the following:
Level 1 – Quoted prices in active markets for identical assets or liabilities
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3 – Inputs that are not based on observable market data
Assets and liabilities measured at fair value on a recurring basis are summarized below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements at Reporting Date Using |
(In thousands) | | (Unaudited) |
Description | | June 30, 2023 | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Derivatives (interest rate swaps) | | 4,467 | | | — | | | 4,467 | | | — | |
Derivatives (foreign exchange contracts) | | 13,410 | | | — | | | 13,410 | | | — | |
Total Assets | | $ | 17,877 | | | $ | — | | | $ | 17,877 | | | $ | — | |
| | | | | | | | |
Liabilities | | | | | | | | |
| | | | | | | | |
Derivatives (foreign exchange contracts) | | $ | (6,267) | | | $ | — | | | $ | (6,267) | | | $ | — | |
Total Liabilities | | $ | (6,267) | | | $ | — | | | $ | (6,267) | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | Fair Value Measurements at Reporting Date Using |
Description | | December 31, 2022 | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Derivatives (interest rate swaps) | | 2,299 | | | | | 2,299 | | | |
Derivatives (foreign exchange contracts) | | 10,025 | | | — | | | 10,025 | | | — | |
Total Assets | | $ | 12,324 | | | $ | — | | | $ | 12,324 | | | $ | — | |
| | | | | | | | |
Liabilities | | | | | | | | |
Derivatives (interest rate swaps) | | $ | (1,013) | | | $ | — | | | $ | (1,013) | | | $ | — | |
Derivatives (foreign exchange contracts) | | $ | (18,313) | | | $ | — | | | $ | (18,313) | | | $ | — | |
Total Liabilities | | $ | (19,326) | | | $ | — | | | $ | (19,326) | | | $ | — | |
The valuation techniques used to measure the fair value of our financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques.
Derivatives include foreign currency forward and interest rate swap contracts. Our derivatives are valued using an income approach (Level 2) based on the spot rate less the contract rate multiplied by the notional amount. We consider counterparty credit risk in the valuation of our derivatives. However, counterparty credit risk did not impact the valuation of our derivatives during the six months ended June 30, 2023. There were no transfers in or out of Level 1 or Level 2 during the six months ended June 30, 2023.
Non-financial assets such as equity-method investments, goodwill, intangible assets, and property, plant and equipment are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment is recognized. The amounts related to all assets and liabilities required to be measured at fair value on a nonrecurring basis were not material at June 30, 2023 and December 31, 2022.
We did not have any items that were measured at fair value on a nonrecurring basis at June 30, 2023 and December 31, 2022. The carrying value of net accounts receivable, accounts payable, and long-term debt contained in the condensed consolidated balance sheets approximates fair value.
Note 5 – Derivative instruments and hedging activities
We recognize all of our derivative instruments as either assets or liabilities in our statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.
We have direct operations in approximately 40 countries. Sales outside of the Americas accounted for approximately 55% and 59% of our net sales during the three months ended June 30, 2023 and 2022, respectively, and approximately 57% and 59% during the six months ended June 30, 2023 and 2022, respectively. Our activities expose us to a variety of market risks, including the effects of changes in foreign currency exchange rates. These financial risks are monitored and managed by us as an integral part of our overall risk management program.
The vast majority of our foreign sales are denominated in the customers' local currency. Movements in foreign currency exchange rates pose a risk to our operations and competitive position, in that exchange rate changes may affect our profitability and cash flow, and the business or pricing strategies of our non-U.S. based competitors. We use foreign currency forward contracts as hedges of forecasted sales and expenses that are denominated in foreign currencies and as hedges of foreign currency denominated financial assets or liabilities. These contracts are entered into to help protect against the risk that the eventual dollar-net-cash inflows or outflows resulting from these transactions will be adversely affected by changes in exchange rates. We designate foreign currency forward contracts as cash flow hedges of forecasted net sales or forecasted expenses. In addition, we hedge our foreign currency denominated balance sheet exposures using foreign currency forward contracts that are not designated as hedging instruments. None of our derivative instruments contain a credit-risk-related contingent feature.
Cash flow hedges
To help minimize the financial impact of fluctuations in foreign currency exchange rates of forecasted foreign currency cash flows resulting from international sales over the next one to three years, we have instituted a foreign currency cash flow hedging program. We hedge portions of our forecasted net sales and forecasted expenses denominated in foreign currencies with forward contracts. For forward contracts, when the value of the dollar changes significantly against the foreign currencies, the change in the present value of future foreign currency cash flows may be offset by the change in the fair value of the forward contracts designated as hedges. We use foreign currency forward contracts for up to 100% of our forecasted exposures in selected currencies (primarily in Euro, Japanese yen, Hungarian forint, British pound, Malaysian ringgit, Korean won and Chinese yuan) and limit the duration of these contracts to 40 months or less.
