NATI - Earnings call transcript Q1 2018 | National Instruments Corp

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Operator

Good day, everyone and welcome to the National Instruments First Quarter 2018 Earnings Conference Call. Today's call is being recorded.

You may refer to your press packet for the replay dial-in number 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, 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 G. Hugley

Good afternoon.

to Securities XXXX, predictions During differ make future forward-looking those of revenue wish the this Exchange that, Report to and Chief Karen events files results February contain earnings may can the statements. that our We cause quarter. leverage documents our contained Instruments growth of actual and in company XX-K and such long-term refer important that we should I conference Form call, for including over in operating to share regularly statements now for results continued profitability, With actual you XX, turn gross Annual with guidance company's the identify to second Financial our future our the it model course Officer and These margin, changes documents statements that and materially. Corporation, National including and you from the statements XXXX. forward-looking filed the Commission, per We caution Rapp. to factors on will are materially differ just or regarding

Karen Rapp

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

revenue non-GAAP quarter in for acquisition messages software quarter, today year-over-year first of growth net growth and our and key record data income, revenue strong products. for our Our are double-digit year-over-year XX%

From years. our in was the year-over-year which quarter. of with was apparent record in million, Taiwan number accounts especially Korea. guidance $XXX our margin margin a perspective, of QX weakness both exposure. primarily software operational mobile below points XX.X%, results slightly and as strength broad-based highest was gross For Non-GAAP chain, driven favorable our an devices of first gross operating a the and margin basis were the in concentrated currency small data as and X% products, midpoint seven well in revenue a QX, acquisition year-over-year, XXX the by This for is non-GAAP for up supply in quarter first and up

or data we year-over-year supportive which volatility. has last quarter non-GAAP operating double-digit and where ago. see growth a in to and more growth supply environment. devices these in been income and a products software points income. Record our of mobile net products of basis was expense relatively XX.X% to acquisition share, revenue strong non-GAAP long non-GAAP The million a range applications wide global net deliberate we was QX, pleased offset weakness were XXX chain the and XX% has per increasing industries the year the diversity midpoint The at to Our steady a improvement margin QX tend QX help NI $X.XX of discipline of strength drove from see across held to of our in in $XX was a PMI indicative guidance. year-over-year

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

for the the we in share directors NI QX. quarter, board and dividends approved $XX per dividend of million $X.XX the During of paid have

in X% year-over-year our QX Orders of dollars. looking the $XX,XXX orders, U.S. the a value grew X% was year-over-year below value total quarter. first Now, up at with orders in

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

statements. forward-looking XXXX, will a include take to which like I'd QX Now, at look

responsiveness for of R&D our to XXXX, greater will dramatically development modern all means providing our capitalization customer be infrastructure, NI Because future need team of predictability methodology. customer be and software strong of capabilities will this agile code expect needs. using As NXG of This able self-test you agile development will capabilities which the reduce new the efforts. accelerate be software of project platform. from QX, updates, the LabVIEW refresh a remove provide significant transparency comparability. development results, more and into take of we frequent Starting provides will even immaterial. robust non-GAAP are majority release This in NXG software in our features, our to software testing, and our self-test P&L P&L amortization we enable extended of release much our To capitalized software XX-year LabVIEW spend, development. greater QX aware, for project advantage a the built-in will a to was to including improve apply

into XXXX. about deliver As increasing delivering optimistic R&D a we guidance. XXX want of on result changes XXXX efficiency while long-term model in visibility. change, this million for adjusting points to $XXX approximately increasing margin currently in our expense we're our We're backlog improve and We million. goals, revenue our to by expect XXXX growth range the leverage and QX QX built of gross model profit $XXX basis in our be and XX% to These of upward In to QX, our are revenue. target to

