NATI - Earnings call transcript Q2 2019 | National Instruments Corp

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Operator

Good day ladies and gentlemen, and welcome to the National Instruments Q2 2019 Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce your host for today’s call Ms. Investor of Head Vidaurri, Relations. Marissa Ms. begin. Vidaurri, you may

Marissa Vidaurri

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

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

deployment strategic call, innovate, During growth focus, our and conference make our directions, customers statements to we and and continuing our course cash revenue the for this including for forward-looking our profitability, plans, shall QX. of and statements future guidance vision regarding EPS

statements financial expense results that from annual cause We filed or contain wish XX, contained on to in are and GAAP by report quarterly and caution just and and disclosed These filed on measure important X, differ weakness may including non and Form you report XX-Q identify factors could events statements. XX-K release XXXX and on in fluctuations contained regularly that those inefficiencies, in to on actual factors, exchange in from disclosures actual our documents materially February negatively economies, most and the our affected such effect A May Form to on measure numerous rate. press revenue comparable forward-looking related differ that our our XXXX. GAAP this could materially the adverse price be financial our reconciliation effective of directly files call in ni.com. to predictions are foreign results you Exchange any We including changes global company’s refer large company with customers, overruns, the manufacturing and tax the Securities Commission, documents fluctuations, the of

of now to turn that, National it Officer over With Alex Davern. I Instruments Executive Chief will

Alex Davern

joining Thank today. you, thank afternoon us you for Good and Marissa.

we quarter $XXX net down today X% for dividends messages share through second Record execution quarter. to million year-over-year, non-GAAP sequentially. excellent approximately the income million, $XX and returned X% key shareholders Revenue in and external and are despite disruptions of up repurchases. Our

our of to earnings reached gross as our lowest guidance margins result We the a of ability slightly operating PMI the non-GAAP levels expenses. in since the guidance as share per our of global scale mid-point achieved point its of October the strong Revenue came below mid and XXXX.

Huawei paused the our was the across global decision and trade smartphone placed business our restrictions as on May. all Additionally, Entity had And in when shipments we Intel’s chains. XG Huawei Huawei List impacts conference, on to we discussed supply investor modem negative exit the

of in profitability. systems. a structurally aligned be new on ability to reinforces This automated with to and for PMI, the This XX% net products we regulations. my our which delivered year-over-year opportunity Despite defined in confidence in growth ago, of measurement determined for tests non-GAAP leader have week and resumed in focus on shipment long-term compliance the growth first we journey income contracting higher a the were we U.S. growth deliver export software we the half. core vision automated began and our renewed years Three profitability. We strategic

years. fruition in and our as me suited semiconductor goal and accounts our impact in add and is operating We of more add strengthen through shifted platform for long-term believe broaden level leveraged reoriented drive XX% aerospace our performance of to realignment of comes reach where to our of system the the industries and great within to and best two the the sales of more operational value to of our transportation our We future to cycle. sales of government key margin non-GAAP We the delivering centers and a growth force NI our economic committed our levels value strategic The the force. we all our gives business. next confidence focus inside excellence relationships of customers of strength within key defense to we to

Eric through Officer. turn To and details to to talk Chief President quarter, our the Starkloff, of I’d performance of Operating over it the like

Eric Starkloff

Thank afternoon. Alex, good and you,

share continues strategy some alignment provide our Intel’s our then offerings market Our quarter optimistic chain, is decision, opportunity. growth strong and by believe due of our deliver build remain semiconductor by how this can supply in at our resulting indicative We disruptions targeted our customers. continued order in which to focus in Despite to and to on to order year-over-year our I’ll growth for from through and strategy industry to we business advantage XG the the focus competitive a we level now create growth in region. gains strategy growth QX, drive global execution. Huawei in provide system for growth context

In use production customers and specifically of X-gigahertz characterization, test continued QX, STS, semiconductor Test traction as Semiconductor strong continued validation test in in production orders saw Our tests with our the offering components. of sub across semiconductor offering our test. validation customers to record value see production System, our and XG the

on leveraging moment as would business of Ritu forward Manager her to more Biometrics her with RF CEO to Business. as of and welcome General take semiconductor in brings the and experience positive XX experience previously than in a Favre working most of NEXT recently Semiconductor like with Freescale. to Ritu our I to Ritu industry, for years serving the at Manager this the our industry. build General deep momentum look as I the

grew defense aerospace year-over-year positive single relatively QX government Our and mid in environment. a digits orders in spending

life-cycle needs industry, our customized these significant add long and platform as customers modular their helps it from systems. for value benefits meet which Our highly this defined software approach continues to to

be software safety a competitive focused saw double-digit in on of continues a electrification, portion strong advantage. our this to order the autonomy industry active adoption transportation, saw while QX in we In strong Our and decline year-over-year business growth.

