NATI - Earnings call transcript Q4 2018 | National Instruments Corp

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Operator

Good day, ladies and gentlemen, and welcome to the National Instruments Fourth Quarter 2018 Earnings Conference Call. At this time, all phone participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today's conference may be recorded. With us today are Marissa Vidaurri, Head of Investor Relations; Alex Davern, Chief Executive Officer; Eric Starkloff, President and Chief Operating Officer; and Karen Rapp, Chief Financial Officer. turn Relations over for to Head Marissa like Investor of opening now the to call Vidaurri, I'd remarks.

Marissa Vidaurri

Good our afternoon. QX joining XXXX earnings Thank call. you for

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

Alex Davern

everyone, quarter afternoon, Good you Marissa. our thank fourth you, Thank joining conference for call. and

record Our delivered annual profit goal record on profitability key and our messages revenue, are annual quarterly XXXX. in we today and quarterly and long term

to to team's business, the the like in of year, related in the I'd particularly challenges due I'm an the Greater came sector. impacting overview of APAC give due recent quarter China. Revenue low the at to in on reflecting Before in end primarily quarter execution technology despite headwinds guidance our QX. proud the fourth the of

proud in APAC to market is Despite tensions effect mobile the year. in over years us very years. the non-GAAP tough in unsettling on full XX% challenges for I'm the $X.XX non-GAAP absolute the recent disruptions for a devices $XXX report in income weakening million, a feel revenue the all-time and it's QX. to up for Asia the execution highest We've net records and trade to PMI have market In an last QX, it revenue in two net and quarter revenue. in margin draw had was While coupled of XXXX, our XX% with both history, that disciplined billion, conclusions, been company's net up the XX% year-over-year two and over income QX quarterly the last was was the and in

$XXX to delivering record with execution to to of happy platform our XXXX the cash. $XXX We by in When pleased year also aggressive key our to CEO very XXXX, with we as two strategic revenue and team. our In in January in target on and cash revenue to our reflecting new achieved National flow through reach our the focus goals, of in in operations industries goals, accelerators generated million the We net technology CEO both XXXX capabilities customers. XXXX. two years within we again deliver expand of I'm million record I took from to profit ending say, XXXX. I'm in tend Instruments, cash be the operating and hit in role more said deploy of

ahead On margin of operating long profitability XXXX, XX% our in the we non-GAAP side, of target term hit schedule. year one

in our we and our XXXX. has like saw the to our XX% XXXX. Eric year increased this platform software by portions non-GAAP address to a take industry records few since reported review Many business regional almost and will result, a I'd results, net As minutes income our while of success with all-time

we saw respond NXG. was for year-over-year. XXXX LabVIEW our a software in digit customers great positively year to Our investments revenue, to growth continue software double

growth long our other continued growth strong of measurement adoption metric, saw in program of us gives access this potential. drives in our than More enterprise opportunities. me we any confidence and its customers more term software our software to agreement test our addition, gives and demonstrating We industry. widespread In that loyalty adoption believe

focus a systems. are As continue inorganically platform automated a result, us expand NI To - and term investing defined to about in President record to about we position performance address Chief our XXXX. as to we We're record and more more of customer driving tests believe, well-positioned and our geographically within to growth. from be organically revenue, revenue customers. to balance, the Eric believe, a our our to new cash focused industries we're reach on leader positioning to talk long key and accelerate record growth and our automated these be share operations industries start believe and the technology flow capabilities order we turn With in over Starkloff, software taking We in profit, Operating record Officer. for aggressive both to on in more enables in like very future platform I it and to needs measurement vision cash and strong

Eric Starkloff

and Thank afternoon. good you, Alex

of And where vision. provide strategic our provides most platform I'm recent and orders region clarity was business. strong execution adds QX We we competition. to foreign the faster weaker their innovate customers. XXXX were in headwind growth weakness the core believe orders excited year-over-year. to to our were ahead and QX stay of headwinds, X% performance them where order industries X% excluding focus flat and EMEA in year-over-year year-over-year Our a China, order And Greater X%. contributor continues despite region X% with with to economic the our help platform X% the continue global work year-over-year the to our year total how to the up year-over-year in to the weakness China for to primary market in for our and a and We finish over customers our up together economy. use teams. of Orders saw Greater value APAC were We're down continues they year. achieve get in exchange year full total pleased in and QX our European in annual the its the our to company applications see In orders vision up reflecting that were vision