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

the changes manufacturing must expense affected expenses I negatively model price operating despite on statements, quarter targets In and economies, our us exchange we value for been could to such enabled managing that of of inefficiencies, and a employees weakness our culture operating our income May our expenses. I our on pleased growth our has our on look earnings our our on XX continue seeing continues key will be revenue. We you in I am focus this to forward-looking strategies brand, drive as Austin, that actual be to thank Together, profitability discipline execute caution adverse global Conference numerous employees want to revenues, major and which differentiator with summary, I space. into factors business any in Investor Texas. deliver our goals to the by and the to believe continuing fluctuations, you lower XXXX. these effect forward and rates. to overruns, For in while tax effective at foreign

As with will NIWeek. conjunction held usual, conference, this in annual be our user

from differentiation throughout leadership while will chance key our leveraging our software the have strength our our focus the of hear our You industries. NI investments to and strategy drive within platform to about company

the that our them access now have platform to in advantage it you our help will to better to value structure. their model help will turn to will Starkloff. provides Eric to operating customers You and and I And win long-term capital over we understand space. our competitive speak

Eric Howard Starkloff

sales Thank some you, as our afternoon. insight our QX, broad portfolio. into from in with we well driven will account evolution. product good performance our Karen, now and and EMEA, additional I as strongest across saw regions, growth performance Starting our provide on channel by commentary the

help particularly and our and Our in Taiwan region with direct large Americas in spending. in government year-over-year, saw with Double-digit and APAC aerospace growth, revenue China accounts our revenue offset this Within U.S. strength Korea. weakness several device growth chain, was in weakness. region, flat revenue defense slight the mobile and supply from Japan challenges year-over-year in

mobile supply and saw platform business broad-based our for characterization In performance, testing our industry XG headwinds devices semiconductor particular, in while test the for from to chain, slowdown devices. and adoption demand remain semiconductor we our saw Turning production continued strong. the platform of

quote. their leading a of Qorvo, to provider of and test Liaison flexibility were LabVIEW, Products excellent at Carrier critical introduce engineers of NI's devices. RF said, commercially vector wide for Cooper, available helping the example, performance, XG XG Qorvo the mobile industry's For at targeted solutions, RF in front-end the system PXI early and PXI Paul new "the Standards module module." and Mobile front-end signal first us transceiver bandwidth, Director quote, test used End

helping complexity evolving customers For manage these significant our risk applications, deliver extensive and and platform by our value test from designs. software-based ecosystem

new and customers offering differentiated us radio opportunities developing Our for semiconductor many helped as XG performance testing win displace products. vendors XG incumbent has

driver. testing at discontinuity change experienced to electric for to estimates Subaru are costs. for these new and major Opportunities and Subaru, PXI At vehicle electric share technologies technology continued active for how time system automotive they reduce team vehicle reduced longstanding leverage safety for new will a Valeo, hardware X automotive and Turning testing meet manufacturers platform OEM test processes. by time including suppliers testing example, automotive. technology conditions electrification, pressure using These to growth they've Automotive be to road reducing LabVIEW, to requiring road XX%. in the test in-the-loop our new Mazda are time by to Tier driving. and have the technologies. market considerable like driven development autonomous testing NI technology By NIWeek, simulate and companies, test Automotive lower lab, to using

Now, turning engage reengage revenue teams have excited year. customers sales and last the software product of see platform. of our growth momentum NXG were created the in to and for opportunities we other in to half marketing performance, continuing capabilities of customers software, the year-over-year new new strong Releases existing from second and to very growth our LabVIEW tools about software

of challenges. excited portfolio are software customers testing that their the features help new and products our Our solve new about them

products, platform We adoption. from also showing acquisition saw strong revenue year-over-year growth in data overall

like technology sensitive networking industries. the across with With powerful acquisition and the NI multiple serve portfolio, many products broadest needs new software data and interface time systems to environments, programming of industry's applications measurement driver different operating measurement

reviewing all selling platform, of this been In orientation model our size significantly customers our designated complexity with sales channel. the individual to to be Historically, geographically, to product entire of product growth. long-term turning longer no NI the the teams believe our our Now, drive transformation sales optimal the NIWeek Conference, average portfolio, is have we sellers sales the our the portfolio their territories. of decade, scaled oriented we in Investor increased we'll channel. and our order At as have expanded last NI geographic