from in technologies the market the to production overall of shift from I areas weakness new impacted was automobiles business from mentioned. in broad adversely of general transportation softening and Our by the rate traditional spending the a

We continue development our that our growing from to technologies platform. using most on fast focus benefit

and test seeing to positive the success system rate announced system our For of opportunities. This NI in example, repeatable scale very last increase us are month, to validation battery deployments gives opportunity and we battery a the response.

orders our region year-over-year with continued new orders from perspective dollars, years. released strong well China This growth. our other this the restrictions. our down to of in represents still EMEA U.S. customer first our in and a broad we reported weakness, digits From orders adoption respect headwinds customers as continued portfolio term the platform up to our growth the business software year-over-year were industries, of in we regional LabVIEW over industries, approximately most down products despite APAC in region trade customers by X% driven stability near in of reported provides down the future region adoption task. of the single to a of broad past the the our With Americas as and this based orders Historically, year-over-year X% set for high which released XX% provides our believe a Across all has half features saw business we’ve in the of foundation QX. new many and Huawei the in business two reported year-over-year, adoption continued the was that in software QX correlated growth PMI. our been part Despite

platform. the from that key annual this May. in user Now, I’d from X,XXX took directly At XXth industry we hosted leaders than engineers about in and our NIWeek, of NIWeek, anniversary attendees spoke X,XXX person premier heard the like benefits nearly place more NI share to in At some online. and event our the business technology utilizing takeaways leaders industry, conference that of

For up are example, industry reuse. disrupting and by the Orbit commercial XX% platform the innovation. support in XX% reduction how Virgin their hardware they Valeo shared time using reported NI software rapid to and development satellite

transceiver NI to common showed their analog from NI shared tests reliability their a Semiconductor to and test accelerate implemented System and use improved how validation of production devices they Qorvo the platform XG tests. the with signal of Test vector

the recognized had our the are we fact, on impact as In operational has devices platform their recently were supplier of year efficiency. analog they for by

NXG wave and also new at numerous test new to the address LabVIEW, data NIWeek We system management launched millimeter transceiver XG. LabVIEW and of signal versions system of software the vector challenges products including linked,

continue to on in targets. their component we summary, our economic any innovation innovation committed investments, success. platform to critical industry our believe from focused growth must cycle our confident through customers through We to strategy R&D and In and alignment internal a remain then is our our long-term

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

Karen Rapp

you, Thank Eric.

was of the revenue of Our XX% QX guidance. our in mid-point

a and earnings Our for also our we and scalability With at delivered the of guidance mid-point QX. performance stayed increased strong culture second efficiency, a operational of non-GAAP in NI’s share per $X.XX earnings quarter. record

performance of that pay We’re the to structurally efficiencies variable our operational we implemented to have profitability. help proud and alignment scale

million, year-over-year, X% orders down under X% year-over-year $XXX flat company’s was and constant were and value revenue X% down total QX, in QX, X% year-over-year. orders down In X% orders the year-over-year, up $XX,XXX sequentially. were of the we’re over $XX,XXX For down dollars

economic the our our to provide our QX gross We of our a impacted to margin and Non-GAAP strong of benefits was were and orders Our in dollar. XX.X%. testament as weakness platform by the strong the a margins believe remain during gross broad the quarter brand as well value systems customers.

company X% XX an up XX% reported from half in non-GAAP similar year. the a of XXXX million a GAAP years. operating income income net non-gap the during approximately the and net The to $XX half of this non-GAAP in or $XX income of PMI to three income margin years was last ago. performance has non-GAAP margin between QX we of XX% QX In years. and results QX PMI basis net million, QX the per in increase XXXX been our first XXXX, period at Our of $X.XX and in the the delivered was current XX% year our strongest was time a levels that compared The XX first net net in contracting increase three the non-GAAP XX%, of points share. QX cents was and revenue

Now, allocation an capital our strategy. update on

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

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

$XX. million average total approximately During return quarter, X.X the stock of shares The $XX $XX approximately shareholder dividends and was in paid of QX. an million price outstanding at our common we million second in repurchased

of NI record Directors shareholders $X.XX XXXX. of share dividend XX, on approved August The per for of Board the

dividend trailing For our months payout ended income. net XX XX% ratio XXXX, the been approximately has QX non-GAAP of

to the we million. pressures range quarter external expect For mentioned cautious of earlier. in remain be to total revenue We and $XXX third currently the economic to due million XXXX, disruptions $XXX

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

in fund earnings of share that GAAP estate, gain for guidance a social of a a corporate Included per donation $X.XX supports donor-advised responsibility. our net pending is sale real approximately of

these please be could factors For that forward-looking actual highlighted statements Marissa. previously our revenues affected by numerous by and remember earnings negatively

net increased operating of delivered due committed income to to long-term non-GAAP We non-GAAP on efficiency. summary, cycle. goal In record value our the remain delivering strong operational and and XX% culture margin shareholder through we scalability our of delivering

