Business Wire | Oct 29, 2020 04:20PM EDT

NI Reports Third Quarter Results

Oct. 29, 2020

AUSTIN, Texas--(BUSINESS WIRE)--Oct. 29, 2020--National Instruments (Nasdaq: NATI) today announced Q3 2020 revenue of $308 million, down 9 percent year over year, and up 2 percent sequentially.

In Q3 2020 the value of the company's orders was down 7 percent year over year; orders over $20,000 were down 4 percent year over year; and orders under $20,000 were down 11 percent year over year. For Q3, year over year orders in the Americas region were relatively flat, in EMEA orders were down 16 percent, and in APAC orders were down 7 percent during the quarter.

Before the second quarter of 2020 we included order value and net sales attributable to our operations in India within the EMEA region. In the second quarter of 2020, we began including these amounts within the APAC geographic region, to reflect recent changes within our organizational structure.

Geographic revenue in U.S. dollar terms for Q3 2020 compared with Q3 2019 was down 11 percent in the Americas, down 5 percent in APAC and down 12 percent in EMEA. Excluding the impact of foreign currency exchange, revenue was down 11 percent in the Americas, down 3 percent in APAC and down 13 percent in EMEA. Historical revenue from these three regions can be found on NI's investor website at www.ni.com/nati.

In Q3, GAAP gross margin was 70 percent and non-GAAP gross margin was 74 percent. Total GAAP operating expenses were $218 million, up 1 percent year over year. Total non-GAAP operating expenses were down 3 percent year over year at $189 million. GAAP operating loss was $(2) million with non-GAAP operating income of $40 million. GAAP net loss for Q3 was $(5) million and non-GAAP net income was $30 million, with GAAP fully diluted EPS of ($0.04) and non-GAAP fully diluted EPS of $0.23, above the midpoint of our guidance. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, was $19 million for Q3.

For the first nine months of 2020, GAAP revenue was $919 million, down 7 percent year over year, the value of the company's total orders was down 6 percent year over year, with GAAP net income of $139 million, up 34% year over year, and GAAP fully diluted EPS of $1.06.

"We have and will continue to take a broad range of actions to ignite growth. Building on our unique software position, we believe we have the opportunity to once again modernize and disrupt our industry," said Eric Starkloff, NI CEO. "We remain focused on execution in the areas of our business that can drive our growth even within the constraints of an overall weaker spending environment. The actions we are taking, on both reductions and investments, are focused on achieving long-term growth."

"We delivered third quarter revenue above the midpoint of guidance despite the current economic environment. While we have seen positive signs in our business, we remain cautious to the uncertainty that lies ahead," said Karen Rapp, NI CFO. "We remain committed to the execution of our growth and profitability strategy in pursuit of our long-term financial targets. We believe our strong balance sheet and cash position provide us the capability to keep our capital allocation priorities unchanged as we stay committed to shareholder value."

As of September 30, 2020, NI had $290 million in cash and short-term investments. During the third quarter, NI paid $34 million in dividends and repurchased 446,502 shares of our common stock at an average price of $34.86 per share. The NI Board of Directors approved a quarterly dividend of $0.26 per share payable on December 7, 2020, to stockholders of record on November 16, 2020.

The company's non-GAAP results exclude, as applicable, the impact of purchase accounting fair value adjustments, stock-based compensation, amortization of acquisition-related intangibles, acquisition-related transaction and integration costs, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, restructuring charges, tax reform charges, disposal gains on buildings and related charitable contributions, tax effects related to businesses held for sale, gain on sale of businesses, and capitalization and amortization of internally developed software costs. Reconciliations of the company's GAAP and non-GAAP results are included as part of this news release.

Guidance

NI currently expects Q4 GAAP revenue to be in the range of $333 million to $363 million and Q4 non-GAAP revenue, which adjusts for the impact of purchase price accounting related to OptimalPlus, to be in the range of $335 million to $365 million. The company currently expects that GAAP fully diluted EPS will be in the range of $(0.04) to $0.10 for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.32 to $0.46. Included in our EPS guidance is a restructuring charge of $0.13 which relates to a reduction in our global workforce of approximately 9%.

Conference Call Information

Interested parties can listen to the Q3 2020 earnings conference call with NI management today, October 29, at 4:00 p.m. CT at ni.com/call or by dialing 855-212-2361 and entering confirmation code 7456239 ten minutes prior to the call start time. Replay information is available by calling (855) 859-2056 and entering confirmation code 7456239 , shortly after the call through November 1 at 10:00 p.m. CT or by visiting the company's website at ni.com/call.