we've able changes external accounts to of tier years EMEA We're half based evolving been The ever and the potential on XXXX Americas to in have acumen with and work our the positive. been the to staged have able our These accounts hiring. them second channel both to in adoption. from sales last accounts on and XXXX, changes the proactively focus and As before initial management the customer We've through been a in in around a QX over APAC orient XXXX. been highest more beginning our introduced internally process with resources region coverage with drive grow sales result, our these than result the account potential. two and their coverage these

impact and to are have a business. at customers that seeing higher told them us level their with value Our interact create and they us more

of a the base scales to direct Given with key our success enabler of them relationship software-based a this a strong organization to development have strategy has serve very sales and broad large and customers transition accounts. of been of of that platform, the our our number adoption we to very inside drive

at platform, inside the technology. our effective primarily utilizing Our selling and web-based are over sellers highly phone

sales of these teams. customers encouraged continue delivering have channel be through and efficiency this Our by been results we effectiveness to served the to strong and

force through and benefits During process, for reaping improved minimal to leverage. this sales sales entire coverage disruption like managing to forward in capabilities. has long-term managed in their growth this new in looked with through and the thank and changes the I'd growth transition we our team

we've sales transformation look seen NIWeek. our more the seeing and We results you at our there. to about at I Investor initial will forward Conference share

call I'll turn Alex. over Now, the to

Alexander M. Davern

you, Eric. Thank

came drive continue to leverage. QX, our While for operating slightly below guidance of midpoint revenue in our we the

chain, weakness supply revenue partially in the by improved mobile quarter in Our device this offset which broad-based negatively business. growth by was our impacted was

with for the believe provide seen of the at strength The across and its most base strength applications. midpoint, to customers net and in performance our systems that differentiator year-over-year already us year in in our quarter. is We to and across along of software of industry. mentioned, out these broad-based costs of and milestone every we've validates quarter with of and XGPP, adds capabilities growth our I'm the been deliver We of bookings We approach also platform income non-GAAP onto the guiding XXXX an signals and believe functionality NXG pleased in demonstrate the in outpace first helped a almost LabVIEW value NI's platform. portfolio. has our test. the more of our set our platform-based are record strengthened measurement growth new during our and the for hardware adoption the autonomous products to product software the XG performance increase These market to technology with QX. technology communication products, long significant across believe to a software Karen new As data gross diverse LabVIEW the This of lab validation record and roads. has customer driver out Using the test broad and test tenders reception software, investment our acquisition the a very position. in complexity coming position. that margins don't helps health time a platform second Each crucial market production exciting design. revenue public rolling been ensure we increase more strong in

a Mobile managing this to collaborate including released next-generation challenges At World the mobile of customers number test shown of our plans environments devices. rapidly stations have technology. software-based with on Our Congress to XG to is critical for new we evolving help radio, of base significant announcements interoperability Samsung test year, our test that platform and

Our has products. to us positions helped of meet bring needs the extensive with quickly these technology space generation this to platform work next our XG-capable and wireless us in testing innovators

of expansion decision hardware founders will quality production new to and to with scale and to time leave discuss technology our continued in evolve to weeks can At companies NI's these will research meets NIWeek, software-based through cost, products technical tangible insight leveraging and trends and examples ensure where bring market out four of software. of gain you new decades solutions. the our they investments into XX-year These we'll investment platform our the to customers that our NI XXXX and of challenges, platform bring NIWeek and thousands users stack investment through celebrate innovative latest see goals. As deliver together market, new in and software. to only from excited computing We're cloud how and whole I'm from and makers demonstrate engineers users, software customers value value integration and drivers, impact we to trends. of At leveraging the advancements the software to analytics test development technology more platform of software like support adding will are the NIWeek, this test management and expand our customers close we capabilities to and reiterating teams are by that to our can the number that our products having world the focus. the importance the see future. we thanking further our will of on and for the serve differentiate to unveil customers by platform latest will existing of help employees in I

market and drive Our to in and and complexity us to see us for within from execution, systems will Once multi-year to emerging open faster. target with differentiate industries these we'll coupled positioned to sales help to value areas well I'm deliver from channel, your and our on excited a further investments I delivery, look NIWeek and technologies deliver forward have new to seeing and of created now our processes platform at Aligned the applications. system platform hardware up software, new further our questions. multi-year you in these development capitalize high adoption us evolution product technology. again,

