NATI - Earnings call transcript Q3 2019 | National Instruments Corp

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the National Instruments Third Quarter 2019 Earnings Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please be advised, that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Marissa Vidaurri, Head of Investor Relations. Ma'am. ahead, go Please

Marissa Vidaurri

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

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

fluctuations most and call the A our press forward-looking cause in our could to those related quarterly on filed our are refer strategic call, and Exchange XXXX. from identify comparable non-GAAP revenue rate. customers, large and allocation files on documents During with exchange growth actual could that in our factors, focus, changes, our and disclosures conference February ni.com/nati. from make for actual company measure events fluctuations, results directions, regularly materially the filed affected foreign report factors market statements XXXX, capital reconciliation the we and guidance of and manufacturing statements. important position, our course this inefficiencies, tax contained measures effective expense negatively and EPS price may XX-Q you the materially economy, in by X, of our contain numerous We Form documents this Securities differ on including XX, and and forward-looking GAAP to to plans, that company's profitability, Form in just adverse to in release XX-K plans, including shall contained wish are differ financial predictions of that be for the on on and the statements future weakness revenue vision Commission, August you annual effect regarding and including our statements or financial such and disclosed any QX. overruns, report These We results directly global the caution

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

Alex Davern

a environment. Thank messages you us performance PMI contracting afternoon. today. good and Marissa in all My joining key strong are NI today you, Thank for by

Our year in highest very and NI the long-term margin three first IPO believe that the is of I the net growth. XXXX, for positioned non-GAAP quarters for since

in share and in midpoint our slightly guidance, revenue above came of came per earnings the our the at midpoint. Our

Our during a operating PMI QX strong for maintaining in margin And a I very believe quarter, strong on record market it a the flow. this during since best to a for of we the the third deliver recession, non-GAAP when industrial continue our company IPO a foundation; was current we're building delivering in the profitability contracting revenue cash position goals by strong by starting our that puts and period is XXXX. a and the us performance recovers. believe I very

believe a company software progress We in path years. great tests, We highly continuing the differentiated platform. as core make last automated systems defined leverage market or measurement strategic be us our clear to over with our vision provides to [indiscernible] a our expand significantly to automated three leader the and

team strategic leadership functions company our realigned pursue NI to vision. has of three Over core the systematically years last all the

We the greatest get to and have on the business our from realigned differentiated platform. industries applications we benefit our focus believe

business potential. We be greatest units channel have of on the with to informed the realigned our our a sales accounts and focus

profitability to committed our greater deliver this compared to goal months and realigned growth provide nine brand, accelerating I'm and impact resulted I our our and to allowed operations aligned in the the on company a of realigned realignment period net to non-GAAP believe pleased system we this see XXXX to this through in income will service that to teams follow have the revenue our XX% XXXX. XXXX XXXX. first impact future focus to the a that revenue and for has marketing has our profit level increase in now, our is significant fully Together, value. and have in having of We growth; operations enhancing same on us

higher of that be a to improved software-centric XXXX show us structurally new to we profitability In meet production the our transition commitment the on-track remained to customers us on our quarters NI XXXX. increase XXXX. in in recovery believe differentiation as in industrial in and mainstream are This to we economy, executing benefit deliver flexibility weakness to delivering focused sight. help anticipate options share with history four and meantime, in of expected XG look revenue After on of to would on the should market later platform the give our the coupled goals market reason for profitability of to We're demands. mass achieve

on goals ability Our profit very a starting to good means the deliver this in market difficult environment be we our recovers. in when will position

X, discuss my to was Now, opportunity personal company's the up for I take taking It to will and Strategic NI at May lead the on of XXX fall. future excited position the CEO teaching University always from role have to announce the career, of for switching growth. Business reset the as in McCombs to I'm a Starkloff through topics. intention transition to successfully that long Founder Advisor before position I'm has effective to been be will School our strengthen participated succeeding as of my over significantly necessary Having excited as February earnings transition. the my Texas, calls to me in XXXX. CEO NI to Eric then

him Board will will NI on partnering three to growth and years promotion. for past of long-term NI and XX Eric realign I've years the the the innovation be profitability. right years and forward. worked Eric many for make His his to Board, take passion at leadership the part enjoyed his with him for I joining on of NI over choice I've as and then our journey NI with over remain

let congratulate for over him our that, Eric it to performance turn talk and QX. with through me So to

Eric Starkloff

afternoon. good and you, Thank

the to him with for me tremendous in personally as been for on thank last XX Alex the and his past take impact importantly, alongside First, my opportunity NI. work the together leadership to in team years, X remain we and has most core results for It his let I of partnered stakeholders. create strategy, with and for company our our confident vision to long-term to strategic the growth. our align our deliver along our leadership ability entire leadership our team all honor

for on to our to continue growth on increase career more We and the our will to employees, creating our market. paths value in profitability adding on opportunity and focus customers

we've our challenging performance we progress performance macro-environment. with and relative the aligned pleased our our onto vision our to in to company strategy new and QX; Now remain and

down-cycle This we a semiconductor, by global economy that our weaker of was the meet quarter midpoint revenue decline impacted tensions, despite a adversely trade in the automotive continued and in industry. guidance industrial

we best Our of years; where year-over-year bookings were in QX to compared X% XXXX the quarters year-over-year growth down recent up one in XX%. bookings reported QX