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 revenue, gross profit, gross margin, operating expenses, operating income, operating margin, provision for income taxes, net income and fully diluted EPS for the three and nine months ended September 30, 2020 and 2019, on a GAAP and non-GAAP basis. NI is also providing guidance on its non-GAAP revenue and 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 purchase accounting fair value adjustments, stock-based compensation expense, amortization of acquisition-related intangibles, acquisition-related transaction and integration costs, taxes levied on the transfer of acquired intellectual property, foreign exchange loss on acquisitions, restructuring charges, tax reform charges, disposal gains on buildings and related charitable contributions, tax effects related to businesses held for sale, gain on sale of businesses, and capitalization and amortization of internally developed software costs 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 and nine months ended September 30, 2020 and 2019. 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.

Forward-Looking Statements

This release contains "forward-looking statements" including statements regarding we have and will continue to take a broad range of actions to ignite growth; building on our unique software position, we believe we have the opportunity to once again modernize and disrupt our industry; we remain focused on execution in the areas of our business that can drive our growth even within the constraints of an overall weaker spending environment; the actions we are taking, on both reductions and investments, are focused on achieving long-term growth; while we have seen positive signs in our business, we remain cautious to the uncertainty that lies ahead; we remain committed to the execution of our growth and profitability strategy in pursuit of our long-term financial targets; we believe our strong balance sheet and cash position provide us the capability to keep our capital allocation priorities unchanged as we stay committed to shareholder value; expecting Q4 GAAP revenue to be in the range of $333 million to $363 million, expecting Q4 non-GAAP revenue, which adjusts for the impact of purchase accounting fair value adjustments related to OptimalPlus, to be in the range of $335 million to $365 million, and expecting that GAAP fully diluted EPS will be in the range of $(0.04) to $0.10 for Q4, with non-GAAP fully diluted EPS expected to be in the range of $0.32 to $0.46; and included in our EPS guidance is a restructuring charge of $0.13 which relates to a reduction in our global workforce of approximately 9%. These statements are subject to a number of risks and uncertainties, including risks and uncertainties related to the COVID-19 virus and further economic and market disruptions resulting from COVID-19; further adverse changes or fluctuations in the global economy; further adverse fluctuations in our industry; foreign exchange fluctuations; changes in the current global trade regulatory environment; fluctuations in customer demands and markets; fluctuations in demand for NI products including orders from NI's large customers; component shortages; delays in the release of new products; NI's ability to effectively manage its operating expenses; manufacturing inefficiencies and the level of capacity utilization; the impact of any recent or future acquisitions or divestitures by NI (including the ability to successfully operate or integrate the acquired company's business into NI, the ability to retain and integrate the acquired company's employees into NI, and the ability to realize the expected benefits of the acquisition); NI's ability to achieve the benefits of employee restructuring plans and possible changes in the size and timing of the related charges; expense overruns; and 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, 2019, its Form 10-Q for the quarter ended June 30, 2020 and the other documents it files with the SEC for other risks associated with the company's future performance. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in our forward-looking statements.

All information in this release is as of the date above. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

About NI

At NI, we bring together the people, ideas and technology so forward thinkers and creative problem solvers can take on humanity's biggest challenges. From data and automation to research and validation, we provide the tailored, software-connected systems engineers and enterprises need to Engineer Ambitiously(tm) every day. (NATI-F)

LabVIEW, 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,

2020 2019

(unaudited)

Assets

Current assets:

Cash and cash equivalents $ 197,319 $ 194,616

Short-term investments 92,853 237,983

Accounts receivable, net 214,620 248,872

Inventories, net 209,558 200,410

Prepaid expenses and other current assets 72,956 65,477

Total current assets 787,306 947,358



Property and equipment, net 253,073 243,717

Goodwill 487,101 262,242

Intangible assets, net 183,067 84,083

Operating lease right-of-use assets 69,395 70,407

Other long-term assets 63,930 44,082

Total assets $ 1,843,872 $ 1,651,889



Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses $ 48,886 $ 52,192

Accrued compensation 53,496 47,732

Deferred revenue - current 116,871 131,445

Operating lease liabilities - current 16,177 13,431

Other taxes payable 41,604 40,607

Debt, current 3,500 -

Other current liabilities 50,259 20,716

Total current liabilities 330,793 306,123



Deferred income taxes 41,514 14,065

Liability for uncertain tax positions 6,867 6,652

Income tax payable - non-current 61,628 69,151

Deferred revenue - non-current 34,210 33,480

Operating lease liabilities - non-current 37,767 40,650

Debt, noncurrent 84,289 -

Other long-term liabilities 7,606 5,418

Total liabilities $ 604,674 $ 475,539



Stockholders' equity:

Common stock 1,312 1,305

Additional paid-in capital 1,012,656 953,578

Retained earnings 247,970 242,537

Accumulated other comprehensive loss (22,740 ) (21,070 )

Total stockholders' equity 1,239,198 1,176,350

Total liabilities and stockholders' equity $ 1,843,872 $ 1,651,889

National Instruments

Condensed Consolidated Statements of Income

(in thousands, except per share data, unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Net sales:

Product

$

269,651

$

305,247

$

809,890

$

882,747

Software maintenance

38,473

35,195

108,944

103,000

Total net sales

308,124

340,442

918,834

985,747

Cost of sales:

Product

88,370

84,127

254,236

240,056

Software maintenance

3,893

1,788

7,689

5,700

Total cost of sales

92,263

85,915

261,925

245,756

Gross profit

215,861

254,527

656,909

739,991

70.1

%

74.8

%

71.5

%

75.1

%

Operating expenses:

Sales and marketing

109,774

113,922

330,939

352,340

Research and development

70,802

66,558

206,648

200,981

General and administrative

37,431

35,711

92,980

92,639

Total operating expenses

218,007

216,191

630,567

645,960

Gain on sale of business/assets

-

26,842

159,753

26,842

Operating income

(2,146

)

65,178

186,095

120,873

Other (expense) income:

(2,001

)

2,249

(2,584

)

5,379

Income before income taxes

(4,147

)

67,427

183,511

126,252

Provision for income taxes

475

15,783

44,588

22,697

Net (loss) income

$

(4,622

)

$

51,644

$

138,923

$

103,555

Basic (loss) earnings per share

$

(0.04

)

$

0.39

$

1.06

$

0.79

Diluted (loss) earnings per share

$

(0.04

)

$

0.39

$

1.06

$

0.78

Weighted average shares outstanding -

Basic

131,419

131,385

131,017

131,896

Diluted

131,419

131,889

131,671

132,890

Dividends declared per share

$

0.26

$

0.25

$

0.78

$

0.75

National Instruments

Condensed Consolidated Statements of Income

(in thousands, except per share data, unaudited)



Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019



Net sales:

Product $ 269,651 $ 305,247 $ 809,890 $ 882,747

Software 38,473 35,195 108,944 103,000 maintenance

Total net 308,124 340,442 918,834 985,747 sales



Cost of sales:

Product 88,370 84,127 254,236 240,056

Software 3,893 1,788 7,689 5,700 maintenance

Total cost of 92,263 85,915 261,925 245,756 sales



Gross profit 215,861 254,527 656,909 739,991

70.1 % 74.8 % 71.5 % 75.1 %

Operating expenses:

Sales and 109,774 113,922 330,939 352,340 marketing

Research and 70,802 66,558 206,648 200,981 development

General and 37,431 35,711 92,980 92,639 administrative

Totaloperating 218,007 216,191 630,567 645,960 expenses

Gain on saleof business/ - 26,842 159,753 26,842 assets

Operating (2,146 ) 65,178 186,095 120,873 income

Other(expense) (2,001 ) 2,249 (2,584 ) 5,379 income:

Income before (4,147 ) 67,427 183,511 126,252 income taxes

Provision for 475 15,783 44,588 22,697 income taxes

Net (loss) $ (4,622 ) $ 51,644 $ 138,923 $ 103,555 income



Basic (loss)earnings per $ (0.04 ) $ 0.39 $ 1.06 $ 0.79 share

Diluted (loss)earnings per $ (0.04 ) $ 0.39 $ 1.06 $ 0.78 share



Weightedaverage shares outstanding -

Basic 131,419 131,385 131,017 131,896

Diluted 131,419 131,889 131,671 132,890



Dividendsdeclared per $ 0.26 $ 0.25 $ 0.78 $ 0.75 share

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

Nine Months Ended September 30,

2020

2019

Cash flow from operating activities:

Net income

$

138,923

$

103,555

Adjustments to reconcile net income to net cash provided by operating activities:

Disposal gains on sale of business/asset

(159,753

)

(26,842

)

Depreciation and amortization

61,228

54,546

Stock-based compensation

42,556

38,054

Deferred income taxes

(932

)

(1,461

)

Net change in operating assets and liabilities

26,762

(18,507

)

Net cash provided by operating activities

108,784

149,345

Cash flow from investing activities:

Acquisitions, net of cash received

(334,981

)

