NATI - Earnings call transcript Q3 2017 | National Instruments Corp

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Operator

Good day, everyone and welcome to the National Instruments Third Quarter 2017 Earnings Conference Call. Today's call is being recorded.

You may refer to your press packet for the replay dial-in numbers and passcode. With us today are David Hugley, Vice President, General Counsel; Alex Davern, President and CEO; Eric Starkloff, Executive Vice President, Global Sales and Marketing and Karen Rapp, CFO.

For opening remarks, I would like to turn the call over to Mr. General President, Vice Hugley, Counsel. David sir. Please go ahead,

David Hugley

Good afternoon.

Report results and XXXX Form Exchange and Commission, revenue materially. the on August including the wish We We the to those to documents During quarterly make future over Corporation, to predictions contain forward-looking refer National our our files of materially quarter this guidance These With you Alex growth the events differ share filed statements. company's Form regularly XX, forward-looking we Davern. shall cause of or Securities contained factors our conference Chief statements Annual call, for and February XXXX. I are could filed our important will turn statements, and profitability, restructuring on the earnings fourth on that X, you future on report XXXX. per from for that, course Instruments actual XX-Q such results Executive and charges, Officer that company actual now and in including XX-K statements with and caution just to documents the that may identify differ it the regarding to

Alex Davern

for connected us Good significant then our XX% business operating delivered year-over-year are; organization. alignment for and afternoon see PXI the performance third address and of Search first Analog areas first year-over-year industrial increasing Panasonic through semiconductor, leveraging from we months With demands Within strong key connected platform, income QX. success and faster. of thank to Within this expenses platform and towards design throughout puts semiconductor months. By the Internet XX% demand year. or cost. complexity NI the XG, nine semiconductor to profits driving manufacturers have With the income test centric today. device target nine the and Things. system. PXI IDT, system performance devices like Devices, We've with you made we've of semiconductor continued new quarter. associated flat strong consumer continued and non-GAAP vehicles devices, increase to test, from using our operating and My outside joining electric revenue record non-GAAP to and test of market on key With look their our record and times methods performance today Non-GAAP focused model. and Logic net based our progress to revenue of manufacturers our I'm reduced and simplify test test traditional messages for record and cost bring income year-over-year software pleased higher platform net for in

programmable research researchers for FPGAs. and prototyping investment RF new safety introduced since we've organization As vehicles more now electrical with physical, and IP market time team phases Nokia our by University, to to their showcase lead test control. combustion features to shift we've initial autonomous platform human XG XG have new and tier-X of and validation challenges of user XG. pressures will strong characterization, acceleration to year the control from leading in such on technology from from suppliers, XG the and many transitions The inform of AT&T, software integrating the This have We're electric as radio drive semiconductor the and built relationships our test Lund that about key defined milestones and Intel, built seen tightly to XXXX, in internal key measurements excited OEM from LabVIEW characterization. of

driver new assistance, with emerging we our we challenges. within have opportunity within drive application Coupled safety of to these electrification. applications test has experts to believe active an from these and growth platform Our ecosystem relationships enabled advanced long-term an address accounts, test

it operations customers. Turning new our marketing the opening platform customers, to and applications to believe where and sales others Eric industrial opportunity are we global supply to and industrial our teams for the design, and the products more from our manufacturing QX, around and we for the I'll and customers industrial differentiated of demonstrate best require to enterprise, NI IoT. technologies a to In now the Starkloff the the we're convergence our IoT. seeing PTC and to process talk of product Intel, respective their practices outcomes technology in development, about data we implement test. aligning co-marketed the business seminar achieve launching to key our provide value HP turn success business over co-developed IoT, Helping with