With over for to comments. turn that I’ll now closing it some Alex

Alex Davern

in compared XX% that XXXX. the have Excellent the contracting net deliver Thank of first non-GAAP up execution up half us profitability net delivered strong reposition half period and The years. to This during income of period to a is XX% years first has non-GAAP three the long-term With NI been margin you, Karen. the last success. to a the for in PMI of in XXXX. over XX NI last journey same strongest enabled XXXX

they’re NI proof of customers their NIWeek structural challenges lasting will firsthand these I platform solve competitive business. how profitability At heard I are spoke many the believe our and of their to points in benefit. and that provide with improvement to the deliver advantage our utilizing

key relationships new to customer technologies direct to a them Our and our market. differentiator critical helping bring are innovation is

the conference our future. impact will NI’s of growth how within expectations. years now industry the and have At NI. has market by NIWeek three exceeded investor opportunities our our Semiconductor, focus the [Indiscernible] over the shared In for we during next exciting our event the the we drive technology stage growth last for of inspired

a we’ve allows Our we proof offerings millimeter success to our and us for to transceiver, industry strategy units. new our strong of forward results see on the was other wave and into our to impact of business are production as platform share system historical We The to transitioned based opportunity approach, level broad test the gain signal to continue position address vector which in challenges our looking market model XG. more the the our accelerate. for as and seen this point serve

based current and value a safety on had focus in traditional proportion we in trends couple in automotive we’re transportation, business from In active investment, accelerate our and revenue these broad technologies electrification, the deliver level and these key the with applications. of more investment for reduction system to platform of shifting application and increase new our the we believe autonomy can next decades, and increase the an coming of over years growth With areas new areas. these fast-growing we of focus

be where the level believe aerospace, to In many with portion This their have we market. that a proprietary that a I is advantage lot we market opportunity, value defense application this government Customers our this one are a in to based and we market a have in more approach system it value large for footprint to areas ability a the underpenetrated. future of our In IP, capture key platform key we working will delivers. deliver with platform broad of is served larger and which years. control is

level have opportunity we to believe deliver in customers this of differentiated value to the greater space. systems I a

our is business reach key tens of customers thousands the our stability Our of core portfolio with to leveraging and the of platform. broad NI

delivering to Our applications. customers while system tests broad servicing goal is with key defined automated for and best value growth the platform level for software business base and this of measurement also automated systems, continue this more

progress to to of last dynamics the want transition NI We’ve operational our to hard leverage three their excellence. market believe deliver made and years and our work take for growth profitability. thank long-term our NI reposition employees when I the for progress advantage significant over recover. I positions significant operating and

your questions. up We’ll now for open

Operator

from Thank you. [Operator comes Eastman Our question Baird. Richard first Instructions] with

Richard Eastman

afternoon. Good

Alex Davern

Rick. Hey

Richard Eastman

you could nominal dollars, U.S. repeat the repeat could Eric, geographies But them? referenced you order past by just question. ride Quick dollars? that numbers of just those, couldn’t I those were that you

Eric Starkloff

and that were, and they within They down up then China the dollars, original X% our were, sure. Americas Sure, were X% down I year-over-year. was U.S. strong XX% was year-over-year, APAC. was APAC commented and in QX EMEIA was region numbers particularly

Richard Eastman

And versus reference I see, you that dollar gave. okay. that’s orders the

Okay. And then…

Eric Starkloff

in that’s USD. orders Yes

Richard Eastman

minute Yes. or And Alex, then, for could two. speak you just a maybe

question you in sense is resumed backlog of general big shipping a and not same Intel customer, customer, any order third exiting in of from consider I enough needle? the XX% the now kind slipped referenced obviously second kind a Huawei stopped You of acknowledging magnitude enough modem a I – May that of have that’s that shipping maybe but would to here the Can that quarter. that give move big was third? a that And the – around there customer business, now you’re if was it to guess shipping

Alex Davern

had in also rest Conference when Yes, a about directly would and at OSATs of Rick, maybe our be and overall XXXX FY ours chain supply obviously chain. at been of Huawei look refresh We said we Investor well the of stated supply revenue the as their what customer their publicly. you that the X%

these I a major impact us QX powerhouses, certainly when look uncertainty So that global around in their the was had at two an technology headwind. business on

we helpful and with that a due are believe to the shipping the comes we’re through extended Certainly, U.S. the was direct but at both chain have products the you around It’s certainly chain. we when regulations diligence, supply and revenue difficult but not honest will the uncertainty companies, completely amount quite with be export with of deep of impact export whole in supply all in comply to QX that to regulations. now been it to quantify compliance shipping, continue beyond the look

