NATI - Earnings call transcript Q4 2017 | National Instruments Corp

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Operator

Good day, everyone, and welcome to the National Instruments Fourth 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, General Counsel and Secretary; Alex Davern, President and CEO; Karen Rapp, CFO; and Eric Starkloff, Executive Vice President of Global Sales and Marketing.

For opening remarks, I'd like to turn the call over to Mr. and Counsel General Hugley, Secretary. David sir. Please go ahead,

David Hugley

Good afternoon.

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

Karen Rapp

and the our Sales will insights platform business share Global for of Marketing, thank Thank an quarter I you, will then CEO, his Starkloff, Executive Good outlook update XXXX. and President Davern, performance; Eric you President afternoon will begin reflections on conference call. for and and David. joining and Vice Alex into fourth with earnings our our share everyone, XXXX Today, success; our financial on

offer record business have performance income and the customers margin toward operating a quarter XX highest profit the for model. our of believe and revenue am our and quarterly model. really years, we revenue, and to the are this our key testament value Our our non-GAAP flow cash operating progress record from are operating our We to proud I significant messages operations, and we year. in operating strong today dedication

up GAAP For XXXX. the XXXX, full year billion, revenue a record X% over $X.XX was

gross XXXX XX%. was Our non-GAAP margin

income full GAAP For release. at included expenses the $XXX non-GAAP was A our earnings in of results nearly XX% year-over-year a non-GAAP our year, is non-GAAP million, operating flat reconciliation year-over-year and net $XXX with million. up press

revenue million For $XXX points QX, all-time XX.X%, up revenue in our was Non-GAAP In X.X% was gross record. year-over-year. year-over-year. QX, an QX basis XX grew margin

Due tax million. Our margin non-GAAP XX%, QX to new operating from $XX increasing corporate loss, basis we U.S. charge ago. of a XXX income net was a points tax in year the recorded

result, a per new adjustments our not net $XX was non-GAAP in million, share, a $XX GAAP are year-over-year represents QX which or increase. The $X.XX loss was XX% As net our million. related tax non-GAAP the results. income included to laws

we and capital balance sheet Moving quarter investments December $XXX million at with short-term management, and cash to the of the ended XX, XXXX.

strategy same. the allocation remain capital will Our

we During XX% dividend an NI quarter, dividends paid Directors $X.XX $XX QX, of and year-over-year. the per for increase million approved a Board the of share has of in

our on for past Our contributed XX%. tax tax such QX continue we year. strong XXXX global And as of through supportive PMI The the strong environment, laws, our effective risk growth and to subject XXXX XXXX the results also which indicative XX% be growth, a adjustments. estimated to tax based of forward understanding delivered industries automotive current non-GAAP semiconductor this was rate to corporate of of looking new rate

quarter. million with compared in X% $XX,XXX was that XXXX. is QX QX orders, of Included customer in the grew below looking to fourth in $X.X U.S. a largest X% from our of in total total in Now dollars. our year-over-year value Orders million up the at year-over-year orders QX as for $X.X orders value received

all saw of up over indicator an $XX,XXX, we orders systems business, X% of As the strength year-over-year. our

current Now, on exchange based improved some our to backlog and efficiency like market our position, profit also goals make the want rates. We I the In XXXX our PMI would forward-looking statements. about optimistic in continue deliver on trend like and and would were to to increase we to improve to QX, visibility.

we total to As revenue XXXX in range a the QX be result, to of $XXX currently $XXX million expect in million.

range $X.XX fully for $X.XX diluted share to will to earnings the per in per of fully We share GAAP in expect earnings $X.XX. with be to non-GAAP diluted be QX, range the expected $X.XX of

I in changes performance in foreign committed factors, strategy. exchange and executing For weakness adverse to effect and This further remain must statements, financial revenues, proud rates. focus our price could effective has on year business we of our benefit have overruns, fluctuations, key am you thank caution our XXXX. as of made economy, in affected our I the In for forward-looking summary, financial our want expenses delivered such from numerous fluctuation expense I to manufacturing our tax revenue that actual this improving our these negatively employees by global progress to any significant earnings to results. customer, delivered we be goals and operating in progress largest inefficiencies,