For foreign currency derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative is reported as a component of accumulated other comprehensive income ("OCI") and reclassified into earnings in the same line item (net sales, operating expenses, or cost of sales) associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. Cash flows from derivative instruments are classified in the statement of cash flows in the same category as the cash flows from the hedged or economically hedged item, primarily in operating activities. Hedge effectiveness of foreign currency forwards designated as cash flow hedges is measured by comparing the hedging instrument’s cumulative change in fair value from inception to maturity to the forecasted transaction’s terminal value.
We held forward contracts designated as cash flow hedges with the following notional amounts:
| | | | | | | | | | | | | | |
(In thousands) | | US Dollar Equivalent |
| | As of June 30, 2023 | | As of December 31, |
| | (Unaudited) | | 2022 |
British pound | | $ | 16,688 | | | $ | 13,929 | |
Chinese yuan | | 94,463 | | | 73,419 | |
Euro | | 130,162 | | | 109,091 | |
Hungarian forint | | 8,813 | | | 19,529 | |
Japanese yen | | 28,647 | | | 21,285 | |
Korean won | | 20,298 | | | 14,048 | |
Malaysian ringgit | | 2,941 | | | 8,856 | |
Total forward contracts notional amount | | $ | 302,012 | | | $ | 260,157 | |
The contracts in the foregoing table had contractual maturities of 18 months or less at June 30, 2023 and 12 months or less at December 31, 2022.
At June 30, 2023, we expected to reclassify $5.0 million of gains on derivative instruments from accumulated OCI to net sales during the next twelve months when the hedged international sales occur, $0.6 million of losses on derivative instruments from accumulated OCI to cost of sales during the next twelve months when the hedged cost of sales are incurred and $0.5 million of losses on derivative instruments from accumulated OCI to operating expenses during the next twelve months when the hedged operating expenses occur. Expected amounts are based on derivative valuations at June 30, 2023. Actual results may vary materially as a result of changes in the corresponding exchange rates subsequent to this date.
In 2022, we entered into interest rate swap agreements with an aggregate notional value of $300 million and a term of three years. The economic effect of the swap agreements is to mitigate the uncertainty of the cash flows associated with floating-rate interest payments due under our term loan and revolving credit facility (“Credit Facility") by fixing the underlying annual interest rate for a portion of our outstanding debt under the Credit Facility at 3.9%, plus a margin. We have designated these interest rate swap agreements as qualifying hedging instruments and are accounting for these as cash flow hedges pursuant to ASC 815, Derivatives and Hedging.
The fair values of these interest rate swap agreements are included in prepaid expenses and other current assets and other long-term liabilities in our condensed consolidated balance sheets at June 30, 2023 and December 31, 2022. Changes in the fair values of these interest rate swap agreements are reported in accumulated other comprehensive loss in our condensed consolidated balance sheets and an amount is reclassified out of accumulated other comprehensive loss into Other (expense) income in the same period that the corresponding interest expense is recognized.
We do not use any interest rate swap agreements for trading purposes.
Other Derivatives
Other derivatives not designated as hedging instruments consist primarily of foreign currency forward contracts that we use to hedge our foreign denominated monetary assets and liabilities to help protect against the change in value caused by a fluctuation in foreign currency exchange rates. We typically attempt to hedge up to 90% of our outstanding foreign denominated net receivables or net payables and typically limit the duration of these foreign currency forward contracts to approximately 90 days or less. The gain or loss on the derivatives as well as the offsetting gain or loss on the hedge item attributable to the hedged risk is recognized in current earnings under the line item “Other expense.” As of June 30, 2023 and December 31, 2022, we held foreign currency forward contracts that were not designated as hedging instruments with a notional amount of $341 million and $282 million, respectively.
