NATI - Earnings call transcript Q1 2019 | National Instruments Corp

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Operator

Good day ladies and gentlemen, and thank you for standing by. Welcome to National Instruments First Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

Now it’s my pleasure to turn the call to Marissa Vidaurri, Head of Investor Relations.

Marissa Vidaurri

Good afternoon. our earnings joining for you QX call. XXXX Thank Chief Eric and Starkloff, today Rapp, are and Officer; Davern, Alex Officer; Speakers President Executive Chief Financial Officer. Chief Karen Operating

with and start We our update questions. your business will then an take on

for and deployment we wish revenue our you events just results could caution We of in predictions statements statements fluctuations revenue and innovate, customers numerous growth may and global profitability, continuing are QX. call, such statements weakness future and in by from vision plans, to cash make that materially including affected our that turn forward-looking February or to be During Chief inefficiencies, foreign Officer, Commission, our on any those the you effect the focus, important filed adverse of conference forward-looking economies, exchange price the refer and and shall factors, large on actual for course negatively Form the and differ this EPS customers, our including XXXX. guidance regarding documents and strategic overruns, our company Alex directions, with With our expense contained and contain will materially We annual our to report tax identify to to documents These cause in factors that from I that, the statements. regularly company’s it Securities actual fluctuations, rate. manufacturing results over XX-K XX, effective now could changes differ Davern. including files Exchange Executive

Alex Davern

revenue in million continued our backlog of company’s at in average Despite revenue, non-GAAP quarter our to were X% first an up orders ability our midpoint for $XX of year-over-year result stock I’m especially Key year-over-year, year-over-year, were with the earnings for the updates mix expenses. and QX. ahead quarter million of the net call. orders midpoint the Combined comparable in as up and And million our achieved Good saw shares in and common despite Marissa. guidance. dollar. total million financial in of operating PMI under impact orders up was changed and X%. $XXX the the QX. in global timing we by of as our joining gross stronger Europe. result thank approximately team’s revenue-recognition the afternoon, approximately the with of in business. came being standard, we growth the Orders are, XXXX, in X% system-level orders shortfall orders per year-over-year, our today but income of $XX of In you, reduced guidance repurchased slightly in the revenue everyone the one a industrial margins QX, $XX,XXX software first quarter $XX $XX,XXX of and proud value QX Record first you foreign $XX year-over-year million exchange line impact below we the as weakened price Thank strong or and a down by with expectations over X% weakening changes share. scale XX% of our up from conference execution of increased of a economy, the Backlog of

for the headwinds, XG our early second revenue and half currency cautious our and XXXX. XXXX the we and XXXX, in in the financial growth net expect of compared first In income benefit excuse XXXX, revenue been millimeter of record we and concerns, over We’ve our In XXXX income wave we operating demand. to these up delivered XX% see We’re – up very the two was record In in to net about significant me years. we leverage. last QX in half first we quarter. QX QX, achieved the conditions expect year-over-year in given macro disciplined execution non-GAAP non-GAAP XX% goals, improved as almost QX, and delivering sorry, left

record Looking record and NI the net the we the well out XXXX. non-GAAP excited the forward again the income in to of I’m to rest in place. in the I’m of term, deliver positioned believe by we put I impact revenue looking and opportunity have XXXX, are for full long seeing to changes

During software-defined strategic core a the automated the in last tests new systems. two years, and leader measurement to we be have vision automated established

R&D investments trends communications advantage take our the We to have and and of in major innovation technology. to disruptive realigned automotive drive

to and to focus leverage. We have an have reoriented help growth, our to sales a and our committed operating focus account we geographic applications facilitate from team delivering

Officer. details like NIWeek, I’d and of turn the the impact the highlight and the navigated industry’s we performance conference, through to To take of profitability over anniversary changes still and have are the pleased these in to Operating of will recent leading our XXth to QX. fruit, to talk Eric time record President While full user headwinds Starkloff, Chief deliver short-term bear it

Eric Starkloff

Alex, and afternoon. you, Thank good

From core to our our some growth quarter economic dollars U.S. ahead we contributing by foreign the a the perspective, in being know our Despite that orders us that In by and mentioned. them can impact software some that regional innovate headwinds, U.S. helps continue and customers vision on region for industry provide and a now region X% down we in year-over-year QX. stay of order and a total context provide their Our up headwind in exchange by preview was focus value platform I EMEIA and were PMI provide of from it our after adversely dollars to X% accounting competition. upcoming and to QX, employees, to will impacted deliver orders in our our strategic our orients Alex foreign around the recent and a exchange continues NIWeek customers. business conference. our weakening

evolution is X% pleased QX. with up XXXX. targeted rebound our change region year-over-year, multiyear sales our our investments We Our building in QX of region in Americas accounts. year-over-year. X% relationships see growth in attributed growth with we’re a growth the team accounting the and key to The up softness QX we believe reported by in orders in after deep in region and saw trajectory order in software orders X% directly The Americas are our customers reduced China APAC to Americas