-

Capital expenditures

(36,573

)

(47,183

)

Proceeds from sale of business/assets, net of cash divested

160,266

32,492

Capitalization of internally developed software

(2,806

)

(7,179

)

Additions to other intangibles

(1,045

)

(1,132

)

Acquisitions of equity-method investments

(7,502

)

(13,670

)

Purchases of short-term investments

(206,330

)

(141,074

)

Sales and maturities of short-term investments

351,597

204,046

Net cash (used in) provided by investing activities

(77,374

)

26,300

Cash flow from financing activities:

Proceeds from revolving loan facility

20,000

-

Proceeds from term loan

70,000

-

Payments on term loan

(875

)

-

Debt issuance costs

(1,480

)

-

Proceeds from issuance of common stock

24,971

25,823

Repurchase of common stock

(39,244

)

(137,171

)

Dividends paid

(102,396

)

(99,083

)

Net cash used in financing activities

(29,024

)

(210,431

)

Impact of changes in exchange rates on cash

317

(1,827

)

Net change in cash and cash equivalents

2,703

(36,613

)

Cash and cash equivalents at beginning of period

194,616

259,386

Cash and cash equivalents at end of period

$

197,319

$

222,773



Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

Nine Months Ended September 30,

2020 2019



Cash flow from operating activities:

Net income $ 138,923 $ 103,555

Adjustments to reconcile net income to net cash provided by operating activities:

Disposal gains on sale of business/asset (159,753 ) (26,842 )

Depreciation and amortization 61,228 54,546

Stock-based compensation 42,556 38,054

Deferred income taxes (932 ) (1,461 )

Net change in operating assets and liabilities 26,762 (18,507 )

Net cash provided by operating activities 108,784 149,345



Cash flow from investing activities:

Acquisitions, net of cash received (334,981 ) -

Capital expenditures (36,573 ) (47,183 )

Proceeds from sale of business/assets, net of 160,266 32,492 cash divested

Capitalization of internally developed software (2,806 ) (7,179 )

Additions to other intangibles (1,045 ) (1,132 )

Acquisitions of equity-method investments (7,502 ) (13,670 )

Purchases of short-term investments (206,330 ) (141,074 )

Sales and maturities of short-term investments 351,597 204,046

Net cash (used in) provided by investing (77,374 ) 26,300 activities



Cash flow from financing activities:

Proceeds from revolving loan facility 20,000 -

Proceeds from term loan 70,000 -

Payments on term loan (875 ) -

Debt issuance costs (1,480 ) -

Proceeds from issuance of common stock 24,971 25,823

Repurchase of common stock (39,244 ) (137,171 )

Dividends paid (102,396 ) (99,083 )

Net cash used in financing activities (29,024 ) (210,431 )



Impact of changes in exchange rates on cash 317 (1,827 )



Net change in cash and cash equivalents 2,703 (36,613 )

Cash and cash equivalents at beginning of 194,616 259,386 period

Cash and cash equivalents at end of period $ 197,319 $ 222,773

The following tables provide details with respect to the amount of GAAP charges related to stock-based compensation, amortization of acquisition-related intangibles and fair value adjustments, acquisition-related transaction and integration costs, capitalization and amortization of internally developed software costs, restructuring charges, gains on sale of business/assets, and other that were recorded in the line items indicated below (unaudited) (in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Stock-based compensation

Cost of sales

$

1,051

$

904

$

2,787

$

2,587

Sales and marketing

5,184

5,231

16,826

14,745

Research and development

4,692

4,099

12,640

12,029

General and administrative

4,293

3,158

10,301

8,693

Provision for income taxes

(3,854

)

(2,128

)

(8,260

)

(7,904

)

Total

$

11,366

$

11,264

$

34,294

$

30,150

Amortization of acquisition-related intangibles and fair value adjustments

Net sales

$

1,299

$

-

$

1,299

$

-

Cost of sales

4,198

833

5,579

2,525

Sales and marketing

2,334

492

3,300

1,485

Research and development

28

28

84

84

Other expense (income)

121

124

363

285

Provision for income taxes

(1,658

)

(190

)

(1,948

)

(576

)

Total

$

6,322

$

1,287

$

8,677

$

3,803

Acquisition transaction and integration costs, restructuring charges, and other(1)(2)(3)

Cost of sales

$

(13

)

$

-

$

7

$

-

Sales and marketing

1,158

2,993

8,771

8,290

Research and development

374

244

5,190

899

General and administrative(1)(3)

10,210

7,998

12,595

9,525

Gain on sale of business/assets(1)(2)

-

(26,842

)

(159,753

)

(26,842

)

Other expense (income)

270

-

397

-

Provision for income taxes

(712

)

3,090

33,965

1,240

Total

$

11,287

$

(12,517

)

$

(98,828

)

$

(6,888

)

(1): During the third quarter of 2019, the company recognized a gain of $27 million related to the sale of an office building, presented within "Gain on sale of business/assets". The company also recognized a charitable contribution expense of $7 million related to an infrequent donation using a portion of the proceeds from the sale of the building, presented within "General and administrative".