The following tables present the fair value of derivative instruments on our Condensed Consolidated Balance Sheets at June 30, 2023 and December 31, 2022, respectively.
| | | | | | | | | | | | | | | | | | | | | | |
| | Asset Derivatives | | |
| | | | June 30, 2023 | | December 31, 2022 | | |
(In thousands) | | | | (Unaudited) | | | |
| | Balance Sheet Location | | Fair Value | | Fair Value | | |
| | |
Derivatives designated as hedging instruments | | | | | | | | |
Foreign exchange contracts - ST forwards | | Prepaid expenses and other current assets | | $ | 8,074 | | | $ | 8,968 | | | |
Interest rate contracts - ST forwards | | Prepaid expenses and other current assets | | 3,411 | | | 2,299 | | | |
Interest rate contracts - LT forwards | | Other long-term assets | | 1,056 | | | — | | | |
Foreign exchange contracts - LT forwards | | Other long-term assets | | 893 | | | — | | | |
Total derivatives designated as hedging instruments | | | | $ | 13,434 | | | $ | 11,267 | | | |
| | | | | | | | |
Derivatives not designated as hedging instruments | | | | | | | | |
Foreign exchange contracts - ST forwards | | Prepaid expenses and other current assets | | $ | 4,443 | | | $ | 1,057 | | | |
Total derivatives not designated as hedging instruments | | | | $ | 4,443 | | | $ | 1,057 | | | |
| | | | | | | | |
Total derivatives | | | | $ | 17,877 | | | $ | 12,324 | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Liability Derivatives |
| | | | June 30, 2023 | | December 31, 2022 |
(In thousands) | | | | (Unaudited) | |
| | Balance Sheet Location | | Fair Value | | Fair Value |
|
Derivatives designated as hedging instruments | | | | | | |
Foreign exchange contracts - ST forwards | | Accrued expenses and other current liabilities | | $ | (4,202) | | | $ | (9,940) | |
Foreign exchange contracts - LT forwards | | Other long-term liabilities | | (25) | | | (196) | |
Interest rate contracts - LT forwards | | Other long-term liabilities | | — | | | (1,013) | |
Total derivatives designated as hedging instruments | | | | $ | (4,227) | | | $ | (11,149) | |
| | | | | | |
Derivatives not designated as hedging instruments | | | | | | |
Foreign exchange contracts - ST forwards | | Accrued expenses and other current liabilities | | $ | (2,040) | | | $ | (8,177) | |
Total derivatives not designated as hedging instruments | | | | $ | (2,040) | | | $ | (8,177) | |
| | | | | | |
Total derivatives | | | | $ | (6,267) | | | $ | (19,326) | |
The following tables present the effect of derivative instruments on our Condensed Consolidated Statements of Income for the three months ended June 30, 2023 and 2022, respectively:
| | | | | | | | | | | | | | | | | | | | |
June 30, 2023 |
(In thousands) |
(Unaudited) |
Derivatives in Cash Flow Hedging Relationship | | Gain or (Loss) Recognized in OCI on Derivative | | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income | | Gain or (Loss) Reclassified from Accumulated OCI into Income |
Foreign exchange contracts - forwards | | $ | 4,682 | | | Net sales | | $ | 3,646 | |
| | | | | | |
Foreign exchange contracts - forwards | | 557 | | | Cost of sales | | (412) | |
| | | | | | |
Foreign exchange contracts - forwards | | 458 | | | Operating expenses | | (302) | |
| | | | | | |
Interest rate swap contracts - forwards | | 5,146 | | | Other (expense) income | | 802 | |
Total | | $ | 10,843 | | | | | $ | 3,734 | |
| | | | | | | | | | | | | | | | | | | | |
June 30, 2022 |
(In thousands) |
(Unaudited) |
Derivatives in Cash Flow Hedging Relationship | | Gain or (Loss) Recognized in OCI on Derivative | | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income | | Gain or (Loss) Reclassified from Accumulated OCI into Income |
Foreign exchange contracts - forwards | | $ | 10,252 | | | Net sales | | $ | 5,055 | |
| | | | | | |
Foreign exchange contracts - forwards | | (2,446) | | | Cost of sales | | (860) | |
| | | | | | |
Foreign exchange contracts - forwards | | (1,645) | | | Operating expenses | | (691) | |
| | | | | | |
| | | | | | |
Total | | $ | 6,161 | | | | | $ | 3,504 | |
| | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | | | | |
Derivatives not Designated as Hedging Instruments | | Location of Gain (Loss) Recognized in Income | | Amount of Gain (Loss) Recognized in Income | | Amount of Gain (Loss) Recognized in Income |
| | | | June 30, 2023 | | June 30, 2022 |
| | | | (Unaudited) | | (Unaudited) |
Foreign exchange contracts - forwards | | Other (expense) income | | $ | 4,176 | | | 3,590 | |
| | | | | | |
Total | | | | $ | 4,176 | | | $ | 3,590 | |
