National Instruments Reports Record Revenue for a Third Quarter

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

The following tables provide details with respect to the amount of GAAP charges related to stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction costs, restructuring charges, foreign exchange loss on acquisitions and taxes levied on the transfer of acquired intellectual property that were recorded in the line items indicated below (unaudited) (in thousands)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,

	2017			2016			2017			2016
Stock-based compensation
Cost of sales	$	689		$	556		$	1,914		$	1,643
Sales and marketing		3,014			2,635			8,523			8,422
Research and development		2,328			2,027			6,552			6,745
General and administrative		1,514			921			4,358			2,764
Provision for income taxes		(2,369	)		(2,092	)		(7,388	)		(6,202	)
Total	$	5,176			4,047			13,959			13,372

Amortization of acquisition intangibles
Cost of sales	$	1,502		$	1,599		$	4,648		$	7,621
Sales and marketing		515			502			1,479			2,141
Research and development		283			276			813			815
Other income, net		—			—			—			—
Provision for income taxes		(546	)		854			(1,656	)		1,312
Total	$	1,754			3,231			5,284			11,889

Acquisition transaction costs, restructuring charges, and other
Cost of sales	$	79		$	74		$	988		$	253
Sales and marketing		1,618			42			8,018			141
Research and development		235			236			1,816			648
General and administrative		207			97			803			317
Foreign exchange gain (loss) ¹		—			—			—			94
Other income (loss), net ²		—			—			—			2,475
Provision for income taxes		(720	)		(156	)		(3,655	)		(1,358	)
Total	$	1,419		$	293		$	7,970		$	2,570

(1) Foreign exchange losses on acquisitions were $0 and $94 for the nine month periods ended September 30, 2017 and 2016, respectively
(2) Taxes levied on the transfer of acquired intellectual property were $0 and $2,475 for the nine month periods ended September 30, 2017 and 2016, respectively


National Instruments
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2017			2016		2017		2016

Reconciliation of Gross Profit to Non-GAAP Gross Profit
Gross profit, as reported	$	237,170		229,632		696,902		669,260
Stock-based compensation		689		556		1,914		1,643
Amortization of acquisition intangibles		1,502		1,599		4,648		7,621
Acquisition transaction costs and restructuring charges		79		74		988		253
Non-GAAP gross profit	$	239,440		231,861		704,452		678,777
Non-GAAP gross margin		75	%	76	%	75	%	75	%

Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
Operating expenses, as reported	$	199,655		200,265		608,436		598,782
Stock-based compensation		(6,856	)	(5,583	)	(19,433	)	(17,931	)
Amortization of acquisition intangibles		(798	)	(778	)	(2,292	)	(2,956	)
Acquisition transaction costs and restructuring charges		(2,060	)	(375	)	(10,637	)	(1,106	)
Non-GAAP operating expenses	$	189,941		193,529		576,074		576,789

Reconciliation of Operating Income to Non-GAAP Operating Income
Operating income, as reported	$	37,515		29,367		88,466		70,478
Stock-based compensation		7,545		6,139		21,347		19,574
Amortization of acquisition intangibles		2,300		2,377		6,940		10,577
Acquisition transaction costs and restructuring charges		2,139		449		11,625		1,359
Non-GAAP operating income	$	49,499		38,332		128,378		101,988
Non-GAAP operating margin		15	%	13	%	14	%	11	%

Reconciliation of Income before income taxes to Non-GAAP Income before income taxes
Income before income taxes, as reported	$	38,115		29,184		90,642		67,742
Stock-based compensation		7,545		6,139		21,347		19,574
Amortization of acquisition intangibles		2,300		2,377		6,940		10,577
Acquisition transaction costs and restructuring charges		2,139		449		11,625		1,359
Foreign exchange loss on acquisitions		—		—		—		94
Taxes levied on transfer of acquired intellectual property		—		—		—		2,475
Non-GAAP income before income taxes	$	50,099		38,149		130,554		101,821

Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes
Provision for income taxes, as reported	$	4,726		4,695		13,949		14,155
Stock-based compensation		2,369		2,092		7,388		6,202
Amortization of acquisition intangibles		546		(854	)	1,656		(1,312	)
Acquisition transaction costs, restructuring charges, and other		720		156		3,655		1,358
Non-GAAP provision for income taxes	$	8,361		6,089		26,648		20,403


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,
	2017		2016		2017		2016

Net income, as reported	$	33,389	$	24,489	$	76,693	$	53,587
Adjustments to reconcile net income to non-GAAP net income:
Stock-based compensation, net of tax effect		5,176		4,047		13,959		13,372
Amortization of acquisition intangibles, net of tax effect		1,754		3,231		5,284		11,889
Acquisition transaction costs, restructuring, and other, net of tax effect		1,419		293		7,970		2,570
Non-GAAP net income	$	41,738	$	32,060	$	103,906	$	81,418

Basic EPS, as reported	$	0.26	$	0.19	$	0.59	$	0.42
Adjustment to reconcile basic EPS to non-GAAP
basic EPS:
Impact of stock-based compensation, net of tax effect		0.04		0.03		0.11		0.10
Impact of amortization of acquisition intangibles, net of tax effect		0.01		0.03		0.04		0.09
Impact of acquisition transaction costs, restructuring, and other, net of tax effect		0.01		—		0.05		0.02
Non-GAAP basic EPS	$	0.32	$	0.25	$	0.79	$	0.63


Diluted EPS, as reported	$	0.25	$	0.19	$	0.59	$	0.42
Adjustment to reconcile diluted EPS to non-GAAP diluted EPS
Impact of stock-based compensation, net of tax effect		0.04		0.03		0.11		0.10
Impact of amortization of acquisition intangibles, net of tax effect		0.02		0.03		0.04		0.09
Impact of acquisition transaction costs, restructuring, and other, net of tax effect		0.01		—		0.05		0.02
Non-GAAP diluted EPS	$	0.32	$	0.25	$	0.79	$	0.63

Weighted average shares outstanding -
Basic		130,660		128,815		130,103		128,233
Diluted		131,617		129,047		131,050		128,738


National Instruments
Reconciliation of Net Income to EBITDA
(in thousands, unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net income, as reported	$	33,389		$	24,489		$	76,693		$	53,587
Adjustments to reconcile net income to EBITDA:
Interest income		(464	)		(53	)		(863	)		(194	)
Tax expense		4,726			4,695			13,949			14,155
Depreciation and amortization		18,879			16,947			54,794			55,164
EBITDA	$	56,530		$	46,078		$	144,573		$	122,712
Weighted average shares outstanding - Diluted		131,617			129,047			131,050			128,738


Reconciliation of GAAP to Non-GAAP EPS Guidance
(unaudited)
	Three Months Ended
	December 31, 2017

	Low			High
GAAP Fully Diluted EPS, guidance	$	0.27		$	0.41
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 and acquisition accounting adjustments, net of tax effect		0.02			0.02
Impact of acquisition transaction costs, restructuring, and other, net of tax effect		0.01			0.01
Non-GAAP diluted EPS, guidance	$	0.34		$	0.48


National Instruments
Reconciliation of GAAP Revenue Growth to Core Revenue Growth
(unaudited)

	Three Months Ended
	September 30,
	2017
YoY GAAP revenue growth, as reported	4.8	%
Effect of excluding our current largest customer	0.1	%
YoY GAAP revenue growth, excluding our largest customer	4.9	%
Effect of excluding the impact of foreign currency exchange	0.1	%
YoY Core revenue growth	5.0	%

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