Now turning in growth targeted to industry focus strategy performance. In year-over-year a offerings for point growth continue orders, our system-level semiconductor, we see at double-digit industries. strong proof to build to

offering Our adopt validation test across production and tests. our customers continue characterization, to semiconductor

with of We later millimeter are overall The this the year-over-year automotive year. QX. industry. of for in XG validation of production tests as customers strong and working validation declined the the softness our and wave in business, In tests orders plan was impacted sub-X by seeing and XG production closely the strategic they transportation traction business GHz slightly automated

the production of overall to of Using their continue technology vehicles, competition. growth hybrid weakened, are stay technologies and new strong platform, to the While and addressing our automobiles automotive applications. see in powertrains rate to electric we fast-growing such ahead and continued customers investment customers shift NI autonomous to as these

digits aerospace Our year-over-year government low-single defense orders in QX. grew

radio customized in in industry, broad growth approximately innovation. economic other being industries in in orders our our our this do customers stability of such product to slightly the trends approach, broad our customers significant by their all year-over-year. our been Our demonstrates products. for these systems. by our represented and that industries, this is half down software-defined success With of has platform Historically, to highly of RF long portfolio as it which business this software-centric broad and our adoption as broad were represents which continues from of of set the respect applicability benefits meet business, life-cycle Much of helps industry We customers and affected add driven continued and impact modular needs the as PMI. this of strong value to part more believe software

the two continued we software the quarter, software of update as LabVIEW the the new year-over-year see NI systems first growth to such was seat system-like software. products capability – adoption as adoption in we’ve as past the continued This in of by new example, management in over years, XX% released strong software up QX. our well with driven growth For

advances. to and best to engineering anniversary they assets. is share distributed bringing confident highly an and and of test engineers using technologies conference new managing component market the new ever-increasing platform. the to vehicle strategy will NIWeek remain critical applications the semiconductor, record of more most due effectively and platform demonstrate a industry. software industrial arrive success. ability technology about event in challenges and Now in monitor platform Austin we solve forum record intelligence firsthand In next and of their our deliver business our critical We’ll innovation the they and experiencing electric in leading you will a face how keynotes, I NI scientific Thousands analytics from launch are in to the artificial is are XG profitability the at to how of impactful testing, user for XXth pace. and annual our from leaders vision for validation, revenue must enables customer this also products hear summary, like know the some continue, our XXXX. our impact to aerospace premier companies in would we year’s systems preview customers At to month how and will and We the adoption automotive learn to of data our the XXXX, see NIWeek to our NIWeek directly

to to like Rapp, the I’d Karen update. financial Now Financial turn it Chief our Officer, over for

Karen Rapp

increased income culture XX% of in with pleased non-GAAP value NI’s we increase remain buyback. I’m of flat almost to We platform we Eric. to revenue. brand on to a you, earnings gross stock QX, and through Thank and our able the testament strong performance dividends QX. net our operational $XX scalability customers. our believe provides year-over-year In million in With efficiency, benefits our deliver to the shareholders returned and margins were our

$XXX was gross million QX, in $XX margin up XX%. with was revenue For million. QX backlog Non-GAAP

was basis net XX%, $X.XX, $X.XX the were QX non-GAAP Non-GAAP per an XX% QX per two reported year-over-year. income almost a up $XX increase or share ago. points XX% income up share, $XX years. The of million earnings was from of XXX year last Our net operating million non-GAAP over and company QX GAAP margin

Now capital an strategy. allocation update on our

million Our cash QX. of the at strong $XXX balance remains end at

from and flow year-over-year cash XX $XXX approximately million, XX% months up representing revenue. was operations XX% trailing of Our

first $X.XX we shares the X approximately The returning record NI dividend common share in per to approved repurchased dividend million to a shareholders. our outstanding million of of XXXX. XX, stock, $XX Directors paid our quarter, of May and on approximately shareholders million of During $XX Board

that assumes approximately our orders Through sales. low-single sustainability. backlog are months, increase their XX last QX year-over-year underscores we system believe and we our our free XX% the guidance up strategy as yesterday, which continue dividends represent April more flow, of our of Over our cash for will in again digit growing

total quarter second to XXXX, We expect in $XXX we of For uncertainties. range due remain revenues the be to million economic to cautious $XXX million. currently