Morgan now in XXXX. drive our look XXth continue on and into February at our you forward over focus employees and which the And culture been Conference Francisco. the it Together, seeing Starkloff. growth turn Eric the value differentiator Our San brand, Technology continues will space. to our to on I a in and be profitability of major Stanley to We to has we goals will

Eric Starkloff

with and Thank afternoon. QX, year income. revenue to you, pleased good very and Karen, we In operating strong were the end record

full industries. research We particularly continues revenue from starting to customers like to growth our PXI the products. double-digit performance modular on and saw across capitalize growth full test in the commentary record approach aerospace us emerging I'd revenue XXXX for our with revenue for and to our believe position year. automotive, In of year well our needs semiconductor, challenges, and our Now, products instrument platform. we on had XXXX, some modular more provide

reduced their incremental lower the market platform test technology to cost. open and to force are financial that with time these As ecosystem it objectives supports pressures industries, help in teams and meet

we to have to design saw tests and starting platform to at in online to focus software level in jobs. customers’ higher agreement, the more complimentary able executives numerous enhancements teams, renewals a that product engineers engage new time goals. levels our in increases launch driving cost the sales. been new released growth provide organizations and customers’ within software point and enterprise in software to Turning seats In and streamline our Through software LabVIEW to our significant XXXX, growth of we of software improving introductions sales our capability XXXX, and software, double-digit including market strong we from of NXG and products

XXXX, systems. and will the delivers to costs in SystemLink, which enterprise InXXXX, of LabVIEW through system software software continue data deployment, diagnostics maintenance example, at lowering expand we capabilities level, we entire For the NIWeek distributed management remote our and value announced of and platform.

Just products systems will and of and software LabVIEW last of our examples. improved NI to customers version test new support we covering demonstrate customer through and automated XXXX, released release week, distribution. platform to for additional needs NXG the data hardware, expand software new we will we these newest including NIWeek our hardware visualize test and At ways more new

for strong in We teams support delivering want the efforts and Pacific played in to in region. a and XXXX. year. major finish focused and systems, sales the role to our strong effort in for growth globally you Through contributing Now regional profitability growth our growth our particularly looking of I in results. XXXX all recognize the revenue at saw Asia continued three regions

shifting Now with I'll to industry performance, start semiconductor.

devices. semiconductor our to of business the very growth this will in system. like trial Korea Things in we Our technologies this February the at out well rolling initial XG and accelerate. time vehicles XXXX, our With semiconductor and deployments in Olympics very from the XG, in performed autonomous are service test expect late pressure increasing strong Disruptive and market the of with pressures Internet semiconductor complexity commercial U.S. Winter

XG based add us reality, our our we continue leading approach work to platform. making with the modular many As a to software enables companies capability new to of

these with semiconductor So keep our trends. can customers up

source latest times the space our increases same measuring by unit example, density of number channel using PXI the and For parallel measurements increasing fixed power.

to throughput of them capacity test. this increasing their For helping by semiconductor creates cost manufacturers, free and lower

and automotive, Increased the the charging decisions world lab body used to get before budgets challenged With to of using expectations safety, NI Valeo test and software and revenue hundreds can in can environment. are this ALTRANS before validate and deadlines government results. and is to helps how and be platform design double-digit flat in the test these software This aerospace describe will in vehicles test multiple make the In like into U.S. our moving simulate are engineers platform assistance and increasingly more into data stimulate sensors, scenarios to bringing be from critical validate from decisions the XXXX. physical real XXXX, we example, market help control and cameras, expensive able connectivity delays repeatable areas testing. the enable RADAR technology breaking, for into systems vehicles that errors bringing sensors time new growth catch vehicles. and demonstrating saw and was and likes together budgets that to new fusion, controlling budget By to is market. to the informs business operating NI will consuming are was being of Audi, In driving advanced meeting a like input better new and essentially tight, powertrain, where production driver and LIDAR the inputs in by efficiency Turning customers to to reliable multiple platform acceleration, interior differentiated. Sensor drive technologies of used NI NI uncertainty subsystems driving. to spending. autonomous