Richard Eastman

reference. obviously Intel was development, up the that’s customer that And scale then Intel sizable I it your netty because Apple, selling modem losing the with spend was and development I and money their to on in on modem mean the kind side? business, presumably of Intel, of on business think a aggressive

Alex Davern

specific customers don’t has certainly. of a major and Intel for much of too global customer technology said to is want as been but Intel the NI Yes, in powerhouse about many years. I set talk I a good

I think QX. that saw certainly future about for the uncertainty general on I very my think well you, is the of NI are chain. aware that’s on headwinds sentiments you’re the as good the to of in along these PMI and good declining the in the resolution the And of unit half, we supply and for share of global kind quarter

net to look exceptionally the second I think the quarter, really guidance when good for deliver it’s gave profit first we are in after we faced growth non-GAAP non-GAAP record proud team. I at we performance, income the of XX% half, So what an

leverage see You Karen, we’ve committed steady given the created pattern. to the our QX profitability as very our from that normal pretty you can we’re from for and seasonal goal with is guidance we’ve heard

that’s good difficulty an longer-term will of So easier quarters forward the in comparison expectation we’re seeing kind kind to And have of that slowdown as the seasonal start matches three in that of sign or our a after we’re market, they and QX. pattern. looking

Richard Eastman

Okay.

thank you. Okay,

Alex Davern

Rick. Thanks very much,

Eric Starkloff

Rick. Thanks,

Operator

you. Thank

comes next Stifel. John Marchetti Our with question from

John Marchetti

spend rate over back talking business where growth to cross having auto timeframe that yield seeing maybe start the for of could can are we look where second. Or some new Thanks I flatten of that of on auto sort business growth about lags. sort point I obviously exposure come to moment a see a some here obviously more to you for very you? just you growth wanted and the we the business some maybe much. there? over you’re traditional if next where can that were the to I’m quarters What several some a technologies these just at shift but that Is a of out? there that curious,

Eric Starkloff

is that on I’ll Yes, comment John. Eric. This

of strategy attractive disruption in long-term. of fundamentals remain is and and space the first fact an the this frankly why for of look our that all a the change So technology an is lot there in opportunity NI the we think long-term is

these and our the That quarter Specifically, of that of on of that we’re mentioned strongly. order strong and growing safety new focused very it’s your the that active areas are growth. I systems on represent disruptive autonomy question, electrification, is business those and in a areas seeing

the beginning of that supplier rest company. we’ve the the to industry The business, been since a of

broad have as – and broad we disruption. So a affected the that set long and has been business from in of well set of the some that’s that both as market business long-term of happening significantly cyclically and weakness

of to that to goal to that be over a Our course will area continue as overall time. will rate growing the percentage higher growth is time, on become over that’s and more it focus our grows favorable

that over expect We time, turnaround. some of will the of the also also would cyclicality industry

impact having factors this I think both are an timeframe. in

John Marchetti

around it. We recent about quarter. of to as the in XXk of is a this the Got specifics And the this saw question going that Should as kind you that out Huawei we more just of on that some orders, here leverage uncertainty quick orders we macro think When negative is well? large that indicative most forward, or well. the Intel? then maybe orders turned called overall over about think

that bit I orders strong the it a it as in surprised little is change that with frankly Quite guidance was is.

look second the as some half the year. we things obviously of improving here are at clearly, So

and some Just of half calendar large around orders shift think in that the the color year? impacts second about the how trying to get to the some how of

Karen Rapp

for over that. is for Karen. orders forward a the long-term. still and clarifying believe the engine $XX,XXX John, are in us moving this on Yes, Thanks growth We

year, a go were $XX,XXX. where year-over-year. last over pretty order and you period had last If year the those for at look in we tough compare same for time XX% orders We of saw back QX growth

a a to continuing little XXXX at future. tough QX in So in of looking the but it perspective, from makes look that that for year-on-year

Alex Davern

Alex. it’s John, Yes,

continue of to anywhere calls, certainly last the been then in three slowdowns Karen’s decade years We over from we five comment go has the Just last want we’ve growth and absolutely to as we, engine expect XX these the forward that my orders that seen of company. to echo quarters. conference doing larger typically

will look into road, And the to think positioned forward be to so slowdown, into well we’ll leverage a the tremendously the we’re quarters three – deliver future. where down recovery and I in we

John Marchetti

Thank you.

Operator

call for further Thank Davern I Mr. like no you. this closing back to I Speakers, the in remarks. questions showing the time. am at would queue to any over turn Alex

Alex Davern

look much call. Thank joining at to you conference you We next very seeing today. for forward our us

Operator

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

You a may have all and day. disconnect wonderful

National Instruments (NATI) 30 Jul 192019 Q2 Earnings call transcript