GAAP At XXXX, will diluted of half earnings will $X.XX. fully share $X.XX expect the be over be $X.XX net the for QX earnings of we first plan per the up share income be non-GAAP XX% of our Conference to at last range leverage $X.XX fully in non-GAAP midpoint ahead range our We guidance, of year. Investor diluted of communicated for to the to in with per the expected

we We increase statements, of suited and forward-looking on where QX, key year-over-year for to best industries, now believe negatively delivered affected numerous factors. revenue, to on some to value efficiency. that, focused our actual turn revenues we culture is that over you With advantage committed caution it could I be major summary, Alex and to comments. increased and net the a shareholder long-term income flat thanks operational XX% remain technology scalability With our disruptions. non-GAAP In earnings in of strong by our the I in closing take delivering platform must will

Alex Davern

Karen. you, Thank

we automated work positioning positioned innovative join sheet, have are well for creating outstanding opportunities made delivering in to two shareholders, customers, be for opportunities operational to measurement software-defined new XX. our automated employees. partners and growth employees last our at welcome our and years, and in investment great journey profitability their hard career I May our strategy improving balance like our the for as I I’d excellence and hard platform. the thank we progress Investor securing we are continue and to We our over differentiated continue software-defined new leader drive our our to strong long-term us for record NI Conference NIWeek to believe on for systems. value results for in for test confident the our you products growth. With our

your will for questions. We up now open

Operator

Marchetti our from first is question John And Instructions] with Stifel. [Operator

line open. Your is

John Marchetti

a you programs, expectation is improving Just of whether see sort trying of an to if And of that sort made be your much. your for back either Hi, towards of or much a of, in expectation an specific may how in, that comment that? that to wanted improving your much is how a we more for general something I verticals backdrop? should versus is sort for second here? maybe geared the improvement? remarks half. expectation go thanks to of improvement much sense of sort your how maybe of Or PMI some economic it’s specific that very get economic the is XG to around And about how like much earlier that tied of

Alex Davern

couple Certainly, of a question, we situation Very challenging think QX, a will rates we’ve I QX go and because orders good a tough mix. those expectations. We into It as having PMI, point despite QX of quarters, QX ahead my certainly John. of from pass expectation. and had last exchange that seen into of declining relatively our view isa tougher headwind that’s

we made for participate stage as cycle the XXXX the specific – production opportunity stage look as vertical for that into much. high-volume at that technologies move as we’re later we investments of think quite of a engineering we see year investments But the And don’t lot as we’re Obviously, see being excited and clearly gaining. will the tests, a we move benefit a then being where a in traction I we these later in early the are get made in a optimism So an opportunity, are XG, by there. XXXX, in become from us.

John Marchetti

customers obviously on a of a what of been for quarters follow-up just automotive just for? while. all unit for you bit? there doing. aware that, your that Or fairly something like maybe But of little number been to we need for then sort have else that for little seems headline up of a that of where an that to kind maybe had you as have moment a now has we point bit And an disassociated if Are been at area spend group, were there can And is we it end to numbers a area Certainly, you. caught more a tied you’re demand? a unit account strength are those

Alex Davern

John, I think definite been in there’s going this at are right real investments and going also on – time. now. the whole very autonomy There’s in automotive investment industry, electrification as through that you a point in the well is know transition a significant

investments spend And lot transition a growth, – result, those legacy new headlines, legacy investments. we’re are seeing are see that some their pressure. is automotive to technology significantly quite are to a try headwind. We in lot of the technology which a in take seeing the as areas. the the companies strong of is profit seeing as of you a fund more time and shifting of they period to growth of new very areas, to these obviously sufficient until offset participate going We still so that from

NXP. some timeframe, The the are things our ADI, market bellwethers seeing I TI, space. look we they it’s we’re in And of some seeing the are impact to semiconductor that challenges I pretty shorter-term companies aligned in other like of at that point when proximate that the to of with the some think,

John Marchetti

more sizes and I’m in difference there how just the ask geography by order jump sense to maybe or certain seeing I of if terms if XX% a I’ll trying towards your little more last of geographies skew? you’re get are maybe then could here. versus just of, those bit a one queue guess then weighted geographies, one a And greater sub-$XX,XXX size other order side? the Is out on I

