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
Condensed Consolidated Balance Sheets
(in thousands)
				September 30,					December 31,
				2014					2013
				(unaudited)
Assets
Current assets:
Cash and cash equivalents				$	259,455				$	230,263
Short-term investments					188,299					163,149
Accounts receivable, net					187,726					180,680
Inventories, net					170,862					172,109
Prepaid expenses and other current assets					71,735					49,001
Deferred income taxes, net					28,425					33,393
Total current assets					906,502					828,595
Property and equipment, net					261,622					260,568
Goodwill					145,026					146,520
Intangible assets, net					83,151					82,310
Other long-term assets					24,592					25,558
Total assets				$	1,420,893				$	1,343,551
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable				$	61,893				$	56,614
Accrued compensation					37,638					25,189
Deferred revenue - current					101,407					96,117
Accrued expenses and other liabilities					13,728					17,627
Other taxes payable					34,822					29,808
Total current liabilities					249,488					225,355
Deferred income taxes					41,885					44,620
Liability for uncertain tax positions					10,412					23,572
Deferred revenue - long-term					24,808					21,389
Other long-term liabilities					7,012					5,531
Total liabilities					333,605					320,467
Stockholders' equity:
Preferred stock					-					-
Common stock					1,276					1,257
Additional paid-in capital					649,794					604,330
Retained earnings					440,785					414,947
Accumulated other comprehensive (loss) income					(4,567	)				2,550
Total stockholders' equity					1,087,288					1,023,084
Total liabilities and stockholders' equity				$	1,420,893				$	1,343,551

National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data, unaudited)
				Three Months Ended									Nine Months Ended
				September 30,									September 30,
				2014					2013				2014					2013
Net sales:
Product				$	287,336				$	269,582			$	837,824				$	810,663
Software maintenance					26,365					19,556				73,262					61,089
Total net sales					313,701					289,138				911,086					871,752
Cost of sales:
Product					79,266					73,541				229,529					224,954
Software maintenance					1,683					1,665				4,443					4,307
Total cost of sales					80,949					75,206				233,972					229,261
Gross profit					232,752					213,932				677,114					642,491
Operating expenses:
Sales and marketing					116,736					111,253				348,026					337,884
Research and development					58,972					60,791				170,082					180,520
General and administrative					22,741					21,363				68,854					66,363
Acquisition related adjustment					-					-				-					(1,316	)
Total operating expenses					198,449					193,407				586,962					583,451
Operating income					34,303					20,525				90,152					59,040
Other income (expense):
Interest income					362					133				793					495
Net foreign exchange (loss) gain					(452	)				456				(1,005	)				(2,057	)
Other (loss) income, net					(70	)				304				283					728
Income before income taxes					34,143					21,418				90,223					58,206
(Benefit from) Provision for income taxes					(5,559	)				5,654				7,275					9,421
Net income				$	39,702				$	15,764			$	82,948				$	48,785
Basic earnings per share				$	0.31				$	0.13			$	0.65				$	0.39
Diluted earnings per share				$	0.31				$	0.13			$	0.65				$	0.39
Weighted average shares outstanding -
basic					127,478					125,032				126,785					124,244
diluted					127,903					125,608				127,529					125,221
Dividends declared per share				$	0.15				$	0.14			$	0.45				$	0.42

National Instruments
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
				Nine Months Ended September 30,
				2014					2013
Cash flow from operating activities:
Net income				$	82,948				$	48,785
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization					51,011					50,897
Stock-based compensation					19,531					21,996
Tax expense/(benefit) expense from deferred income taxes					2,222					(1,272	)
Tax benefit from stock option plans					(1,189	)				(2,185	)
Changes in operating assets and liabilities:
Accounts receivable					(7,046	)				4,789
Inventories					1,247					(8,358	)
Prepaid expenses and other assets					(24,887	)				(18,320	)
Accounts payable					5,279					(10,636	)
Deferred revenue					8,709					6,192
Taxes and other liabilities					2,891					2,834
Net cash provided by operating activities					140,716					94,722
Cash flow from investing activities:
Capital expenditures					(30,645	)				(40,795	)
Capitalization of internally developed software					(22,055	)				(10,566	)
Additions to other intangibles					(2,238	)				(4,146	)
Purchases of short-term investments					(107,664	)				(16,039	)
Sales and maturities of short-term investments					82,514					35,299
Net cash used by investing activities					(80,088	)				(36,247	)
Cash flow from financing activities:
Proceeds from issuance of common stock					24,483					28,809
AWR earnout payment					-					(9,016	)
Dividends paid					(57,108	)				(52,241	)
Tax benefit from stock option plans					1,189					2,185
Net cash used by financing activities					(31,436	)				(30,263	)
Net change in cash and cash equivalents					29,192					28,212
Cash and cash equivalents at beginning of period					230,263					161,996
Cash and cash equivalents at end of period				$	259,455				$	190,208