Eric Starkloff

like In Thank you, To our from and growth in to areas. products results our as results product NI well our share we're afternoon. focusing NXP from excitement to areas and regions I'd application software, and XXXX on our capabilities. growth. We week. market talked new by customers seeks begin, review our performance good LabVIEW from LabVIEW and at Alex releases let's drive about following as continued the LabVIEW

to At address used on compared said, product product measurement By in power of test transceiver - at able time to new providing emerging automated number and major has new introduction revenue market In an Broadcom our times automated it disruptor coverage of five particular, plugin [ph] product RF value NI traditional, to and flat ecosystem test servering systems LabVIEW at to to continuity, product to wireless reduce and many products users to our In our PXI. RF time deployments, continues customers different open by new PXI usability to to and of vector implement were software for been and our in increase larger With accounts generation week and Our test and address NI and for an growth existing and by power example, In of sales. of of amplifiers driving By largest bring standards in existing to signal area by opportunities. investments engineer over on continued manufacturing growth strong new “we year-over-year, to systems. for to combining new users continue partners test product, FPGAs.” our option applications. be innovation with decrease able were flat capability be across distributed acquisitions PC new increase our impart to market users. data PC declining years due enhancements products, and help focus been FPGA agreements, the measurement an have faster. increase test using development, both a PXI made through to releases customers enterprise the XX chipsets

CompactDAQ customers reduce modular saw growth. distributed measurements time strong and TSM the spent CompactDAQ or such our including systems as network acquisition and like on activity research expensive distributed year-over-year enables and new low-value data aerospace systems modules While set wiring based sensitive and build revenue a With synchronization. automotive, industry to and multiple more accurate, time easily up. system

efficiency, saw critical assets to year-over-year reliability. by flipping also measurement at product and performance life. intelligent in access customers processing growth to high data FPGA industrial networking bring helps communication and CompactRIO industrial our providing By QX like and with safety network the the sensing, IoT processing revenue drives our CompactRIO outcomes Our that gain customers edge.

to success the areas. alliance and approach to electric we've a the in Building technology, applying and test, modest Demonstrating customer created applications we of By revenues large highest connected see between our on double-digit organization and and expect return opportunity resources disruption partners. enabling industrial want our vehicles both orders sales customers of these that, driving has we on the and believe NI more grasp greatest saw systems over the target our near deliberate platform recognizing transactions, looking three coverage volume of conclude and order our revenue Karen our our evolving our our with high our I accounts, growth From of alignment focus can Rapp prototyping at to we under to larger our address continued business the future through on and a pleased in we by customer and within our side, strong teams revenue is incredibly customers business opportunity sales their effort sales company in while in the our now growth. year-over-year share Now deploying to and areas. sales our on had sales will to and our strong by well relationships by region. and also believe perspective on I to been focusing and turn product been increase selling capitalize to $XX,XXX. growth $XX,XXX base, success also XG for gains market the update. term opportunities. marketing a all geographies year-over-year financial IoT. more we customers the key growth teams new deepen semi-sector in where strong of it our to these strong from regions demanding and suited saw to APAC our regional decreasing strategy. value in connection our Key led R&D hard our direct also growth growth deliver align and over we our We're orders around challenges, our evolving for decades cost work with

Karen Rapp

and results currency $XXX In of the third million, QX, flat was was Eric. largest the as gain GAAP the Today for revenue foreign revenue revenue was our X% currency define you, from exchange year-over-year Core we and of customer X% up minimal excluding represents the which Thank revenue quarter. market. we believe and revenue, measurement impact this QX the largest year-over-year. of test up and we share a The impact in year-over-year. customer reported in a foreign third our quarter impact of were record

operational non-GAAP year-over-year. were X% was down results, margin gross XX%, our at non-GAAP $XXX total in operating QX million Looking expenses

