Strong Revenue Growth in Software and Record Revenue in RF

Q3 2016 Highlights

• Revenue of $306 million, up 2 percent year over year in U.S. dollar terms with core revenue up 4 percent year over year
• GAAP gross margin of 75 percent, up 70 basis points year over year
• Non-GAAP gross margin of 75.7 percent, up 30 basis points year over year
• Fully diluted GAAP EPS of $0.19 and fully diluted non-GAAP EPS of $0.25
• Currency volatility in Q3 resulted in a $0.8 million loss on foreign exchange
• EBITDA of $46 million
• Cash and short-term investments of $353 million as of Sept. 30, 2016

AUSTIN, Texas — (BUSINESS WIRE) — October 27, 2016 — National Instruments (Nasdaq: NATI) today announced Q3 2016 revenue of $306 million, up 2 percent year over year in U.S. dollar terms with core revenue up 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 Q3 2016, NI received $5 million in orders from its largest customer compared with $6 million in orders from this customer in Q3 2015. Excluding NI’s largest customer, the company’s total order growth was up 5 percent in U.S. dollar terms for the quarter. The impact of foreign currency exchange reduced our year-over-year order growth by 3 percent. Orders under $20,000 were down 3 percent year over year; orders between $20,000 and $100,000 were up 2 percent year over year; and orders above $100,000 were up 34 percent year over year.

GAAP net income for Q3 was $24.5 million, with fully diluted earnings per share (EPS) of $0.19, and non-GAAP net income was $32.1 million, with non-GAAP fully diluted EPS of $0.25. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $46.1 million.

In Q3, GAAP gross margin was 75.0 percent and non-GAAP gross margin was 75.7 percent. Total GAAP operating expenses were $200 million, up 5 percent year over year. Total non-GAAP operating expenses were $194 million, up 6 percent year over year. GAAP operating margin was 9.6 percent in Q3, with GAAP operating income of $29.4 million. Non-GAAP operating margin was 12.5 percent in Q3, with non-GAAP operating income of $38.3 million.

“Over the last decade, we have made the long-term strategic investments necessary to make NI a company built to last,” said James Truchard, NI president, co-founder and CEO. “I believe the strong platform-based product offering and ecosystem we have today, coupled with significant progress in key areas including RF, FPGA and software puts NI in a strategically differentiated position.”

Alex Davern, NI COO and CFO, said, “We continued to execute well in the third quarter, delivering revenue growth year-over-year. I am encouraged by our order growth this quarter and believe that the strong growth in orders over $100,000 reflects improving confidence among our larger customers. We believe we will continue to build on the multi-year investments that we have made to help deliver continued revenue growth and drive towards our 18 percent non-GAAP operating margin target.”

Geographic revenue in U.S. dollar terms for Q3 2016 compared with Q3 2015 was up 3 percent in the Americas and down 6 percent in EMEIA. Revenue growth in APAC was strong at approximately 12 percent year over year. In constant currency terms, revenue was up 3 percent in the Americas, up 1 percent in EMEIA and up 12 percent in APAC. Historical revenue from these three regions can be found on NI’s investor website at www.ni.com/nati.

As of Sept. 30, 2016, NI had $353 million in cash and short-term investments. During the quarter, NI paid $26 million in dividends and repaid $15 million of the outstanding balance under its line of credit. The NI Board of Directors approved a quarterly dividend of $0.20 per share payable on Dec. 5, 2016, to stockholders of record on Nov. 14, 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 Q4 2016

NI currently expects Q4 revenue to be in the range of $323 million to $353 million. Based on current exchange rates, the company expects that the impact of the strengthening U.S. dollar will reduce the company’s year-over-year dollar revenue growth rate by approximately 2 percent in Q4. We are expecting our non-GAAP effective tax rate to be approximately 25 percent in Q4. For 2017, we are expecting our non-GAAP effective tax rate to be in the range of 18 percent to 20 percent. The company currently expects that GAAP fully diluted EPS will be in the range of $0.23 to $0.37 for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.31 to $0.45.