For the full year, orders were in EMEA X%. up

in builds Our year-over-year environment. are Americas the and a relationships in improving region investment and region. XX% QX year. deep the order building multiple of order for growth success accounts customer strong intentional achieved This is economic to favorable years result on sales a attributed our growth growth This evolution, is we our this XX% our in and with

had wins X to continue with test of XG see in orders gigahertz semiconductors. we in we turning semiconductor, early have for performance. focus on year. strong significant for growth industry deliberate In year-over-year Now the and and growth to double We put areas including sub digit the production QX validation

platform Our validation to see helping applications production them in by save time by test can continues customers cost. that these across and strong providing characterization, systems used and adoption our be

also in growth business We in saw order strength in our automotive. continued QX transportation with

solid year-over-year. the up growth transportation we orders in For double digit year, saw

the Greater and fast vehicles. autonomous electric is our technologies growing increased and sulfur high of digits in Despite trains, in automotive the to double automobiles aerospace, While customers as as content grew and government hybrid and such weakened China, digit rate weakness in at technology the for power QX a defense business single using disruptive year. industry to key our QX, experiencing They their our competition the change. in invest stay continue production to in address are of ahead overall rate platform

business platform to highly in Our in This significant industry continues in systems. approach lifecycle to for industry and in EMEA the Americas. them centric seen modular add their highly in needs our and as particular strength meet enables value customized it this values this as our long software

year order to in other the portfolio weakness these and QX addition for industries, to due In of broad in our Greater declined in achieved all growth industries China. full customers

While our this to customers innovation to are in we within more continue our continued success. business identified vision, of the demonstrates is know our and our believe, platform evolution focused a component to business well-executed innovation on we to face, this the product value headwinds sales customers. particularly their overall well our We must of platform. more Despite deliver increasing on the in believe be to broad areas product we environment, our our our this due the growth. stability positioned adoption of and continuing may industry customer drive We accounts critical of focus and our economic closely set have system that to macroeconomic and innovation impact the level tied tends continued that

Chief Now to over Financial update. turn Karen, the financial call to Officer I'd our the like for

Karen Rapp

believe of end close year in Eric. record profit, weakness to QX able our at operating testament margin from the We is proud our we in to revenue, unexpected I'm the operations, target were the a record China with met we value we and of you, performance non-GAAP Thank out dedication in despite quarter, operating XXXX. cash our Greater and to efficiency. ahead customers reporting the the strong XX% the operational record have XX%, schedule which offer we of

year-over-year. in our was QX to year-over-year. XX% guidance revenue Non-GAAP grew end QX, In points in low in weakness November QX, $XXX cash at basis primarily with up Greater For revenue December. gross the due and margin of million X% China XX

net a which million The per share. Our $XX per represents of $XX was basis company share, $X.XX QX year-over-year XX% or million $X.XX income Non-GAAP increase. year income from QX non-GAAP operating margin XXX was reported GAAP XX% increasing a points ago. or net

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

margin gross non-GAAP XXXX was Our XX%.

and of net up is The only year, points news up non-GAAP year. million, our expenses non-GAAP was full GAAP reconciliation year at the earnings With in results million. release. basis our year-over-year $XXX For operating over income included $XXX XX non-GAAP XX%

capital an on Now our allocation strategy. update

to of quarter, per quarter, During dividend and repurchase million the shares. X% our increase $XX an Directors an to the share to in dividends in for X NI QX. taking the this approved approved Board plan Also increase us Board paid we share $X.XX the Directors of of million

our estimated forward the rate range of adjustments. tax XXXX corporate XX% non-GAAP XX% rate of laws, effective And based was XX%. in to risk understanding tax Our new we to tax of for the the XXXX looking subject on

in orders Now detail. looking more at

X% orders $XX,XXX in the fourth total year our up down Orders year-over-year value value the US a quarter. dollars. with below were year was QX X% in of For over

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

total up year-over-year. X% year, the were For orders

cautious range in million, have X% of up revenue and in currently $XXX XXXX. X% the remain uncertainty We to-date, impact quarter in started expect total order to economic growth to be QX of at saw $XXX with the the year-over-year to we XXXX QX, we Although we January million due end midpoint.