(2): During the first quarter of 2020, the company recognized a gain of $160 million related to the divestiture of AWR, presented within "Gain on sale of business/assets".

(3): During the third quarter of 2020, we recognized $5 million of compensation expense related to the replacement of unvested options acquired from OptimalPlus. These amounts were accounted for as post-combination expense and will be recognized over the required service period.

Capitalization and amortization of internally developed software costs

Cost of sales

$

6,769

$

6,954

$

20,995

$

20,073

Research and development

302

(2,682

)

(2,794

)

(7,179

)

Provision for income taxes

(1,485

)

(897

)

(3,822

)

(2,708

)

Total

$

5,586

$

3,375

$

14,379

$

10,186

The following tables provide details with respect to the amount of GAAP chargesrelated to stock-based compensation, amortization of acquisition-relatedintangibles and fair value adjustments, acquisition-related transaction andintegration costs, capitalization and amortization of internally developedsoftware costs, restructuring charges, gains on sale of business/assets, andother that were recorded in the line items indicated below (unaudited) (inthousands)



Three Months Ended Nine Months Ended

September 30, September 30,



2020 2019 2020 2019

Stock-based compensation

Cost of sales $ 1,051 $ 904 $ 2,787 $ 2,587

Sales and marketing 5,184 5,231 16,826 14,745

Research and 4,692 4,099 12,640 12,029 development

General and 4,293 3,158 10,301 8,693 administrative

Provision for (3,854 ) (2,128 ) (8,260 ) (7,904 ) income taxes

Total $ 11,366 $ 11,264 $ 34,294 $ 30,150



Amortization ofacquisition-relatedintangibles and fair valueadjustments

Net sales $ 1,299 $ - $ 1,299 $ -

Cost of sales 4,198 833 5,579 2,525

Sales and marketing 2,334 492 3,300 1,485

Research and 28 28 84 84 development

Other expense 121 124 363 285 (income)

Provision for (1,658 ) (190 ) (1,948 ) (576 ) income taxes

Total $ 6,322 $ 1,287 $ 8,677 $ 3,803



Acquisitiontransaction andintegration costs, restructuringcharges, and other^(1)(2)(3)

Cost of sales $ (13 ) $ - $ 7 $ -

Sales and marketing 1,158 2,993 8,771 8,290

Research and 374 244 5,190 899 development

General andadministrative^(1) 10,210 7,998 12,595 9,525 (3)

Gain on sale ofbusiness/assets^(1) - (26,842 ) (159,753 ) (26,842 ) (2)

Other expense 270 - 397 - (income)

Provision for (712 ) 3,090 33,965 1,240 income taxes

Total $ 11,287 $ (12,517 ) $ (98,828 ) $ (6,888 )

(1): During the third quarter of 2019, the company recognized a gain of $27million related to the sale of an office building, presented within "Gain onsale of business/assets". The company also recognized a charitable contributionexpense of $7 million related to an infrequent donation using a portion of theproceeds from the sale of the building, presented within "General andadministrative".

(2): During the first quarter of 2020, the company recognized a gain of $160million related to the divestiture of AWR, presented within "Gain on sale ofbusiness/assets".

(3): During the third quarter of 2020, we recognized $5 million of compensationexpense related to the replacement of unvested options acquired fromOptimalPlus. These amounts were accounted for as post-combination expense andwill be recognized over the required service period.