aerospace with productivity critical goals. timeline hardware software combined our helps modular budget high meet customers flexible and and Our

industries continues by each driven strong be these NI suppliers developers. to Our partners, and success the ecosystem in and of of platform the

strengthening are turn our I’ll platform success focusing over to are providing unique to of now adoption our in that and our shared ecosystem we value need efforts, Davern. immersing customers target ourselves leading it Alex We By these our areas. in enable with customers. to

Alex Davern

Eric you and Karen. Thank

As accomplished. model and the significant I XXXX, to our dedication company. we and to simply, I for met we all of through And operating Stated progress and reflect want levels discipline our at thank hard we growth this growth to employees our of and on mindset. towards Practically, this make embracing meant of those partners what proud goals goals. focus I'm drive work revenue and set

to us opportunity platform outperform a improved at and in growth Some to within believe to changes advantage competition. continue payoff. have me challenged position XX NI, our we After I our differently on see behave continues the on The to profitability organization, of how competitive have and their standardizing the XXXX. seeing and our both from great Based inspiring drive these we platform growth. still customers our are to gain for solid years to think it's they to us use foundation

For decades, created we've problems. a and portfolio hardware our software installed helped in large investing plus enables XX solve integrated engineers to the platform, to that base years By most our leverage technology continually of challenging our product technical deep of has to modular innovation.

LabVIEW release was As and and for our value users. new of existing big NXG Eric adds milestone teams R&D to shared, both a the

“LabVIEW user my and focus because LabVIEW problem jobs NI on NXG team, at the Architect instead said, our Samsung Hoover tool”. can long-time example, for enjoy makes possible Test it to I of Brian For the Software

early differentiation, our where deployments cutting-edge achieved and our XXXX, areas powered and first customer’s seeing our key on customers platform to autonomous provides of of to focus forward to software-defined to vehicles, address our most more approach commercial help a market the enabler I will In challenges. continue look will we by XG like silicon. remain operation public wins As both

Our platform achieve enabling our technologies instrumentation wireless helped and to wins. software-defined customers communication, investments other have of early

partners. lead our This NI NIWeek encourage our and key our automotive, makers with you us tangible user our within highly NIWeek marketing research the very to gives strong aerospace May industry platform access attend scale, gives about broad a along value I combined at examples to technologies access NI’s both excited to accounts. focused leading and and to program access these and and in semiconductor, our position accounts. and with channel of As decision investor of sales conference our customers XXXX want I'm

leadership provide The We the our are of specifics XXXX and team more very employees will starting strategy. also on focused. our evolution

customers our on differentiated. focused is value are portfolio We delivering to most more where our

profitability set We our target We application growth position brand between XXXX goal. industries that gap goals are and make where our to operating areas focused half enable revenue performance achieved and non-GAAP partners. XX%. focus growth towards of and goal our in strong. us our is progress operating those XXXX the for of a should in ecosystem well We margin XXXX, drive of in of in bridging our This

journey. XXXX in is goal Our to complete that

history. As XXXX in at goal our to stated you on investor NI non-GAAP plans And towards you I conference opportunities foundation will accomplish growth. delivered our from with your non-GAAP to net XXXX, for forward our differentiated started strong our operating highly solve is at We update NIWeek benefit and for to the By on our optimized of goals. our through working income our XXXX. a and I average May, annual defined-platform, highest built our XX% cycle. value customers on by aligned including focus resources company’s progress employees and XXXX to aligning the to records the several model significant and XXXX. our execution, in focus in most close highest our income for Through the making we operating want our we operating software model look we business that thanking needs

questions. We open will for now your

Operator

Thank [Operator of Instructions] comes Deutsche first from Our question Vijay Bank. you. Bhagavath

open. now is line Your

Vijay Bhagavath

and Good Yeah, afternoon Karen Alex. thanks. Hi.