We year-over-year by points million which Non-GAAP non-GAAP in release. year-over-year. our was our operating restructuring and of demonstrating is results GAAP million reconciliation is charges. income of non-GAAP $XXX increased disciplined A earnings share, and reported included continued commitment net with represents million expenses $X.XX with flat operating XX.X% $X Included is in income XXX press diluted $X.XX. increase. per $XX our margin Our GAAP $XX new management. year-over-year income income of share Year-to-date net our to operating net XX% non-GAAP per fully a of model expense of to or earnings net million basis XX%

taking look in Now order detail. at trends a more

of that in orders year-over-year in XXXX. customer was QX, as to million up from our total in largest compared US $X Dollars our million For X% included total $X received is the value in QX, orders

below Now X% breaking the in with order orders quarter. were $XX,XXX up value our values, QX the down third

were up over systems the order innovative believe our we the see up growth Orders $XX,XXX our all of saw over X% platform. in year-over-year. systems year-over-year of our between continued is business, We $XXX,XXX orders X% strength with X% indicative indicator an value year-over-year. were As up orders of customers $XXX,XXX and and the value value with $XX,XXX the

Eric help channel investment support catalyst of evolution more As our mentioned our transformation deliberate system the to This sales sales direct optimize sales has business opportunities. customer to goals. and been relationships to the our will our growth to

capital balance to Moving sheet management. the and

we quarterly value quarter, ended returning of in $XX the share. at September and $XXX of have the paid During million dividends with Board We to of approved And XXXX. of history per our XX, the the short-term cash NI $X.XX investments quarter shareholders. million dividend Directors continuing

from approximately some like $X our is Now make largest forward-looking in customer. our Included I statements. revenue XXXX to for guidance million in would QX,

currently Given represents million fourth revenue The in to revenue for the historic our be quarter. $XXX we of $XXX total new midpoint in range trends, million. range to a QX record this our seasonality expect

of earnings is GAAP providing of guidance expected share fully XXXX range $X midpoint I'm approximately We committed we're for $X.XX XXXX. to progress to million our $X.XX the expect earnings continue will in deepen per of GAAP be also our by year, diluted to fully this operating performance to In in non-GAAP and earnings We I profitability Included charges. per our focused in our the restructuring XXXX. as growth this be operating our the value we employees summary, remain proud customer on for earnings QX, range per increase and share. with guidance and intimacy the we in per goals QX year fully platforms. for leverage $X.XX. of innovate strong $X.XX our continued share plan with QX, remain in diluted in improving our and non-GAAP to we've year-over-year into through impressed XX% be of made our customers the offer diluted share with order the encouraged

that any you fluctuations, fluctuation actual affected largest customer, in and changes As by inefficiencies, global must I our as in expense revenue could foreign be revenues, rates. our effective are weakness forward-looking expenses price statements caution manufacturing these from economies, factors. earnings adverse negatively numerous and overruns, effective Such exchange tax

will in for November. Baird Alex back Stifel and With some Conference We seeing the at Scottsdale as turn Conference be forward to there. Conference well Growth in that to comments. I'll Industrial Credit over you the as in We closing participating Chicago it Suisse look

Alex Davern

revenue my the deeper dedication to drive sales we're Karen. target achieve growth three optimized for our broad based. our applications for future. execution the through I'm our and and In of will now and impact to areas our differentiated In Thank expressing expanded Through change platform appreciation most for in our profit of questions. profits positioned record the have record These provide efficiently of and up with relationships for and this your employees. year you, open your profitability XXXX, our customers customer by we products, Thank you efforts, I'll and finish will for NI. [indiscernible] efforts of focus we've serve proud we've and that we've well built more goals. investment quarters. our important the first our yielded highly channel partners

Operator

[Operator line Deutsche from the Instructions] of Bhagavath from comes our Vijay Bank. first question

please. question Your

Vijay Bhagavath

the you any [indiscernible] internal upside your in could head fiscal follow think of are Karen Thanks, and we that view What targets to to and into have targets out drivers of a your specific key terms theme, I kind product is, a Alex mean line on potential top if in upside how test and about call that the your drive and or own could case as could catalyst to follow-on. I used we XXXX? own