Capitalization andamortization ofinternally developed softwarecosts

Cost of sales $ 6,769 $ 6,954 $ 20,995 $ 20,073

Research and 302 (2,682 ) (2,794 ) (7,179 ) development

Provision for (1,485 ) (897 ) (3,822 ) (2,708 ) income taxes

Total $ 5,586 $ 3,375 $ 14,379 $ 10,186

National Instruments

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Reconciliation of Net sales to Non-GAAP Net sales

Net sales, as reported

$

308,124

340,442

918,834

$

985,747

plus: Impact of purchase accounting fair value adjustments

1,299

-

1,299

-

Non-GAAP net sales

$

309,423

340,442

920,133

$

985,747

Reconciliation of Gross Profit to Non-GAAP Gross Profit

Gross profit, as reported

$

215,861

$

254,527

$

656,909

$

739,991

Stock-based compensation

1,051

904

2,787

2,587

Amortization of acquisition-related intangibles and fair value adjustments

5,497

833

6,878

2,525

Acquisition transaction and integration costs, restructuring charges and other

(13

)

-

7

-

Amortization of internally developed software costs

6,769

6,954

20,995

20,073

Non-GAAP gross profit

$

229,165

$

263,218

$

687,576

$

765,176

Non-GAAP gross margin

74.1

%

77.3

%

74.7

%

77.6

%

Reconciliation of Operating Expenses to Non-GAAP Operating Expenses

Operating expenses, as reported

$

218,007

$

216,191

$

630,567

$

645,960

Stock-based compensation

(14,169

)

(12,488

)

(39,767

)

(35,467

)

Amortization of acquisition-related intangibles and fair value adjustments

(2,362

)

(520

)

(3,384

)

(1,569

)

Acquisition transaction and integration costs, restructuring charges and other

(11,742

)

(11,235

)

(26,556

)

(18,714

)

Capitalization of internally developed software costs

(302

)

2,682

2,794

7,179

Non-GAAP operating expenses

$

189,432

$

194,630

$

563,654

$

597,389

Reconciliation of Operating Income to Non-GAAP Operating Income

Operating income, as reported

$

(2,146

)

$

65,178

$

186,095

$

120,873

Stock-based compensation

15,220

13,392

42,554

38,054

Amortization of acquisition-related intangibles and fair value adjustments

7,859

1,353

10,262

4,094

Acquisition transaction and integration costs, restructuring charges and other

11,729

11,235

26,563

18,714

Net amortization of internally developed software costs

7,071

4,272

18,201

12,894

Gain on sale of business/assets

-

(26,842

)

(159,753

)

(26,842

)

Non-GAAP operating income

$

39,733

$

68,588

$

123,922

$

167,787

Non-GAAP operating margin

12.8

%

20.1

%

13.5

%

17.0

%

Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes(1)

Provision for income taxes, as reported

$

475

$

15,783

$

44,588

$

22,697

Stock-based compensation

3,854

2,128

8,260

7,904

Amortization of acquisition-related intangibles and fair value adjustments

1,658

190

1,948

576

Acquisition transaction and integration costs, restructuring charges and other

712

2,587

2,794

4,437

Net amortization of internally developed software costs

1,485

897

3,822

2,708

Gain on sale of business/assets

-

(5,677

)

(36,759

)

(5,677

)

Tax reform charge

-

(2,774

)

-

(2,774

)

Non-GAAP provision for income taxes(1)

$

8,184

$

13,134

$

24,653

$

29,871

(1): The income tax effect related to each non-GAAP item is calculated based on the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current and deferred tax impact of those adjustments.

National Instruments

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, unaudited)



Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019



Reconciliation ofNet sales to Non-GAAP Net sales

Net sales, as $ 308,124 340,442 918,834 $ 985,747 reported

plus: Impact ofpurchase accounting 1,299 - 1,299 - fair valueadjustments

Non-GAAP net sales $ 309,423 340,442 920,133 $ 985,747



Reconciliation of Gross Profit to Non-GAAP Gross Profit

Gross profit, as $ 215,861 $ 254,527 $ 656,909 $ 739,991 reported

Stock-based 1,051 904 2,787 2,587 compensation

Amortization ofacquisition-relatedintangibles and 5,497 833 6,878 2,525 fair valueadjustments

Acquisitiontransaction andintegration costs, (13 ) - 7 - restructuringcharges and other

Amortization ofinternally 6,769 6,954 20,995 20,073 developed softwarecosts

Non-GAAP gross $ 229,165 $ 263,218 $ 687,576 $ 765,176 profit

Non-GAAP gross 74.1 % 77.3 % 74.7 % 77.6 %margin



Reconciliation of Operating Expenses to Non-GAAP Operating Expenses

Operating expenses, $ 218,007 $ 216,191 $ 630,567 $ 645,960 as reported

Stock-based (14,169 ) (12,488 ) (39,767 ) (35,467 ) compensation

Amortization ofacquisition-relatedintangibles and (2,362 ) (520 ) (3,384 ) (1,569 ) fair valueadjustments

Acquisitiontransaction andintegration costs, (11,742 ) (11,235 ) (26,556 ) (18,714 ) restructuringcharges and other