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

changes price profitability such we goal For be the caution and revenue looking and actual of summary, expenses of ahead could statements, manufacturing customers, effect this schedule by fluctuations, I'm from record that the operating of our made any delivered improving fluctuations performance weakness factors must efficiencies, proud tax I adverse exchange have and in rates. in for year. reported overruns, our affected and year. QX progress and negatively you global in We large foreign in numerous revenue effective In these as on economy, our forward our expense revenues earnings

customers to R&D I'll platform We we We some a to position strength XXXX in and our Alex that, believe on our where in closing growth industries our expand to focus to initiatives. to continue the serve investment continue is top customers turn key of now line continue for over With opportunity with innovate. enter comments. as it best suited will

Alex Davern

on in Thank we're like other starting you, note. In Karen. closing, a XXXX cautious companies our industry,

be to the remain growth for shareholders, employees software delivering for operational products our new I'd long for our prospects. years drive for to our over made value we automated hard in leader to We've we our defined tremendous our as confident our customers, innovative growth and employees. our new like securing However, two progress outstanding results term improving for last systems. partners work thank measurement career creating and the continue their and in automated test excellence journey opportunities opportunities

aerospace and target defense clear We for continue deliver economy. position record as from flow focus operations we're growth challenges our to has to despite With for us enabled XXXX. on broad in in cash We're share transport and strong and continue It's the industrial growth. in record a semiconductor revenues, positioning long QX. in industries record profit, growth start cash NI term on taking a record balance, we focused

your will We up questions. open for now

Operator

from comes Bank. question of [Operator Bhagavath Instructions] Our line first Vijay with Deutsche

Your line now is open.

Unidentified Analyst

is questions from Vijay. end. [ph] just Hi, for two had my Bryan this in, on I

of PMI about that of the particular end earlier? about products weakness that what talk China how this Thanks. think you market are then we year? should in your to you kind demand second, trends and And can First, kind the exposed mentioned impacting

Alex Davern

so Yes, thanks Bryan, for your question.

overall we've year is year in the or see to deceleration improvement across of I'm the we the the driven and QX in significant business the growth What us deliver obviously our over that profitability. PMI, last as particularly all correlation overall on early growth about where seen a to that Just focused we our mentioned time full course at effort really strong reasonably pleased overall in X% for in industries. and really tends the relation PMIs to Eric happy And we've order so. for and as look globe XXXX both portfolio the quarter so of with over kind our other have

As Karen we are entering the in a we reasonably start QX had said cautious, to January. being quarter good

anticipating from are some in We and QX. anticipating to quarter season slowdown knock as some get of we on end here the the earnings potential impact

to build that to relative I'll in guidance. answer let Eric So, we're product the our question the side. trying into

Eric Starkloff

Yeah. Brian. Hi,

in weakness So of product strong strong digit know performance expecting that about quarter some China versus we you product previous in Greater the mentioned companies as the our is we China my exception the multinational guess that growth tied wasn't of the Greater not semiconductor saw many the or with came on line, double year digit way And relatively remarks effectively kind just from I really the that a prepared in industries decline in product quarter. broad, think serve the to versus double as Greater a of to in into China particular and the expectations, crossed was side stayed the saw I we but

Alex Davern

Thank you, Bryan.

Operator

line comes from Our Scott of Stifel. Devitt with next question

now is line Your open.

Scott Devitt

Hey, guys.

more as So how of we again it years? in over business, be this? China about a next term go, short is of going about be Is should as timelines far the the or this to think thing to couple going

Alex Davern

very is question. It good a

this quite the that we unusual got or reverse was December. I've relatively as at business for You these certainly as deceleration you immediately. at years you know know been Generally suddenly November that saw don't looking into XX the we Eric and event. and significant sudden Overall an mentioned things know company, that's

I couple probably for So, say this would at looking we're least at a of quarters.

business innovate. ability time will we I to reasonably but past I think tend point strongly bring a innovation. enable at They're They a be our continue new X the after be tends the to sell because seen customers my X products or in difficult able market. quarters. pause. of products back effect see our customers it's to stage, the it to it's for lingering that critical their in end enable to I've past unlikely this that to in be this period generally When that history be in seen to we this this to I've exact mean beyond when come

Operator

question Baird. Instructions] comes the of Eastman with from [Operator line Our Richard next