The following tables present the effect of derivative instruments on our Condensed Consolidated Statements of Income for the six months ended June 30, 2023 and 2022, respectively:
| | | | | | | | | | | | | | | | | | | | |
June 30, 2023 |
(In thousands) |
(Unaudited) |
Derivatives in Cash Flow Hedging Relationship | | Gain or (Loss) Recognized in OCI on Derivative | | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income | | Gain or (Loss) Reclassified from Accumulated OCI into Income |
Foreign exchange contracts - forwards | | $ | 2,953 | | | Net sales | | $ | 5,890 | |
| | | | | | |
Foreign exchange contracts - forwards | | 1,700 | | | Cost of sales | | (972) | |
| | | | | | |
Foreign exchange contracts - forwards | | 1,334 | | | Operating expenses | | (630) | |
| | | | | | |
Interest rate swap contracts - forwards | | 3,180 | | | Other (expense) income | | 1,329 | |
Total | | $ | 9,167 | | | | | $ | 5,617 | |
| | | | | | | | | | | | | | | | | | | | |
June 30, 2022 |
(In thousands) |
(Unaudited) |
Derivatives in Cash Flow Hedging Relationship | | Gain or (Loss) Recognized in OCI on Derivative | | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income | | Gain or (Loss) Reclassified from Accumulated OCI into Income |
Foreign exchange contracts - forwards | | $ | 12,136 | | | Net sales | | $ | 6,794 | |
| | | | | | |
Foreign exchange contracts - forwards | | (2,467) | | | Cost of sales | | (1,187) | |
| | | | | | |
Foreign exchange contracts - forwards | | (1,642) | | | Operating expenses | | (931) | |
| | | | | | |
| | | | | | |
Total | | $ | 8,027 | | | | | $ | 4,676 | |
| | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | | | | |
Derivatives not Designated as Hedging Instruments | | Location of Gain (Loss) Recognized in Income | | Amount of Gain (Loss) Recognized in Income | | Amount of Gain (Loss) Recognized in Income |
| | | | June 30, 2023 | | June 30, 2022 |
| | | | (Unaudited) | | (Unaudited) |
Foreign exchange contracts - forwards | | Other (expense) income | | $ | 3,319 | | | $ | 2,787 | |
Total | | | | $ | 3,319 | | | $ | 2,787 | |
Note 6 – Inventories, net
Inventories, net consist of the following:
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, |
(In thousands) | | (Unaudited) | | 2022 |
| | | | |
Raw materials | | $ | 278,308 | | | $ | 273,311 | |
Work-in-process | | 10,670 | | | 14,968 | |
Finished goods | | 137,661 | | | 119,302 | |
Total | | $ | 426,639 | | | $ | 407,581 | |
Less: Inventory reserve | | $ | (25,013) | | | $ | (19,417) | |
Total | | $ | 401,626 | | | $ | 388,164 | |
Note 7 – Intangible assets, net and goodwill
Intangible assets at June 30, 2023 and December 31, 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2023 | | |
(In thousands) | | (Unaudited) | | December 31, 2022 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Capitalized software development costs | | $ | 11,399 | | | $ | (8,477) | | | $ | 2,922 | | | $ | 18,810 | | | $ | (15,321) | | | $ | 3,489 | |
Acquired technology | | 179,519 | | | (68,372) | | | 111,147 | | | 167,686 | | | (54,351) | | | 113,335 | |
Customer relationships | | 92,778 | | | (32,904) | | | 59,874 | | | 98,827 | | | (33,514) | | | 65,313 | |
Patents | | 37,627 | | | (32,080) | | | 5,547 | | | 37,240 | | | (31,368) | | | 5,872 | |
Other | | 25,556 | | | (12,142) | | | 13,414 | | | 34,078 | | | (21,237) | | | 12,841 | |
Total | | $ | 346,879 | | | $ | (153,975) | | | $ | 192,904 | | | $ | 356,641 | | | $ | (155,791) | | | $ | 200,850 | |
Amortization of capitalized software development costs is computed on an individual product basis for those products available for market and is recognized based on the product’s estimated economic life, which generally range from three to six years. Acquired technology, customer relationships and other intangible assets are amortized over their useful lives, which generally range from five to ten years. Patents are amortized using the straight-line method over their estimated period of benefit, which generally range from ten to seventeen years. Total intangible assets amortization expenses were $13.7 million and $14.8 million for the three months ended June 30, 2023 and 2022, respectively, and $26.4 million and $27.2 million for the six months ended June 30, 2023 and 2022, respectively.
Goodwill
The carrying amount of goodwill as of June 30, 2023 was as follows:
| | | | | |
| |
(In thousands) | Amount |
Balance as of December 31, 2022 | $ | 615,734 | |
Acquisitions | 18,651 | |
| |
Foreign currency translation impact | 4,074 | |
Balance as of June 30, 2023 (unaudited) | $ | |