Capitalization ofinternally (302 ) 2,682 2,794 7,179 developed softwarecosts

Non-GAAP operating $ 189,432 $ 194,630 $ 563,654 $ 597,389 expenses



Reconciliation of Operating Income to Non-GAAP Operating Income

Operating income, $ (2,146 ) $ 65,178 $ 186,095 $ 120,873 as reported

Stock-based 15,220 13,392 42,554 38,054 compensation

Amortization ofacquisition-relatedintangibles and 7,859 1,353 10,262 4,094 fair valueadjustments

Acquisitiontransaction andintegration costs, 11,729 11,235 26,563 18,714 restructuringcharges and other

Net amortization ofinternally 7,071 4,272 18,201 12,894 developed softwarecosts

Gain on sale of - (26,842 ) (159,753 ) (26,842 ) business/assets

Non-GAAP operating $ 39,733 $ 68,588 $ 123,922 $ 167,787 income

Non-GAAP operating 12.8 % 20.1 % 13.5 % 17.0 %margin



Reconciliation of Provision for income taxes to Non-GAAP Provision for income taxes^(1)

Provision forincome taxes, as $ 475 $ 15,783 $ 44,588 $ 22,697 reported

Stock-based 3,854 2,128 8,260 7,904 compensation

Amortization ofacquisition-relatedintangibles and 1,658 190 1,948 576 fair valueadjustments

Acquisitiontransaction andintegration costs, 712 2,587 2,794 4,437 restructuringcharges and other

Net amortization ofinternally 1,485 897 3,822 2,708 developed softwarecosts

Gain on sale of - (5,677 ) (36,759 ) (5,677 ) business/assets

Tax reform charge - (2,774 ) - (2,774 )

Non-GAAP provisionfor income taxes^ $ 8,184 $ 13,134 $ 24,653 $ 29,871 (1)

(1): The income tax effect related to each non-GAAP item is calculated based onthe tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current anddeferred tax impact of those adjustments.

Reconciliation of GAAP Net (Loss) Income and Diluted EPS to Non-GAAP Net Income, Non-GAAP Diluted EPS, and EBITDA

(in thousands, except per share data, unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Net (loss) income, as reported

$

(4,622

)

$

51,644

$

138,923

$

103,555

Adjustments to reconcile net (loss) income to non-GAAP net income:

Stock-based compensation

15,220

13,392

42,554

38,054

Amortization of acquisition-related intangibles and fair value adjustments

7,980

1,477

10,625

4,379

Acquisition transaction and integration costs, restructuring charges and other

11,999

11,235

26,960

18,714

Net amortization of internally developed software costs

7,071

4,272

18,201

12,894

Gain on sale of business/assets

-

(26,842

)

(159,753

)

(26,842

)

Income tax effects and adjustments(1)

(7,709

)

2,649

19,935

(7,174

)

Non-GAAP net income

$

29,939

$

57,827

$

97,445

$

143,580

Non-GAAP net margin

9.7

%

17.0

%

10.6

%

14.6

%

Diluted EPS, as reported

$

(0.04

)

$

0.39

$

1.06

$

0.78

Adjustment to reconcile diluted EPS to non-GAAP diluted EPS

Stock-based compensation

0.12

0.10

0.32

0.28

Amortization of acquisition-related intangibles and fair value adjustments

0.06

0.01

0.08

0.03

Acquisition transaction and integration costs, restructuring charges and other

0.10

0.09

0.20

0.14

Net amortization of internally developed software costs

0.05

0.03

0.14

0.10

Gain on sale of business/assets

-

(0.20

)

(1.21

)

(0.20

)

Income tax effects and adjustments(1)

(0.06

)

0.02

0.15

(0.05

)

Non-GAAP diluted EPS

$

0.23

$

0.44

$

0.74

$

1.08

(1): The income tax effect related to each non-GAAP item is calculated based on the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current and deferred tax impact of those adjustments.

Weighted average shares outstanding - Diluted

131,419

131,889

131,671

132,890

Reconciliation of GAAP Net (Loss) Income and Diluted EPS to Non-GAAP NetIncome, Non-GAAP Diluted EPS, and EBITDA

(in thousands, except per share data, unaudited)



Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019



Net (loss) income, $ (4,622 ) $ 51,644 $ 138,923 $ 103,555 as reported

Adjustments toreconcile net(loss) income to non-GAAP netincome:

Stock-based 15,220 13,392 42,554 38,054 compensation

Amortization ofacquisition-relatedintangibles and 7,980 1,477 10,625 4,379 fair valueadjustments