Operator

you. Thank

is Our Bhagavath line of Bank. the first question Vijay from Deutsche of

line Your is open.

Vijay Bhagavath

operate any OpEx in Vijay segments, goes is Karen. into And Thanks. on aero Yeah, academic releases? any it's color are that Yeah, follow-up the communications, a could question and the said agile for terms around how I question individual that my defense, Yeah, you give these and just or us Bhagavath. frequent software these a any on electronics you Alex, development would afternoon. performing – both the have of interesting, quick research, of in industrial, good half? forward-looking then, software then, with view testing currently, OpEx impact segments have a quite Karen, second you

Alexander M. Davern

industries we've specific software over for seeing some some much would that see kind So We very unfortunately, and mobile in Eric very quarter. of get broad-based with reaction been our Vijay, the directly broad details into thanks in products kind Yeah, of the me positive the reaping you and did made the context, device the and as and we multi-years color of success supply Broadly, the of investments question. serve or weakness the slowdown chain to benefits really there. let there. data have then, control and give to said, a the your we will turned we're in pleased into acquisition platform see, good that our deal quarter and a great what just

QX, our for supply have than So the we're been record look devices normal of particular business volatile QX chain mobile over we glad course at goals. our to When and see more area years. that on in deliver revenue that accounts profitability many

of set provides down enter but bump good about on year-over-year this is so, bit we news two-thirds. side, of the as us little the a XXXX, And a revenue into speed for that accounts from

a impact be then forward if for second ability their pretty the negative does go year. of tailwind So on that expectations the will is And a low. to that return, half us in our have

Eric Howard Starkloff

Yeah. This are how is I'll Eric. you Vijay, chime doing? in just

the strength that software industries yeah, customers data across the we So and in all and cuts serve. acquisition

in general, in strong rest devices of well quarter the particularly as of supply the as production chain semiconductor. semiconductor color were then, for business less the very both that industry, terms than weak the the themselves pleased were us transportation quarter. a those in accounts, our an It in XX quarter. tale test, was few of in aero approximately defense view, these labs, where was was sides. roughly mobile validation strong we're in So From is industry accounts point in in two and and the kind as of offset Alex in with and good, flat of commented, And

Karen Rapp

the methodology the on hi, you I'll move our Karen. faster. OpEx. features these this And much software as We're leverage agile take about to customers deliver the mentioned, Vijay. and that ability to for pretty is excited, This question to Okay.

And we will R&D. was so, will were view that new a transparency. of the XX% and non-GAAP guidance with that align that XX% to now target that running at target provided go for We be increasing I our R&D up of to

Alexander M. Davern

move our up Obviously, margin to gross expect we correspondingly.

two we model offsetting move So in substantially the see as areas that provide that. will you'll

of talking I gross view NIWeek. industry we'll be norm transparent our R&D margin. both evolution and more our think And long-term really of model our about and at our

it happy detail So in point. get at be we'd to that more into

we'll that to of bring about reflect, has we been as able NXG is features been rapid glad comments And so the a quickly. LabVIEW been and common a with I'm couple multi-year that us, the able development for process a more to more to I'll Just large practice of for in as excited industry NXG, much completeness. to It's this move stable I'm adoption now we that looking particular, is investment market customers very team NXG be R&D can what's very we more the we've much align our a to drive transition forward. forward opportunity release.

Vijay Bhagavath

you. Thank Okay.

