Company Continued to Drive Significant Operating Leverage

Q3 2014 Highlights

• Quarterly revenue of $314 million, up 8 percent year-over-year
• Record Q3 revenue for CompactRIO, PXI, and data acquisition products
• GAAP operating income up 67 percent year-over-year
• Non-GAAP operating income up 38 percent year-over-year
• Fully diluted GAAP EPS of $0.31 and fully diluted non-GAAP EPS of $0.37
• EBITDA of $51 million or $0.40 per share
• Cash and cash equivalents of $448 million, up $46 million from Q2 2014

AUSTIN, Texas--(BUSINESS WIRE)-- NI (Nasdaq: NATI) today announced Q3 revenue of $314 million, up 8 percent year-over-year. The company's orders under $20,000 grew 3 percent year-over-year; orders between $20,000 and $100,000 increased 9 percent year-over-year; and orders above $100,000 increased 10 percent year-over-year. In Q3 2014, NI recognized $17 million in revenue from its largest customer, compared with $4 million recognized in Q3 2013. Year-to-date, through Oct. 30, the company has received $56 million in orders from this customer, compared to $35 million at this point last year.

GAAP net income for Q3 was $40 million, with fully diluted earnings per share (EPS) of $0.31, and non-GAAP net income was $47 million, with non-GAAP fully diluted EPS of $0.37. As discussed in the NI earnings call on July 29, 2014, the company recognized a tax benefit of $14 million in Q3 related to a settlement with the Internal Revenue Service of the examination of our U.S. income tax returns for 2010 and 2011. 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, up 40 basis points from Q3 2013. Total GAAP operating expenses were $198 million, up 3 percent year-over-year. Total non-GAAP operating expenses were $192 million, up 4 percent year-over-year.

GAAP operating margin was 11 percent in Q3, with GAAP operating income of $34 million, up 67 percent year-over-year. Non-GAAP operating margin was 14 percent in Q3, with non-GAAP operating income of $45 million, up 38 percent year-over-year.

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.

"I am pleased with the record revenue delivered in the third quarter and the significant progress made toward improving our operating margin," said Dr. James Truchard, NI president, CEO and cofounder. "I remain optimistic about our long-term position in the industry, with new products released in Q3 adding capability to our platform to further differentiate our approach in automated test and address new opportunities in areas such as the Industrial Internet of Things."

Geographic revenue in U.S. dollar terms for Q3 2014 compared with Q3 2013 was up 2 percent in the Americas, up 8 percent in Europe, up 34 percent in East Asia and down 14 percent in Emerging Markets. In local currency terms, revenue was up 5 percent in Europe, up 33 percent in East Asia and down 12 percent in Emerging Markets.

As of Sept. 30, NI had $448 million in cash and short-term investments, up $46 million from Q2 2014. The company paid $19 million in dividends in the third quarter. The NI Board of Directors also approved a quarterly dividend of $0.15 per share on the company's common stock payable on Dec. 8, 2014 to stockholders of record on Nov. 17, 2014.

Guidance for Q4 2014

"I am pleased with the operating leverage we have delivered so far this year and we expect to continue to deliver year-over-year revenue growth and operating leverage in Q4," said Alex Davern, NI COO and CFO. "Looking forward we are working hard to take advantage of our opportunity and remain committed to driving organic growth."

Gross margins are expected to be up sequentially in Q4. NI currently expects revenue for Q4 2014 to be between $312 million and $342 million, up 9 percent year-over-year at the midpoint. NI expects fully diluted EPS to be in the range of $0.23 to $0.35 for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.29 to $0.41.

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 Sept. 30, 2014 and 2013, 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 adjustments, 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 also discloses the company's EBITDA and EBITDA diluted EPS for the three- and nine-month periods ending Sept. 30, 2014 and 2013. 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.

Conference Call Information and Availability of Presentation Materials

Interested parties can listen to the Q3 2014 conference call today, Oct. 30, at 4:00 p.m. CT at ni.com/call. Replay information is available by calling (855) 859-2056, confirmation code #10295526, shortly after the call through Nov. 1 at 11:00 p.m. CT, or by visiting the company's website at ni.com/call. You may also view certain presentation materials that we may refer to on the conference call at ni.com/nati.

Forward-Looking Statements

This release contains "forward-looking statements," including statements regarding driving significant operating leverage, being optimistic about our long-term position in the industry, our new products released in Q3 adding capability to our platform to address new opportunities, expecting to continue to deliver YOY revenue growth and operating leverage in Q4, working hard to take advantage of our opportunity and remain committed to driving organic growth, gross margins expected to be up sequentially in Q4 and NI's Q4 guidance for revenue and GAAP and non-GAAP 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 customer demand for NI products including orders from NI's largest customer, fluctuations in average order size and customer mix, the company's ability to effectively manage its operating expenses, manufacturing inefficiencies and the level of capacity utilization, and the impact of any acquisitions by NI. Actual results may differ materially from the expected results.

The company directs readers to its Form 10-K for the fiscal year ended Dec. 31, 2013, and its Form 10-Q for the quarter ended June 30, 2014, 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)

CompactRIO, 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.

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

Source: National Instruments

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