National Instruments Reports Record Revenue for a Third Quarter of $321 Million

Net Income up 43% Year Over Year Through First Nine Months

Q3 2017 Highlights

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Revenue of $321 million, up 5 percent year over year

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GAAP gross margin of 74 percent

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Non-GAAP gross margin of 75 percent

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Fully diluted GAAP EPS of $0.25 and fully diluted non-GAAP EPS of $0.32

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GAAP net income of $33 million

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Non-GAAP net income of $42 million

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GAAP net income up 43% year over year through first nine months

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Non-GAAP net income up 28% year over year through first nine months

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EBITDA of $57 million

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Cash and short-term investments of $385 million as of September 30, 2017

AUSTIN, Texas – Oct. 26, 2017 - National Instruments (Nasdaq: NATI) today announced Q3 2017 revenue of $321 million, up 5 percent year over year.

In Q3 2017, NI received $8 million in orders from its largest customer compared with $5 million in orders from this customer in Q3 2016. The value of the company's total orders was up 5 percent year over year for the quarter; orders under $20,000 were up 1 percent year over year; orders between $20,000 and $100,000 were up 8 percent year over year; and orders above $100,000 were up 9 percent year over year.

GAAP net income for Q3 was $33 million, with fully diluted earnings per share (EPS) of $0.25, and non-GAAP net income was $42 million, a record for a third quarter, with non-GAAP fully diluted EPS of $0.32. Included in NI's GAAP net income for Q3 is $1 million related to restructuring charges. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $57 million for Q3.

In Q3, GAAP gross margin was 74 percent and non-GAAP gross margin was 75 percent. Total GAAP operating expenses were $200 million, down slightly year over year. Total non-GAAP operating expenses were $190 million, down 2 percent year over year. GAAP operating margin was 12 percent in Q3, with GAAP operating income of $38 million, up 28 percent year over year. Non-GAAP operating margin was 15 percent in Q3, with non-GAAP operating income of $49 million, up 29 percent year over year. Year-to-date, GAAP operating expenses were $608 million, up 2 percent year over year, and non-GAAP operating expenses were $576 million, flat year over year. GAAP operating income year-to-date was $88 million, up 26 percent year over year, and non-GAAP operating income year-to-date was $128 million, up 26 percent year over year.

"I am pleased with our performance in the first nine months of the year." said Alex Davern, NI president and CEO. "We have seen record revenue and record profit and have made significant progress toward our target business model. With strong alignment and focus throughout our organization, we have seen continued success in the key focus areas of semiconductor test, 5G, the electric and connected vehicle, and the Industrial Internet of Things."

Karen Rapp, NI CFO, said, "I am proud of the progress we have made in improving our operating performance this year. The midpoint of our Q4 guidance would provide a 45 percent increase in our GAAP fully diluted EPS year over-year for 2017. I continue to be impressed with the commitment from our employees as we all work toward alignment with our operational model. We believe this focus on growth and profitability will keep us on track to achieve our goals this year and into 2018."

Geographic revenue in U.S. dollar terms for Q3 2017 compared with Q3 2016 was up 3 percent in the Americas, up 12 percent in APAC and up 1 percent in EMEIA. Excluding the impact of foreign currency exchange, revenue was up 3 percent in the Americas, up 12 in APAC and up 1 percent in EMEIA. Historical revenue from these three regions can be found on NI's investor website at www.ni.com/nati.

As of Sept. 30, 2017, NI had $385 million in cash and short-term investments. During the third quarter, NI paid $27 million in dividends. The NI Board of Directors approved a quarterly dividend of $0.21 per share payable on Dec. 4, 2017, to stockholders of record on Nov. 13, 2017.

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. 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.

 

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 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 for the three-month and nine-month periods ending Sept. 30, 2017 and 2016. 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 to GAAP net income is included with this news release. This news release also discloses the year-over-year change in the company's core revenue growth for the three-month period ending Sept. 30, 2017.  The company believes that including its year over year change in core revenue growth assists investors in assessing the company's operational performance. A reconciliation of its year over year change in GAAP revenue growth to its year over year change in core revenue growth is included with this news release.

Forward-Looking Statements

This release contains "forward-looking statements" including statements regarding significant progress toward our target business model,  strong alignment and focus throughout our organization, continued success in the key focus areas of semiconductor test, 5G, the electric and connected vehicle, and the Industrial Internet of Things, progress we have made in improving our operating performance, that the midpoint of our Q4 guidance would provide a 45 percent increase in our GAAP fully diluted EPS year-over-year for 2017, commitment from our employees as we all work toward alignment with our operational model, our belief that this focus on growth and profitability will keep us on track to achieve our goals this year and into 2018, expecting  Q4 revenue to be in the range of $331 million to $361 million, expecting the impact of foreign exchange on dollar revenue will be minimal in Q4, expecting that GAAP fully diluted EPS will be in the range of $0.27 to $0.41 for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.34 to $0.48, approximately $1 million of restructuring charges in Q4, and estimating non-GAAP effective tax rate to be approximately 21 percent. 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, fluctuations in demand for NI products including orders from NI's largest customer, component shortages, delays in the release of new products, 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, 2016, its Form 10-Q for the quarter ended June 30, 2017 and the other documents it files with the SEC for other risks associated with the company's future performance.

 

About NI

NI (ni.com) empowers engineers and scientists with a software-centric platform that incorporates modular hardware and an expansive ecosystem. This proven approach puts users firmly in control of defining what they need to accelerate their system design within test, measurement and control. NI's solution helps build high-performance systems that exceed requirements, quickly adapt to change and ultimately improve the world.

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