First time: We took the Northern Lights tour out about an hour outside of Rekyjavik and they didn't show.
Second time: Northern Lights tour canceled for the night because of visibility problems (cloudy day).
Third time: We went an hour outside Reykjavik, patiently waited, and they magically appeared, waving in the night sky. Beautiful and amazing!
Tip: Book your tour for your first day in Iceland so you have more chances to reschedule (they allow free re-booking if you don't get to see it).