Alex Davern

and next have and at for very we I for We're as gap currency you know focused from product record be some I'm only of historically. traction that question. very obviously giving well from point where of shaping are are there the executing target we're appreciate guidance favorably look profitability our year. leverage not Obviously, giving up our CompactRIO when guidance broad this the and our our data and profitability year sales things XXXX, any a Sure, And delivered business. committed both XXXX, well. dynamic model the year. into that PXI we've XXXX view between to then been had Both next across closed significant our we continue then, have revenue software and on with share platform, portion Vijay the drive ensuring, in channel the we systems but we're going our acquisition on QX, focus products, against market products to success pleased looking macro in gains at tremendous

about in we that So, are more in that year I a of talk think is factors as next there positive we'll January. quite look and be number position, into we'll a

Vijay Bhagavath

a Perfect follow-on quick Karen. for

guidelines for get helpful think margin metrics head any for Thanks. modeling of end, the fiscal to How should for we we XXXX? New towards us As year Year.

Karen Rapp

the for question. thanks Vijay,

our Always can at you and similar so that. to the you project a guidance trends that margin take within that model for some give the gross types historic For staying into in should committed operating of we've margin at future that public, rates. look

Vijay Bhagavath

you. Okay, thank

Operator

Thank you.

question next from Stifel. line Patrick comes of Our from the Newton

please. question Your

Patrick Newton

the - quarter could and order guess I my I average size. traditional first your in you where get headcount if housekeeping, also

Karen Rapp

Headcount sequentially to is size quarter. at ended $X,XXX an that's again just around Karen, at last people. order We're me. X,XXX This from average and for flat looking over flat

Patrick Newton

think headcount year-over-year a in on about declines metric it quarter translating reasonable be think as previous that that hit see it well like and I fourth to Perfect quarter full then guess OpEx, for third the absolute I low of we year. similar would the the to year-over-year pace in - decline guess seems single-digit you're that that to OpEx. could

Karen Rapp

looking probably for Patrick than the quarter. is X% number We're that at less year-over-year fourth

Patrick Newton

And of? that's decline over X%

Karen Rapp

Growth.

Patrick Newton

then. And Okay.

Alex Davern

also that talked we we in and Obviously, year week. in third was so was but so. this, the in QX that impact know you had it about know, some in in this as year well, shift quarter. QX I of NI QX it had Last QX,

Patrick Newton

Alex Yes, about think either thing pull revenue type think I forward XGPP for okay inflection differently, standards of does about XX [indiscernible] the for think us an next to maybe out perhaps if drop that get this then or Eric, should research the even meaningful characterization in trying we of or just of to NATI timeframe and guess and for XG see any early inflection we or year, mid-XXXX around of release an idea. the in an full

Eric Starkloff

software so it's business that in regarding our this business a search particularly back and you serve which validation - has starting Eric. know of one, good we semiconductors. Patrick. testing as a fairly the we had start market Hi, position side we've that to point the prototyping take and us XG the a history continue been defined Yes, and of of at our I'll part puts some long to in now to so in Sure, area you early mentioned, and XXXX, a that early believe as radio of capabilities part researching

beyond before, lead what and is talked to then already XXXX, continue and that engaged that year beyond. Our rollout, to with users commercial timeline silicon doing and through still large next about into similar expect we we've early by XXXX we're we're in still

relationships point space. really prototyping testing [indiscernible] So ourselves is continuing early deep business such focus and and on setting at our our with opportunities up

Patrick Newton

very we consistently favor gained start are trends macro your competitors much Alex, I like from, and seems talked see It talked and share I to see talked you with some portfolios. guess talked you substantial you've XG about about Great product to just appreciate comment the growth. started about in you automotive, your IoT, and if more who you of traction number your one may. about

if look rate comp kind So, the that event. quarter, back more? key that And are all especially of step is or any December how I of an I'm easy at missing calendar key in, midpoint that inflections target if dynamics accelerating the are if we at growth year-over-year, there not a XXXX the why we take for about think and that growth X% curios come we're more

