Weakness Seen in Industrial Economy and Wireless Supply Chain

Q1 2016 Highlights

• Revenue of $287 million, down 1 percent year-over-year in U.S. dollar terms with core revenue up 3 percent year-over-year
• GAAP gross margin of 73.5 percent
• Non-GAAP gross margin of 74.8 percent
• Fully diluted GAAP EPS of $0.07 and fully diluted non-GAAP EPS of $0.16
• EBITDA of $32 million or $0.25 per share
• Cash and short-term investments of $329 million as of March 31, 2016

AUSTIN, Texas--(BUSINESS WIRE)-- National Instruments (Nasdaq: NATI) today announced Q1 2016 revenue of $287 million, down 1 percent year-over-year in U.S. dollar terms with core revenue up 3.4 percent year-over-year. The company's definition of core revenue is GAAP revenue excluding the impact of NI's largest customer and the impact of foreign currency exchange. A reconciliation of GAAP revenue to core revenue is included with this news release.

In Q1 2016, NI received $6 million in orders from its largest customer compared with $3 million in orders from this customer in Q1 2015. Excluding NI's largest customer, the company's total order growth was down 1 percent for the quarter with orders under $20,000 down 2 percent year-over-year; orders between $20,000 and $100,000 up 2 percent year-over-year; and orders above $100,000 down 2 percent year-over-year.

"While it is clear that the industrial economy, especially in the U.S., experienced a slowdown in Q1, we believe the diversity of our business and the solid execution of our sales force allowed us to continue to gain market share," said James Truchard, NI president, co-founder and CEO. "Going forward, we plan to be very disciplined in managing our expenses while working to ensure that our highly differentiated platform and broad ecosystem continue to help engineers and scientists address their test, measurement and control needs."

GAAP net income for Q1 was $9 million, with fully diluted earnings per share (EPS) of $0.07, and non-GAAP net income was $20 million, with non-GAAP fully diluted EPS of $0.16. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $32 million, or $0.25 per share in the first quarter.

In Q1, GAAP gross margin was 73.5 percent and non-GAAP gross margin was 74.8 percent. Total GAAP operating expenses were $197 million, up 2 percent year-over-year. Total non-GAAP operating expenses were $190 million, up 2 percent year-over-year. GAAP operating margin was 5 percent in Q1, with GAAP operating income of $14 million. Non-GAAP operating margin was 9 percent in Q1, with non-GAAP operating income of $25 million.

"In light of the uncertain outlook for the industrial economy, we plan to leverage the strategic investments we have already made while managing expenses carefully," said Alex Davern, NI COO and CFO. "Looking forward we will be focused on driving operating leverage while gaining market share through our differentiated platform."

Geographic revenue in U.S. dollar terms for Q1 2016 compared with Q1 2015 was down 6 percent in the Americas and down 3 percent in EMEIA. Revenue growth in APAC was strong at approximately 11 percent year-over-year. In constant currency terms, revenue was down 5 percent in the Americas, up 6 percent in EMEIA and up 18 percent in APAC. Historical revenue from these three regions can be found on NI's investor website at www.ni.com/nati.

As of March 31, 2016, NI had $329 million in cash and short-term investments. During the quarter, NI paid $26 million in dividends and used $4.6 million to repurchase 171,000 shares of NI's common stock at an average price of $27.18 per share. The NI Board of Directors approved a quarterly dividend of $0.20 per share payable on June 6, 2016, to stockholders of record on May 16, 2016.

The company's non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction costs, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, and restructuring charges. Reconciliations of the company's GAAP and non-GAAP results are included as part of this news release.

Guidance for Q2 2016

NI currently expects Q2 revenue to be in the range of $287 million to $323 million. Based on current exchange rates the company expects that the impact of the strengthening of the U.S. dollar will reduce the company's year-over-year dollar revenue growth rate by approximately 300 basis points in Q2 and approximately 200 basis points in each of Q3 and Q4. The company currently expects that GAAP fully diluted EPS will be in the range of $0.08 to $0.24 for Q2, with non-GAAP fully diluted EPS expected to be in the range of $0.16 to $0.32.

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 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-month periods ending March 31, 2016 and 2015, 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 stock-based compensation expense, amortization of acquisition-related intangibles, acquisition-related transaction costs, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, and restructuring charges. 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 and EBITDA diluted EPS for the three-month periods ending March 31, 2016 and 2015. 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 and EBITDA diluted EPS to GAAP net income and GAAP diluted EPS is included with this news release. This news release also discloses the company's core revenue for the three-month period ending March 31, 2016. The company believes that including its core revenue assists investors in assessing the company's operational performance. A reconciliation of GAAP revenue to core revenue is included with this news release.

Conference Call Information and Availability of Presentation Materials

Interested parties can listen to the Q1 2016 earnings conference call with NI management today, April 28 at 4:00 p.m. CT at ni.com/call. Replay information is available by calling (855) 212-2361, confirmation code 76767338 shortly after the call through May 1, at 11:00 p.m. CT, or by visiting the company's website at www.ni.com/call. Presentation materials referred to on the conference call can also be found at ni.com/nati.

Forward-Looking Statements

This release contains "forward-looking statements" including statements regarding our belief that the diversity of our business and the solid execution of our sales force allowed us to continue to gain market share, our plan to be very disciplined in managing our expenses, while working to ensure that our highly differentiated platform and broad ecosystem continues to help engineers and scientists address their test, measurement and control needs, our plan to leverage the strategic investments we have already made, while managing expenses carefully, being focused on driving operating leverage while gaining market share through our differentiated platform, our guidance for Q2 revenue, that the company expects that the impact of the strengthening of the U.S. dollar will reduce the company's year-over-year dollar revenue growth rate by approximately 300 basis points in Q2 and approximately 200 basis points in each of Q3 and Q4, our guidance for Q2 GAAP fully diluted EPS and non-GAAP fully diluted EPS. These statements are subject to a number of risks and uncertainties, including the risk of adverse changes or fluctuations in the global economy, foreign exchange fluctuations, component shortages, delays in the release of new products, fluctuations in demand for NI products including orders from NI's largest customer, the company's ability to effectively manage its operating expenses, manufacturing inefficiencies and the level of capacity utilization, the impact of any recent or future acquisitions by NI, expense overruns, 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, 2015; and the other documents it files with the SEC for other risks associated with the company's future performance.

About NI

Since 1976, NI (www.ni.com) has made it possible for engineers and scientists to solve the world's greatest engineering challenges with powerful, flexible technology solutions that accelerate productivity and drive rapid innovation. Customers from a wide variety of industries - from healthcare to automotive and from consumer electronics to particle physics - use NI's integrated hardware and software platform to improve the world we live in. (NATI-F)

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.

Detail of GAAP charges related to stock-based compensation, amortization of acquisition intangibles, acquisition related transaction costs, restructuring charges, foreign exchange loss on acquisitions and taxes levied on the transfer of acquired intellectual property (unaudited)

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National Instruments
Marissa Vidaurri, 512-683-6873
Investor Relations

Source: National Instruments

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