Alex Davern

are Vijay. How you? Hey,

Karen Rapp

are How you?

Vijay Bhagavath

Hey, as and asks Year into also questions important into growth clients. top-line kind of our most XXXX, from as New the this we of comes of Yeah, hi. head one

opportunities on model have of to perhaps that kind want orders in your get for so spending growth you all where the year. view helps most new budgets this and new you see Thank I that the calibrate terms So new you. of of us and do conviction demand

Alex Davern

industry-leading company, pleased Thanks for growth we're in very objectives acceleration always have Vijay. record need a Obviously, revenue our see XXXX. Sure, an in to growth deliver question. And as revenue delivering to your know for that organic and been value revenue with you balance a profitability. as

those both we're we of on made the pleased progress fronts. with So in XXXX

year see Now in we've in the moves areas overall we seen our look forward, at automotive. looking seen results We We've areas. Certainly, obviously full we see business operational like are markets that that as stronger like XG are currency strong and investments We benefits a the favor. economy. tailwinds some for our semi, XXXX. of in focused industrial our like

hitting that backlog later to perhaps very we're of outlook for profitability But goal about some taking will goals our advantage So the here the XXXX. build ensure QX, years. look at we and our in as optimistic to we're for we're some and opportunity be visibility raise

Vijay Bhagavath

and perfect. goals the margin quick be follow-on Yeah, on thought A the for would Karen process towards on this year? margin targets. for Any updates heading

Karen Rapp

not change we those about we time, the XXXX, no goals point. model May laid that stated Yep, Vijay. continuing Hi, so and we the operating focus driving are model that of that changing leverage so on NIWeek in in at at we to this as talked out

Vijay Bhagavath

Okay.

Alex Davern

NIWeek We’ll be at in to happy – XXXX May.

Vijay Bhagavath

Okay, you. great. Thank

Operator

Thank you.

Stifel. of Patrick Our comes from next Newton question

Your line open. is now

Patrick Newton

quarter actually and number Good the in Eric. afternoon on orders employees housekeeping average guess Alex, side Karen first and I of size?

Karen Rapp

year almost about average year-over-year. to size down in $X,XXX, X% X,XXX people, the X% ended up We QX And be year-over-year. exact. Patrick. X,XXX It’s was Hi, order with

Patrick Newton

[ph] guess, basis look margin at guess and EPS I then than revenue if step quarter, guidance gross would March you're sequentially XXX from seem points down of midpoint And forecasting OpEx increase that perhaps Great. the And more. would Karen, in I to the I sequentially although or revenue. a lower it the

headcount tea to correctly? the you I am in of XXXX? kind speak perhaps what So trends in to the for while could you guess leaves budgeting I trends reading you're QX, OpEx address also then And

Karen Rapp

Sure, Patrick.

the trajectory in we the which that in guidance continues headcount got a growth aligning the with building midpoint we’re of growth out and in model saw we've stays We're of for our QX XXXX. for growth year of the XXXX. areas X% a at looking that relatively As coming the at company that QX, QX for built model, areas flat

Patrick Newton

currently? and remarks percentage in Can progress Okay. the last the quite with remind on And contribution launch prepared year. of made us your a revenue software NXG from platform you coming spend then Eric, bit in of software time especially that you've you

Eric Starkloff

mentioned seat strength we If add to can years, as well in our pleased remarks a software comment let said, for best adoption and the key was in existing and so us with business reason customer really overall. our like and on year both it year indicate from quarter before enterprise five for overall as indicators areas we've like I look in well, software at to Yeah, so can base a base we've quarter as good really our software the good you that customers NXG as platform that success prepared the a new me we’re also software. on for like customer really had so in areas with growth, renewals so strong value, far we software shared over that. I growth XXXX. and strong seats pleased for existing and was sell it, agreement customers engage a our that come both good

Patrick Newton

of percentage the software? from And revenue coming

Eric Starkloff

software Overall, the is it as with services somewhere you including XX% in that enter Patrick, and we range, that XXXX. along go know, continues

