Core Revenue up 5 Percent Year Over Year

Q3 2015 Highlights

• Revenue of $300 million, down 4 percent year over year in U.S. dollar terms with core revenue up 5 percent year over year
• Growth in LabVIEW seats driven by NI's success in enterprise agreements and the continued broad adoption of PXI
• GAAP operating margin of 11 percent
• Non-GAAP operating margin of 14 percent
• Fully diluted GAAP EPS of $0.18 and fully diluted non-GAAP EPS of $0.24
• EBITDA of $51 million or $0.40 per share
• Cash and short-term investments of $411 million as of Sept. 30, 2015

AUSTIN, Texas--(BUSINESS WIRE)-- NI (Nasdaq: NATI) today announced Q3 revenue of $300 million, down 4 percent year over year in U.S. dollar terms with core revenue up 5 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 Q3 2015, NI received $6 million in orders from its largest customer compared with $12 million in orders from this customer in Q3 2014. Excluding NI's largest customer, the company's total orders were flat for the quarter with orders under $20,000 down 2 percent year over year; orders between $20,000 and $100,000 up 3 percent year over year; and orders above $100,000 up 4 percent year over year.

"Over the course of several decades, we have successfully managed the business through various economic and currency cycles. I am confident our product pipeline, channel and operational excellence will help drive the long-term growth and profitability of the company," said Dr. James Truchard, NI president, CEO and co-founder. "At NIWeek this year, we focused on how we are uniquely positioned to empower our customers to benefit from the trends of the Industrial Internet of Things and Big Analog Data, given our rich history in measurements and our software-based platform that allows us to add more intelligence to devices and systems across a broad range of industries."

Today, NI also announced its acquisition of Micropross, a technology innovator and a leading supplier of software-based test systems for Near Field Communications (NFC), smart cards, and wireless charging test systems. NI continues to invest in RF and wireless test as a strategic area of growth. This transaction will further build on NI's success in wireless test while providing opportunity for future growth in the design, prototyping and testing of RF and communications systems.

GAAP net income for Q3 was $23 million, with fully diluted earnings per share (EPS) of $0.18, and non-GAAP net income was $30 million, with non-GAAP fully diluted EPS of $0.24. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $51 million, or $0.40 per share in the third quarter.

In Q3, GAAP gross margin was 74 percent and non-GAAP gross margin was 75 percent. Total GAAP operating expenses were $190 million, down 4 percent year over year. Total non-GAAP operating expenses were $183 million, down 4 percent year over year.

GAAP operating margin was 11 percent in Q3, with GAAP operating income of $32 million, down 6 percent year over year. Non-GAAP operating margin was 14 percent in Q3, with non-GAAP operating income of $43 million, down 5 percent year over year.

"Despite the challenging PMI and weakness from our energy customers, we were able to execute well and positioned ourselves for future growth," said Alex Davern, NI COO and CFO. "Though we will continue to experience a drag on our revenue from currency headwinds in Q4, we expect to enter Q1 with more favorable compares that should allow the strength of our broad-based business to show through."

This quarter, NI has consolidated its regional reporting into three geographic areas: the Americas; Europe, Middle East, India and Africa (EMEIA); and Asia-Pacific (APAC). Historical revenue data that conforms to NI's new reporting structure is included in NI's investor presentation. Geographic revenue in U.S. dollar terms for Q3 2015 compared with Q3 2014 was down 3 percent in the Americas, up 2 percent in EMEIA and down 14 percent in APAC. In constant currency terms, revenue was down 1 percent in the Americas, up 12 percent in EMEIA and down 8 percent in APAC. Historical revenue from these three regions can be found on NI's investor website at ni.com/nati.

As of Sept. 30, 2015, NI had $411 million in cash and short-term investments. During the quarter, NI paid $25 million in dividends and used $64 million to repurchase 2.2 million shares of NI's common stock at an average price of $28.94 per share. The NI Board of Directors approved a quarterly dividend of $0.19 per share payable on Nov. 30, 2015, to stockholders of record on Nov. 9, 2015.

The company's non-GAAP results exclude the impact of stock-based compensation, amortization of acquisition-related intangibles and acquisition transaction costs and restructuring charges. Reconciliations of the company's GAAP and non-GAAP results are included as part of this news release.

Guidance for Q4 2015

NI currently expects Q4 revenue to be in the range of $315 million to $345 million. Included in its revenue guidance is an expectation that the impact of the strengthening of the U.S. dollar will reduce our year over year dollar revenue growth rate by approximately 500 basis points and that revenue from NI's largest customer will be approximately $5 million in Q4, compared with $7.5 million in Q4 last year. At the midpoint, NI's guidance reflects a 1 percent decrease in U.S. dollars and approximately 5 percent year over year core revenue growth. The company currently expects that GAAP fully diluted EPS will be in the range of $0.21 to $0.33 for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.27 to $0.39. In Q4, NI currently expects its non-GAAP effective tax rate to be approximately 34 percent.

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- and nine-month periods ending Sept. 30, 2015 and 2014, 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 and restructuring charges 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 and EBITDA diluted EPS for the three- and nine-month periods ending Sept. 30, 2015 and 2014. 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- and nine-month periods ending Sept. 30, 2015 and 2014. The company believes that including its core revenue assists investors in assessing the company's operational performance. A reconciliation of core revenue to GAAP revenue is included with this news release.

Conference Call Information and Availability of Presentation Materials

Interested parties can listen to the Q3 2015 earnings conference call with NI management today, Oct. 27, at 4:00 p.m. CT at ni.com/call. Replay information is available by calling (855) 859-2056, confirmation code #50410593, shortly after the call through Oct. 30. at 11:00 p.m. CT, or by visiting the company's website at 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 being confident our product pipeline, channel and operational excellence will help drive long-term growth and profitability; being uniquely positioned to empower our customers to benefit from the trends of the Industrial Internet of Things and Big Analog Data; continuing to invest in RF and wireless test as a strategic area of growth; the Micropross transaction will further build on our success in wireless test while providing opportunity for future growth in the design, prototyping, and testing of RF and communications systems; being positioned for future growth; that we will continue to experience a drag on our revenue from currency headwinds in Q4; that we expect to enter Q1 with more favorable compares that should allow the strength of our broad based business to show through; that NI expects the impact of the strengthening of the U.S. dollar to reduce its year-over-year dollar revenue growth rate by approximately 500 basis points in Q4; expected revenue from NI's largest customer in Q4; and NI's guidance for Q4 revenue and GAAP, non-GAAP fully diluted EPS and non-GAAP tax rate. 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 and adverse effect of price changes and 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, 2014; its Form 10-Q for the quarter ended June 30, 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)

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

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National Instruments
Marissa Vidaurri, 512-683-5215
Investor Relations
marissa.vidaurri@ni.com

Source: National Instruments

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