Eric Starkloff

seen larger we and over it business, continues region. across in geographies, every mean, of the years that’s as happening XX% approximately the a It’s the Eric. now had general orders. than in of rest going of the been faster That’s now a growth a number to Yes. our is John, driver. I you’ve shift this all be business towards

said as indices. more impacted business by as $XX,XXX economic the Now we to under we’ve before, general the tend characterize

So did you weak really weakness saw look Europe, if particular, you affect in based the in and and weakness into PMI. under European base QX, business economy, the $XX,XXX in business, that European more that broader clearly that so on

Alex Davern

one John. just one, And last

look you $XX,XXX year, at created artificial impact an But software a mentioned Eric last in of there. kind change X%. mix in number, orders Just were from that accounting bit as obviously remarks, all-in-reporting his up of the over

So that of it an been growth basis. we large X%, on the rate reported our brought as apples-to-apples higher to down X% orders would’ve

John Marchetti

very much. Got thanks it,

Operator

Eastman And question with our is next Baird. from Richard

Your line open. is

Richard Eastman

I’m looking at backlog to that change. Americas accounting afternoon. we’re maybe – if quarter-to-quarter, if Yes, accounting to XX% X/X at follow business number Because is good Thank what you follow the And you. just that declined declined also the sequentially? I’m revenue typically software me. applied software curious, what impact Americas? in the business? seeing maintenance Americas is also, Alex, it’s Or the best. guess that the I And Did up the impacted Americas that the or that on software

Alex Davern

Yes. [indiscernible]. it Part of is

So first of the Americas. [indiscernible] highest in the change the was software accounting all, impact

was I make in in it, that Americas. comparison digits apples-to-apples you so high-single if And growth, it get order the

Richard Eastman

year-over-year a Correct? number? Okay, that’s

Alex Davern

so connected. Rick, that’s that’s that a you said, that correct, in maintenance, the those are two of revenue affected affects it gets sorry, it as over QX a – lot software number, – recognized time, year-over-year things That’s and QX,

Richard Eastman

Okay.

So okay.

at EMEIA appear me and this maybe of shortfall sat we just or aside to bit the little kind a revenue the the Americas then? short then I’m short. software related it most out, came to by pull been might again also have that and But that Americas a geography, change if looked of accounting plan looking So of midpoint would more

Alex Davern

affect It’s backlog, number. software both a had the the and order the growth combination of on

Richard Eastman

Okay.

end Is you can auto when Or weakest was PMI? instance, I that’s And market particular saw was particular it automotive the the market in that look mean at Okay. you what you EMEIA, I any there, suggested did again, more number. for PMI-driven the we weakness – EMEIA? maybe there? guess, softer to versus point any that there

Alex Davern

Yes.

couple down ways. So in a I’ll break of it

we from us was it impact think, So look, you I X% then follow And about if long in EMEIA Rick, currency. time. for

this really well. data the of So an certainly, factor in point can’t for is is that’s automotive you know and PMI XX% is really, that. exact And but chain because deep our But a definitely supply a I business. pervasive definitely heavily that so automotive. Germany troubling number in Germany put significant

Richard Eastman

a Is that? might think, I the And of I should okay. I’m larger to that yes, help start timing. of were mentioning when this year for like It’s piece? And just Yes, around of the some orders production get and later the certainly guessing we see XG that then but is shipping going what you the in have kind we like Alex, maybe semiconductor that to could STS look orders, tests. of kind business XG kind do ask that – to XXXX. business business, us going we impact

Alex Davern

all first relevant, answer short is a of... Just

Richard Eastman

here. business know reasonably your of moving but I there’s lot well pieces may a

Alex Davern

problem. No

found the quarter, wants in everything products is what to in customer talking we the customer take the about of the so first there are products QX. delivery quarter the we’re of orders in the on those Just delivery point wants

next Rick, tests impact we volume semiconductor In order QX it will material When in accounted production those in to terms forward and will at XG view, most that efforts. wave of focused maybe of our definitely aren’t point, have a year, look just clear. deliver this orders from point be the for on millimeter its

able on we will launch the that of take leveraging interesting to be about as be to it. large as investors. advantage so help a will production Eric some they and able a in a down be and critical earlier from questions you’re leverage will customer conference to a customers, comments part we’re if technology. platform as that we’re the excited to get So millimeter STS we directly mentioned And our test, that his platform so around making intend ensure and crucial is have of to hear in in context XG is that you investments that well, see I wave very, our to panel This of person. more that seeing ask We’ll NIWeek, be NIWeek. you’ll for the think to really how very you’ll

that through I’m and we should the are This is to deliver growth. investors results as good The really other we really to confidence in here that XX% point make, cycle. a out flat the first that see I think test think result. profitability the the to pleased team profitability rest non-GAAP QX, committed revenue I of look on it’s delivering of give year, And want operating the of commitment record kind I very to