National Instruments
Detail of GAAP charges related to revenue, stock-based compensation, amortization of acquisition intangibles, and acquisition transaction costs and restructuring charges
(in thousands, unaudited)
				Three Months Ended										Nine Months Ended
				September 30,										September 30,
				2014					2013					2014					2013
Stock-based compensation
Cost of sales				$	465				$	390				$	1,264				$	1,219
Sales and marketing					2,756					2,908					8,334					8,907
Research and development					2,497					3,803					7,221					9,136
General and administrative					877					889					2,657					2,734
Provision for income taxes					(2,284	)				(2,894	)				(5,917	)				(6,585	)
Total				$	4,311				$	5,096				$	13,559				$	15,411
Amortization of acquisition intangibles
Cost of sales				$	2,662				$	2,672				$	7,991				$	8,045
Sales and marketing					433					490					1,351					1,506
Research and development					392					396					1,198					1,638
Other income, net					170					185					507					566
Provision for income taxes					(1,207	)				(1,232	)				(3,647	)				(3,850	)
Total				$	2,450				$	2,511				$	7,400				$	7,905
Acquisition transaction costs and restructuring charges
Cost of sales				$	547				$	4				$	547				$	7
Sales and marketing					(24	)				146					152					406
Research and development					(42	)				281					264					691
General and administrative					38					71					145					246
Acquisition related adjustment					-					-					-					(1,316	)
Provision for income taxes					(182	)				(153	)				(388	)				(412	)
Total				$	337				$	349				$	720				$	(378	)

National Instruments
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, unaudited)
					Three Months Ended										Nine Months Ended
					September 30,										September 30,
					2014					2013					2014					2013
Reconciliation of Gross Profit to Non-GAAP Gross Profit
Gross profit, as reported				$	232,752				$	213,932				$	677,114				$	642,491
Stock-based compensation					465					390					1,264					1,219
Amortization of acquisition intangibles					2,662					2,672					7,991					8,045
Acquisition transaction costs and restructuring charges					547					4					547					7
Non-GAAP gross profit				$	236,426				$	216,998				$	686,916				$	651,762
Non-GAAP gross margin					75	%				75	%				75	%				75	%
Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
Operating expenses, as reported				$	198,449				$	193,407				$	586,962				$	583,451
Stock-based compensation					(6,130	)				(7,600	)				(18,212	)				(20,777	)
Amortization of acquisition intangibles					(825	)				(886	)				(2,549	)				(3,144	)
Acquisition related adjustment					-					-					-					1,316
Acquisition transaction costs and restructuring charges					28					(498	)				(561	)				(1,343	)
Non-GAAP operating expenses				$	191,522				$	184,423				$	565,640				$	559,503
Reconciliation of Operating Income to Non-GAAP Operating Income
Operating income, as reported				$	34,303				$	20,525				$	90,152				$	59,040
Stock-based compensation					6,595					7,990					19,476					21,996
Amortization of acquisition intangibles					3,487					3,558					10,540					11,189
Acquisition related adjustment					-					-					-					(1,316	)
Acquisition transaction costs and restructuring charges					519					502					1,108					1,350
Non-GAAP operating income				$	44,904				$	32,575				$	121,276				$	92,259
Non-GAAP operating margin					14	%				11	%				13	%				11	%
Reconciliation of Income before income taxes to Non-GAAP Income before income taxes
Income before income taxes, as reported				$	34,143				$	21,418				$	90,223				$	58,206
Stock-based compensation					6,595					7,990					19,476					21,996
Amortization of acquisition intangibles					3,657					3,743					11,047					11,755
Acquisition related adjustment					-					-					-					(1,316	)
Acquisition transaction costs and restructuring charges					519					502					1,108					1,350
Non-GAAP income before income taxes				$	44,914				$	33,653				$	121,854				$	91,991
Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes
Provision for income taxes, as reported				$	(5,559	)			$	5,654				$	7,275				$	9,421
Stock-based compensation					2,284					2,894					5,917					6,585
Amortization of acquisition intangibles					1,207					1,232					3,647					3,850
Acquisition transaction costs and restructuring charges					182					153					388					412
Non-GAAP provision for income taxes				$	(1,886	)			$	9,933				$	17,227				$	20,268