Alexander M. Davern

Thanks.

Eric Howard Starkloff

Thank you, Vijay.

Karen Rapp

Thanks.

Operator

you. Thank

from line of Our Mason next the Rob question is of Baird.

Your open. line is

Rob W. Mason

Yes. Good the afternoon. for Thanks question. taking

quarter first question So second about just guidance. the

a is discounted low revenues revenues year-over-year. the going essentially guys delivers flat present I'm issue? or a curious So forward thought your process kind year-over-year just, I'm the we've be around of if end, they comparison comparable maybe what wireless at flat what would

Alexander M. Davern

always mentioned. of we Obviously, from we've view, revenue that year-over-year a last have consistent. kept kind guys point Rob, of range as those year, from did you Obviously,

focus don't on the to thing a QX So from the is view. decline our have real I we the point point an on of anticipate given those view, that guidance in From of guidance ability a can hit our in I accounts QX, really sequential saw impact on think they midpoint. to

some if on We delivering we we're will element very and the to build be profit in obviously here. looking backlog successful can, of terms

to we'd able like the So to be more business. to other efficiently have backlog, than manage more

guidance accounts point unlikely to ability supply hit QX. for Eric mentioned, handful chain So substantial our that impact of that set view, of a to guidance on mobile have in going forward, the from QX any devices our

Rob W. Mason

Okay.

a Okay. little bit, I a And things. to geographically want dig couple then, just in

in saw just then given transition sales the you you mentioned good the just force going any in role also, in flat in mobile that and Japan, there. you you on color Asia, in but saw have I backdrop as also you in curious up the the had was played on here, PMI issues growth your that you had the supply Americas and thought China maybe well. And then, Asia sales. we just some what X%, chain, Americas

Eric Howard Starkloff

take Eric. How that doing? I'll Rob. are Yeah, It's you

the So I'd of as set it of challenges. and APAC, narrow success sort characterize broad yes,

impact the government of stronger prepared into like aerospace, as areas by sales the bit small U.S. to color offset China U.S. in and that that's similarly, the of countries particular, continues the the in of mentioned I the offset in like in So National devices dollars. things number what growth automotive just APAC, challenge, U.S. Japan, which strength accounts well. Americas. to flat concentrated remarks, as bit Americas And direct comes added in a Labs be those up more and I And was and double-digit were in a a in the areas by mentioned A little continues that in mobile on approximately X%. was in couple up was result then little to really government and so, Americas the then, the

Rob W. Mason

you any Do better? have

Alexander M. Davern

the teams our to really, significant rebrand in do earlier stage we're transformation On on, to we'll a the any where we been that going a channel. force walk to part tried Rob, that sales we Investor a will It's on minimize through a be specifically. without going journey of to and have transition force Eric want to I fashion disruptions. two-year evolution through sales session the – point as said Conference, of disruption. the congratulate our XX-month to the really

Rob W. Mason

a now, given in where any Okay, when the – develop okay. trend better see just government on the see better might budget have sales you the visibility are when U.S. there? we line might you Do situation you

Alexander M. Davern

a time. No, for that's some been Yeah. weakness

less as course, little over they weak impactful. a are some become things time, Of

but don't, for will aerospace in government is I So like commercial the of places just in contractors and business the yet. strengthen. to which it lot U.S. to Labs defense aero We to say haven't National was I seen that defense good direct see start a

Rob W. Mason

Okay. Thank you.

Alexander M. Davern

Thank you, Rob.

Eric Howard Starkloff

very Thanks much, Rob.

Operator

further back the Thank Alex I'd over Davern, closing like conference questions. any turn to to President CEO, no you. I'm and for showing remarks.

Alexander M. Davern

Thank you much and for us Thank again join go encourage on through today. or very us in We of over to the building at XXXX. for to the I our NIWeek. Conference we look person forward joining Investor you web either you. as event momentum to an our rest exciting

Operator

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

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

National Instruments (NATI) 26 Apr 182018 Q1 Earnings call transcript