Richard Eastman

just to – want I bit. just a back cycle And

around is NATI’s more around on Can your benefit or to the the analog XG One semi-chip more chip-side test, going RF is – – going benefit around two the are handset signal on separate test? Or is test? things. mixed two? you production you or mean be play around is to I Your is

Alex Davern

many real later various the applications years cycle, former. then focus of handset. up that these the around the is participating, A all certainly domain. front in of elements down for we And in on the And testing ecosystem as the we have be [indiscernible] for will and

Richard Eastman

the in quarter? was plan get year? Karen Yes. And Is for the – there then FTE the question just the what full is to then And last one one and here. I’ll one what

Karen Rapp

relatively perspective. headcount are a we Rick, from flat sequentially

a at to us continuing You can the bit, through year. about stay little down that, expect

Richard Eastman

Sequentially. Okay.

you. All good thank very Okay. right,

Operator

our And Instructions] from [Operator question Deutsche next is with Bhagavath Bank. Vijay

open. is line Your

Vijay Bhagavath

questions. Two

about economic you on, obviously indices. mentioned is first industrial The the

cycles, the in any and back catalysts are? more they are track and that next into half the there I year, head my monitor terms a specific what need as product to of have into follow-on. we indices and think then because economic industrial question we are I is And

Eric Starkloff

Yes. and conference. platform I’ll initiatives. for for plug a on for That set as new is that, of It’s investments lot EV announcements is well. a in vehicles, this – Also make obviously, of Eric. NIWeek Vijay. have area the portion automotive us the in shift part product put into and of that’s another I’ll portfolio launching see the shift quick comment as I some Yes, well automotive in a key is investor customers of our ADAS the serve shifting that hybrids positive on on our into Clearly, becoming as in product gave ramping the And of a autonomy millimeter the back that automotive new XG some into that. big our Alex of color are and few a a of is preview about that of of half bigger the and year, existing portion their going around of where we a of from those. element. we XG wave as growth the and that a business will applications elements we the our XXXX, talked is a

Vijay Bhagavath

meaningful then the would quick And Europe you exposure have be revenue perfect. Asia. Yes, in do – and follow-on

of of again and demand once to catalysts there that U.S. in that we U.S., trends kind need there what of geographic question different so rest contrast trends, versus EMEIA/APAC world. fundamentally any or of is are in terms my are we a the monitor So get

Alex Davern

Yes.

heavy very you I break In what Germany, when we significantly great does think what heavy we certainly, semiconductor. concentrations, heavy generally this is Americas did than PMI in In diversified, all at is refer geographically, the in industrial to quite very particular a permutations, geographically quite example, we uniform, we’ve Taiwan is for relatively when [indiscernible] Japan, strength. EMEIA look business it’s proxy quarter. which downward have particular the And down It’s it than it’s it’s And in seen the Americas for we’ve but geography’s the Europe performance automotive. is and mix. the things quite our it’s automotive. in the trend in seen that like this in better as different

remain insight and have looking macro So I really key the be the will XG broad retain belief valid of our automotive for to disruptive into an tropical And then our semi-companies to indicators other some industrial the traps. business technologies changes, customers. the as well and those a you that counters buying of behavior get as certainly, at

Vijay Bhagavath

final Yes. be OpEx rest of percentage of of year? revenues How through Perfect. The for question would think Karen. as should we the

Karen Rapp

strict Vijay, at year. presented yes, our we’ve pretty true stay is NIWeek our operating model to we’ve to goal what been last and with

operating that be talked maintaining the and income model So assumptions to as out our providing to as goal. it’s and cycle context on we Alex through or be model then again back about revenue at growth, XX% that’s and of please the that color growth refer expectation, you continuing make on in more May revenue we’ll But NIWeek. our still

Vijay Bhagavath

all you. thanks of Okay,

Operator

Alex am for would showing the And call the I remarks. I his not in questions like Davern to queue. turn to any further final

Alex Davern

today. us joining for you Thank

join XX, to dial in to If stream in encourage web. on listen you you can’t that on over you. make sorry, and Thank live – and August the as May Austin I Investor Conference the

Operator

This we Have thank gentlemen, and day. disconnect. ladies you today’s you participating for And wonderful program, concludes in a conference. may the and all

National Instruments (NATI) 2 May 192019 Q1 Earnings call transcript