National Instruments
Reconciliation of GAAP Net Income, Basic EPS and Diluted EPS to Non-GAAP Net Income, Non-GAAP Basic EPS and Non-GAAP Diluted EPS
(in thousands, except per share data, unaudited)
				Three Months Ended								Nine Months Ended
				September 30,								September 30,
				2014				2013				2014				2013
Net income, as reported				$	39,702			$	15,764			$	82,948			$	48,785
Adjustments to reconcile net income to non-GAAP net income:
Stock-based compensation, net of tax effect					4,311				5,096				13,559				15,411
Amortization of acquisition intangibles, net of tax effect					2,450				2,511				7,400				7,905
Acquisition related adjustment					-				-				-				(1,316	)
Acquisition transaction costs and restructuring charges, net of tax effect					337				349				720				938
Non-GAAP net income				$	46,800			$	23,720			$	104,627			$	71,723
Basic EPS, as reported				$	0.31			$	0.13			$	0.65			$	0.39
Adjustment to reconcile basic EPS to non-GAAP
basic EPS:
Impact of stock-based compensation, net of tax effect					0.04				0.04				0.11				0.13
Impact of amortization of acquisition intangibles, net of tax effect					0.02				0.02				0.06				0.06
Acquisition related adjustment					-				-				-				(0.01	)
Impact of acquisition transaction costs and restructuring charges, net of tax effect					-				-				0.01				0.01
Non-GAAP basic EPS				$	0.37			$	0.19			$	0.83			$	0.58
Diluted EPS, as reported				$	0.31			$	0.13			$	0.65			$	0.39
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS
Impact of stock-based compensation, net of tax effect					0.04				0.04				0.11				0.12
Impact of amortization of acquisition intangibles, net of tax effect					0.02				0.02				0.06				0.06
Acquisition related adjustment					-				-				-				(0.01	)
Impact of acquisition transaction costs and restructuring charges, net of tax effect					-				-				-				0.01
Non-GAAP diluted EPS				$	0.37			$	0.19			$	0.82			$	0.57
Weighted average shares outstanding -
Basic					127,478				125,032				126,785				124,244
Diluted					127,903				125,608				127,529				125,221

National Instruments
Reconciliation of Net Income and Diluted EPS to EBITDA and EBITDA Diluted EPS
(in thousands, except per share data, unaudited)
				Three Months Ended										Nine Months Ended
				September 30,										September 30,
				2014					2013					2014					2013
Net income, as reported				$	39,702				$	15,764				$	82,948				$	48,785
Adjustments to reconcile net income to EBITDA:
Interest income					(362	)				(133	)				(793	)				(495	)
Tax expense					(5,559	)				5,654					7,275					9,421
Depreciation and amortization					17,654					17,342					51,011					50,897
EBITDA				$	51,435				$	38,627				$	140,441				$	108,608
Diluted EPS, as reported				$	0.31				$	0.13				$	0.65				$	0.39
Adjustment to reconcile diluted EPS to EBITDA
Interest income					(0.01	)				-					(0.01	)				-
Tax expense					(0.04	)				0.04					0.06					0.07
Depreciation and amortization					0.14					0.14					0.40					0.41
EBITDA diluted EPS				$	0.40				$	0.31				$	1.10				$	0.87
Weighted average shares outstanding - Diluted					127,903					125,608					127,529					125,221

Reconciliation of GAAP to Non-GAAP EPS Guidance
(unaudited)
				Three months ended
				December 31, 2014
				Low				High
GAAP Fully Diluted EPS, guidance				$	0.23			$	0.35
Adjustment to reconcile diluted EPS to non-GAAP
diluted EPS:
Impact of stock-based compensation, net of tax effect					0.04				0.04
Impact of amortization of acquisition intangibles, net of tax effect					0.02				0.02
Non-GAAP diluted EPS, guidance				$	0.29			$	0.41

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