Patrick Newton

just And digit have speak last competitors healthy we of some on a triple one order the timeframe growth but base. to low XXXX near off then XG, had in Okay.

are to spoke semi horizon the on XXXX. increase the on You customers pressure commercial that exiting and rollouts

in longer-term to raise So your you're in for you whether year? seeing business. the orders to goal I'm and are duration visibility your orders in XG perhaps curious And to contributing for later similar if and could growth these speak backlog

Eric Starkloff

let bit Yeah, and your of to a little on come comment color XG me question.

a had March. Mobile be part research of World believe lot know all and improve the So I we Patrick to that in Congress success XG. continue as of at second that monetize you'll have first and the we of you

of and of lot At well point unsolved a area. see test the that this that a in opportunity technical be in these is XG positioned test which in And us lot will of is There engaged deeply with what systems. very examples these test users ultimately systems. You'll on research how sort lead we're for of devices. prototyping larger time, challenges to

that that very, and attributes platform the of this lead From I well you – pretty, doing very our very think Those say by this way really to with very, still in the platform And changing should we important. that evolving itself something and that's is and user that, so our lends – work a the important pretty at it rapidly software content modularity of point are standard. our time. point in at we’re

we As XXXX when it that but be testing part that few the more will opportunity. we becomes see comes scale that going of is our not that's characterizing sort a specifically backlog, the to that area. design question opportunity that’s when and where the forward, year kind look wins will semiconductor going not think and forward big in particular devices be And to still we to a years a start to that a factor of initial volume be revenue of – asked big off significant a in about of you’ve of

Patrick Newton

increase bigger to some the one drop up have post will and with midyear. seen helpful. of these you the question this flow last flow the later change or Okay. any coming first standards – the in be standards XGPP we just releases guess of year? exiting or That's XX release I order order an in add And Have the the on year

Eric Starkloff

No, not time. at this

we our the outlook with think in consistent what past. I remains said

Patrick Newton

luck. my you taking questions. for Thank Good

Eric Starkloff

Patrick. thanks, Sure,

Alex Davern

Thank you.

Operator

Richard of Thank question Instructions] you. Eastman next from Baird. comes Our [Operator

Your now open. line is

Richard Eastman

afternoon. Yes, good

Alex Davern

you? Hey, are Rick. How

Eric Starkloff

are How Rick? you,

Richard Eastman

there? curious – and the But could XX there systems in XXX Was any commentary was or XXX? side am anything than that’s Alex Karen, positive above between to the there good. growth was Good, was just there a I greater disparity breakdown negative maybe orders or XX,XXX. there order X% you on

Karen Rapp

Hi, orders Rick. $XXX,XXX. significant growth This in is Karen. There over was the

they of are XX%. So kind at look double-digit, a

Richard Eastman

Okay.

Karen Rapp

shift So growth space. and the have towards that in solution that continue we’re focus in a payoff system as seeing to the we areas, we customer that

Richard Eastman

system think fall in the what and you maybe And Any of STS obvious am else, STS? else in also that that if know the I any the influence fall there? does I of orders? speak – than what larger business to? And trying that’s side the in XXX,XXX is don’t there to automotive there,

Eric Starkloff

Sure, Rick, Eric. this is

take that. shot Let a me at

a our because a example. put a So fall for have that of applications on does lot the from of certainly highlighted STS that, all – production automotive k modular lot will little just that systems we of business used so PXI across stated more we business, different our it’s characterization through a bit across comment saw the just STS own instruments semiconductor, or people platform area on over growth and a that. we certainly that systems using to little industries, category, were as a XXX their other build and way is but And into as I color test big of our to to to before, across complex validation areas the success. flows of goes and all

quite Now k, few systems your XXX a bucket, category. the that of that those That’s question fall be certainly k that fall about of component. into labs in system going even RF that an XXX to to we characterization in a

more part call systems a business our me broad So becoming of our let different is it industries. across

Richard Eastman

large what of Okay. it the matched the quarter? revenue Is the was customer kind order number? And in

Eric Starkloff

Rick. I $X it Sure, XXXX, about at of look was If QX million.