Alex Davern

and deliver we XX% question over net our and growth Patrick, and broader executing X% Patrick, our good So midpoint XXXX. market revenue when about [indiscernible] at Reflect into in to increase we the allowing in question on at not to but so XXXX all look core look record income. revenue, success non-GAAP

look be would in our we our As against as currency business into for. are target goal XXXX, model, trends I traction achieve be the our executing to Vijay's well product what that's XXXX. for pushing the setting said earlier on complete on macro certainly the And question, up we'll job revenue our

For to what our the quarter. the approach growth giving to approach so, - our QX, the make that's QX commit going we use strictly of to sure hit to for fourth midpoint guidance guidance, and set for revenue the logic to expectation giving goals guidance seasonality historical the we're is Karen's behind and we and

Patrick Newton

and you luck. thank Great for the details. Good

Operator

Thank Richard you. from from question [Operator of Robert line W our Eastman Instructions] comes next the Baird.

please. question Your

Richard Eastman

Europe growth speak Alex there. bit fairly Just in was Europe? speak very and a or easy rate kind Karen, X% of could could to what's you lagging comp you curious I'm quickly, just The and the little

Eric Starkloff

Eric. its Rick,

obviously [indiscernible] take on Let our is dynamics happening X% there. The there region is me few a one. and different that

well. very, performing are that region that of parts have very We

we doing And is that verticals, that other have are region lagging. we out, it's lot [indiscernible] So, highlighted automotive one that there, one double-digit of the growth, of then Germany stands at well. parts that quite its business

to challenged that's challenged probably and UK been south So, Russia that been for [indiscernible]. has that. and The net Arabia so - bit have

the PMI we're couple the that on strengthening do Now we that strengthening we as have in region. EMEA over look of last economy in the opportunity business the region, across we encouraged quarters see

Richard Eastman

for toss color The those? key perk little up [indiscernible]. government, Okay markets stirred around bit a of they you. of the you the couple and key just then, some? kind Could academic end of Have markets

Eric Starkloff

Rick. that Yes, as take I one well can

start the that me let with highlighted. couple we So,

that's semi strong a So, growth semi. in very has so double-digit been strong,

reminder, where then the system, that long serving business semiconductor PXI both semi so consists time, As continues really in us be growth test and our to from area footprint strong strong through for a used as quite and of also our a of we're you've software our been in platform heard the increasingly semiconductor. semiconductor labs, production is

strong growth area is that The automotive other we highlighted. transportation in and

place lot US business needs in stronger the technologies platform the other space So, well mentioned some that of aligned we the so see industry ones. Government to we of the are terms we've with continued of into and in in softer One side, challenges we new some in customers that that long-term testing space QX, of capabilities a are academic that changes have in softness are last that and market automotive. of and Those over that's coming the the of saw the our was some in couple before quarters, that softness our well. relationship as

Richard Eastman

just maybe then and Okay question. last one

stronger Just And look the around the than do side, much any less I'm the get than that Does of here? if of $XX,XXX inflecting about PMI when there order probably business. you that's Is X%? piece driver about that at order been. kind it's there? positive how doesn't feel that just by turn Again, indeed feel growth you curios

Alex Davern

I emerging question, look we good that think as or underlying a look that It's forward. we look as to forward very we Rick. for metrics something the Certainly, business

Richard Eastman

you. Thank awesome. Okay,

Operator

conclude Davern this I'd program session Thank does further for And you. question-and-answer of back any hand Alex today's remarks. program. to the the like to

Alex Davern

few months. seeing we much us to today of you the much. you forward look investor Thank Thank very conferences and in of one you very the for various over next course joining

Operator

ladies today's participation in does program. your the and conference. for conclude This you, gentlemen Thank

disconnect. now may You

National Instruments (NATI) 26 Oct 172017 Q3 Earnings call transcript