Acquisitiontransaction andintegration costs, 11,999 11,235 26,960 18,714 restructuringcharges and other

Net amortization ofinternally 7,071 4,272 18,201 12,894 developed softwarecosts

Gain on sale of - (26,842 ) (159,753 ) (26,842 ) business/assets

Income tax effects (7,709 ) 2,649 19,935 (7,174 ) and adjustments^(1)

Non-GAAP net income $ 29,939 $ 57,827 $ 97,445 $ 143,580

Non-GAAP net margin 9.7 % 17.0 % 10.6 % 14.6 %



Diluted EPS, as $ (0.04 ) $ 0.39 $ 1.06 $ 0.78 reported

Adjustment toreconcile diluted EPS to non-GAAPdiluted EPS

Stock-based 0.12 0.10 0.32 0.28 compensation

Amortization ofacquisition-relatedintangibles and 0.06 0.01 0.08 0.03 fair valueadjustments

Acquisitiontransaction andintegration costs, 0.10 0.09 0.20 0.14 restructuringcharges and other

Net amortization ofinternally 0.05 0.03 0.14 0.10 developed softwarecosts

Gain on sale of - (0.20 ) (1.21 ) (0.20 ) business/assets

Income tax effects (0.06 ) 0.02 0.15 (0.05 ) and adjustments^(1)

Non-GAAP diluted $ 0.23 $ 0.44 $ 0.74 $ 1.08 EPS

(1): The income tax effect related to each non-GAAP item is calculated based onthe tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current anddeferred tax impact of those adjustments.



Weighted averageshares outstanding 131,419 131,889 131,671 132,890 - Diluted

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Net income, as reported

$

(4,622

)

$

51,644

$

138,923

$

103,555

Adjustments to reconcile net income to EBITDA:

Interest expense (income), net

560

(1,923

)

(2,608

)

(6,155

)

Tax expense

475

15,783

44,588

22,697

Depreciation and amortization

22,887

18,562

61,228

54,546

EBITDA

$

19,300

$

84,066

$

242,131

$

174,643

Weighted average shares outstanding - Diluted

131,419

131,889

131,671

132,890

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Net income, as $ (4,622 ) $ 51,644 $ 138,923 $ 103,555 reported

Adjustments toreconcile net income to EBITDA:

Interest expense 560 (1,923 ) (2,608 ) (6,155 ) (income), net

Tax expense 475 15,783 44,588 22,697

Depreciation and 22,887 18,562 61,228 54,546 amortization

EBITDA $ 19,300 $ 84,066 $ 242,131 $ 174,643

Weighted averageshares 131,419 131,889 131,671 132,890 outstanding -Diluted



Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS Guidance

(unaudited)

Three Months Ended

December 31, 2020

Low

High

GAAP Diluted EPS, guidance

$

(0.04)

$

0.10

Adjustment to reconcile diluted EPS to non-GAAP diluted EPS:

Stock-based compensation

0.12

0.12

Amortization of acquisition-related intangibles and fair value adjustments

0.06

0.06

Acquisition transaction and integration costs, restructuring charges, and other

0.20

0.20

Net amortization of software development costs

0.04

0.04

Income tax effects and adjustments(1)

(0.06)

(0.06)

Non-GAAP Diluted EPS, guidance

$

0.32

$

0.46

(1): The income tax effect related to each non-GAAP item is calculated based on the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current and deferred tax impact of those adjustments.

Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS Guidance

(unaudited)

Three Months Ended

December 31, 2020



Low High

GAAP Diluted EPS, guidance $ (0.04) $ 0.10

Adjustment to reconcile diluted EPS to non-GAAP diluted EPS:

Stock-based compensation 0.12 0.12

Amortization of acquisition-related intangibles and 0.06 0.06 fair value adjustments

Acquisition transaction and integration costs, 0.20 0.20 restructuring charges, and other

Net amortization of software development costs 0.04 0.04

Income tax effects and adjustments^(1) (0.06) (0.06)

Non-GAAP Diluted EPS, guidance $ 0.32 $ 0.46

(1): The income tax effect related to each non-GAAP item is calculated based onthe tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment, and considers the current anddeferred tax impact of those adjustments.

Reconciliation of GAAP Revenue to Non-GAAP Revenue, Guidance

(unaudited)

Three Months Ended

December 31,

2020

2019

Percent Inc/(Dec)

(midpoint)

GAAP Revenue, guidance

$

348,000

$

367,468

(5

)%

plus: Impact of purchase accounting fair value adjustments

2,000

-

Non-GAAP Revenue, guidance

$

350,000

$

367,468

(5

)%

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