Your now open. line is

Richard Eastman

Yes I'm here little on going pile bit. just a

the without the assume a midpoint the the met Given release China guide. meeting commentary I that expectations If of revenue slowdown. in would about was expectations press have

sense about you might And how million XX us down that could China percentage So just of was in give wise? a dollars? be much

Alex Davern

when we the we of and said a earlier APAC our in as to know China. actually of growth quite of so China outside remain of roughly double rest saw expected business double to environment. remarks is world team on growth we'd call China our helping wanted Yes, in team prepared a now the the a digit the we us Greater terms I saw Rick, Eric everybody the it's execution share. its you of We're significant we of really so in seen overall gaining that years be effectively half continued deliver and through deliver our profitability. part in with met our digit by the see will the execution aggregate really we a over decline. there. QX. said our impact pleased in China believe really also team numbers number difficult that from all to expectations as China in out market hearing for good continued key but out I being a our And Well And right last

Richard Eastman

in Was handset was because the that quarter. had business what hiccup concentrated on China the test it focused in we any business first every or the

had business kind that know flat handset - first like year's you mentioned down. the come I across business of doesn't as look it presumably just the Eric prior But therefore it that like stay board last does back was mean that been quarter. test So what to but and

Alex Davern

I'll comment, the effectively of Rick. across included across industries Yeah, business some in that other all also parts mentioned it that we was China the mentioned as in chain board I but is serve. supply weakness as we different

just So, chain. supply to it isolated the devices mobile wasn't

areas broad seeing it you in in and were know academic, all actually. seeing defense, in that you're know you bellwether So, transport you're some there. broad Rick slowdown Aerospace, seems investment industries

continued general serve disruption of of seeing overall a in as So lot be we a strong simultaneous China impact. but the if to in semi we're seem lot spaces see to that a

Richard Eastman

orders Or under bucket? that showing primarily? is up Is order greater $XX,XXX in it the XX,XXX in than

Alex Davern

decision terms our the difference mean X% in X% impact plus his on it. see and show up. Greater Eric China prepared or than you'd on was where you K our a the down significant made more to when of expect which without slow XX is plus being that with between you but said remarks, orders is you overall impact felt the as growth of over to I In know expectation more growth kind count know actual Obviously, impact certainly

Richard Eastman

you digit. know starting quarter now Or to given the around And X% And in if leverage think XX? a know should you that for minus first Will you what year question just Okay. we then number? that FTE guide or EBIT? would the full plus could he X? say ability And I and how if here how might, look about sales then just incremental we're sales the also the like low with a two let's growth XX% model deliver give be between somewhere might single Alex have

Karen Rapp

this Karen. Rick, is hi Sure.

expect take me a headcount year back XXXX From it revenue have a operating I from to you operating model, model an we out people, Austin. in in question. that are Day to Let operating shy still the see of - Investor that level Day. we to perspective, that an can get and as we we And sticking update income. to the XX% ended that X,XXX presented just an May at If from for XX% May X% growth make this we we again we'll model in Investor would year. continue hope

Alex Davern

a slowdown our years maybe XX time and as following should long which We're are a We've here. in prepared is I've been leadership target for that of been we significance my better this see XXXX in model this you've previous long So around. operating in important. as much we time almost for frankly had recessions three

increased component. comp balance, for flow - the You we've cash operations year in our record cash XX million variable from know

XX exactly operating So through to net serious and an you that the preparing a be do XX margin and last set that. we the been for know XX% We're between very and cycle. years about two to I've target

also term revenue our strategic more gain there will have than and believe us So like gains may deployment in enhance when is a from and long slowdowns that opportunity for also cost share. some this tend be here opportunity and be through of three accelerators more more customers better focused to period to at over share we're share slowdown are the we And I I much conscious. an of look you an We know prepared previous and cash definitely our feel drive opportunity ability we should gain a an been market time. it to

Operator

no like time. queue the closing Davern call remarks. for I'm further And turn showing this at questions to in I'd to back Mr.

Alex Davern

and Appreciate in. forward sure Conference to much. to and for Planning time Thank April. to today in get you look check take registration you make you. we very your time Investor out NI Also to your Thank the our talking week

Operator

thank great today's This gentlemen and in conference. disconnect. you you for day. participation program and Ladies concludes now may a your the have Everyone,

National Instruments (NATI) 29 Jan 192018 Q4 Earnings call transcript