Richard Eastman

Okay, okay.

Eric Starkloff

year And it was ago. roughly up a X.X

Richard Eastman

we anything there given business? the of that seem get is It there a piece there think would the about on application think discrete and a is large there of standpoint? from flattish anything, application. – that And have how when runs does any sense customer Or business revenue about XXXX? know, But customer to visibility excited general I again that you there maybe the is Yep. I maybe

Eric Starkloff

it always to a revenue will how customer in It know, our the to the much April relationship clear have stream as than come tricky forward at of from said we this generally customer that Well, good with time we January. know is in you year applications. a is broad exactly in very of set

Richard Eastman

Okay.

Eric Starkloff

in significant impact our expectations, But you of know a anticipate on growth broad in don’t scale XXXX. rate I having overall

Richard Eastman

And here Alex, first in order the the kind the had of about some point building building quarter your guide, was expectation of in some revenue your X% you you looking mentioned there have okay. there We had quarter. you into quarter. earlier January, that at – I any on – And mid first some had that I backlog, which is the build backlog month in some could in were plus Okay, number we of the heading know the first am potentially a backlog, accelerated fourth kind X%. orders backlog? Is message of the maybe year, visibility such am

Alex Davern

Yeah, certainly that factors Eric external in to answered Those that look feel guidance. point about position. we really influence that is standard contained we when positive. everything that are our is outcome question. But that are good His know under those we towards tending the our our at certainly, the my control, are

mid look of an QX to would we so we year-over-year, at our The guidance, last revenue went Obviously, improvement in growth. EPS increase point year. mid to point or QX continue when is the from of so, QX. And it earnings XX% – for which the in saw is it

feeling So, the pretty business. we’re good about

Richard Eastman

Okay.

Alex Davern

to time at later we this think potentially to move visibility our planning it’s in point be increase I prudent into as And, XXXX.

will more in April. we So talk that about

Richard Eastman

full here. over the charges bit came I a for here year quarter. last thought million. $XX in The And fourth just one the just think were Okay, a in restructuring tick okay. And bigger

charge that in XXXX what know like maybe in for question so one, about hard that realizing or is And restructured is then the capturing does XXXX? savings XXXX? there we savings up what versus put And you any around look can also number that you perhaps think

Karen Rapp

Sure, areas Rick, I Karen. growth is focusing will of business profitability. take The to drive that the the continue in on our that. is This goal

restructuring. baked to at and model the necessary attrition, in all as our our of into are from resources savings and we So always out in at QX to that actions all we that built factors we That’s look We May some will that are that operating be took performance rebalance how throughout And operating receiving year. guidance the the into place to continue looking will the management laid we model. execute XXXX. XXXX like as

Richard Eastman

within So netted – stay against that. That’s stay X% our operating view growth to investments the the essentially savings the how of and savings get you kind hope model. under or we

Karen Rapp

Correct.

Richard Eastman

Okay.

Karen Rapp

rebalancing the We’re all time.

Richard Eastman

Okay.

Alex Davern

model operating said significant operating mid growth through in high that at delivered our digit half goal And single significant remainder revenue are it leverage profitability we that XXXX. for bridge operating our Certainly to XXXX gap the to and obviously to leverage of and to we in gap implies have operating glad XXXX. our is bridge

Richard Eastman

you. Gotcha, okay. All right, thank

Alex Davern

very Thanks much, Rick.

Eric Starkloff

Thanks, Rick.

Richard Eastman

Sure.

Operator

closing ladies session. to this remarks. And our now gentlemen, and for question-and-answer you. call does I conclude Thank management would like turn the back to over

Alex Davern

for Thank today. us you joining very much

forward conference investor We seeing reiterate you. at an to in look there. our to May. Thank you NIWeek invitation Just

Operator

participating Ladies today’s and for concludes conference. gentlemen, you in program. This thank today’s

great disconnect. all have a Everyone, may day. You

National Instruments (NATI) 30 Jan 182017 Q4 Earnings call transcript