in our the Now semiconductor and I in quarter. A semiconductor, we on growth significant the XG are our the of for impact XXXX In validation we through flat decline overall context the the believe grow. for the weakness, our applications orders of provide will strong R&D testing indicators Despite production overall our is the multi-quarter continues low strategy semiconductor early our now automated in remains instruments of and business market to by is semiconductor positive the a that focus year-over-year industry and XG saw in quarterly QX, of double-digit beyond. decline order bookings dedicated industry share in the year-to-date follow-in a industry. automated success chips; and with

in building semiconductor Over remains a the XG production we months, seen capacity, out and infrastructure chip-makers overall a our sub growth for equipment; X-gigahertz uptick XX business. past have especially significant driver for already this

millimeter While different on is timeline XG wave timing X-gigahertz. for a deployment the sub

shipping test. test validation millimeter systems for currently are and both, We wave production

increases. the has the using very customers XG of automated So conditions and transceiver the of these We our far, released Apple. Lead product in to market deployments business pace Intel's modem and been and reception the test subsequent in signal exit XG wave already been believe which are and restrictions millimeter has due market wave XXXX, sale equipment strong. of somewhat limited been will from millimeter delayed validation production wave production scope, vector to at volume Huawei this May test XG and have millimeter dictate cycle

we transportation QX, in decline orders saw double-digit In below year-over-year.

areas We weakness the continue to electrification, active our rest the and see safety reflects of of autonomy, strong the while in broader business growth market. business in transportation of the the

areas mitigating weaknesses applications. focus continuing of high these invest Our remains our proportion increase order in those the of in in the growth to on to business aggressively and market

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

meet cycles ability customers their software-connected economy to long to value to spending this this industry control industry life of remained year to proprietary benefits for IP, tend their systems. to and continues overall and The significant customized the platform approach highly from this our environment as the cycle has help the and Our positive. add needs our run counter industrial which

across potential our economy, to business year-over-year. Strength to broad part begun of for which software-connected of in compared adoption XXXX, which headwind to with of been has the part our up the software customers QX of first growth in agreements been in up enterprise experiencing a customer this all stabilize. PMI. and our other future strong of in year-over-year indicators of opportunities nearly the these all has this industries year-over-year in order and are business, three the growth We continued revenue believe most in has strong results industrial portfolio business quarters X% of positive the quarter third orders low were down of our correlated represents respect industries, half our XXXX. weakness the QX, we to believe With single-digits Through XX% very of our platform. Historically,

take future strategy opportunities. our remain in a strong we of In we our long-term R&D committed are position believe to advantage and confident to investment, in summary, growth

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

Karen Rapp

Thanks, Eric, congratulations. and

came QX at in Our million. of $XXX midpoint at revenue in our the guidance

delivered QX, Our strong slightly $X.XX earnings of we earnings share, the guidance. in ahead non-GAAP midpoint our per performance stayed and of

to variable operational our alignment We are structurally profitability. efficiencies proud pay our helped of scale that performance and

bookings under X%. Compared down Eric over and XX%, X% a were in orders our over $XX,XXX where QX were to $XX,XXX Orders orders to strong year-over-year XX%. down year-over-year down year-over-year. XXXX, QX orders as XXXX, X% reported under X% As up of $XX,XXX and were growth compared mentioned, were we $XX,XXX were QX year-over-year, in bookings quarter down

terms, revenue in By dollar region the In total in X% X% X% Asia-Pacific in year-over-year. in down down EMEA. was QX, U.S. revenue was and flat in down Americas,

brand Excluding flat We XX.X%. and was the a down believe was flat Americas, our EMEA. testament systems of our foreign remain provide impact the customers. the platforms in strong in in our exchange, our the Asia-Pac, X% to margins QX and benefits margin and value Non-GAAP in currency revenue to gross of gross

Non-GAAP record ago. margin operating income million a $XX XX.X%, a up The points was income QX net reported was QX GAAP at company year XX of for non-GAAP million. $X.XX QX share. per $XX or from basis a

we've years. to talk made like the about I'd three last over the realignment

year-to-date compared increase non-GAAP quarters XX% environment. a of in PMI first similar delivered the net have in very We three to our through a income, QX XXXX

the of year, net for have three delivered structural which as the reflects revenue believe non-GAAP three that quarters at XX% Our in the company. we the compared implemented income impact we a this first quarters, time to X% of changes was first we

on Now an capital allocation our strategy. update

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

revenue. balance the was from sheet we through together I $XXX application Our deliver strong months representing company accelerate million, that NI's trailing position the platform of our and believe innovation operations investments to revenue our a our customers. and in to XX% focus puts increase strong inorganically clear enhance XX with flow industry cash

$XX to shares returned shareholders. third Total stock our quarter, at an quarters million to shareholders dividends approximately $XX.XX. and average X.X we million of outstanding the approximately dividends Through over first price common repurchased and from During $XXX the have of our returned repurchases paid was of we in stock three million million. $XX cash XXXX,

on November The has approved NI share shareholders XXXX. per of for of XX, Directors record dividend Board a $X.XX of

months XX% for non-GAAP income. shares. program shares, of at QX Directors of has dividend improved the X this available share approximately additional increase million Also repurchase X.X ended ratio Board an an our been of For total million XXXX, to XX putting purchase trailing payout our quarter, net our the

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

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

-- our As of flow to will XXXX, have is flow XX% income. last X investments in our a invest flow a cumulative model revenue At we a midpoint operating to operating above the strategic sorry, outlook systems continue cash our will through through, support be years QX from guidance, over reminder, the to to I'm long-term to continue business XX% to XXXX XX%. In evolution.

expect also pay variable see with in We to revenue back growth. come line

flow in outlook cumulative XX% within through flow for through XXXX current XX% since would a range. Our provide to our XXXX target of

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

XX% cycle. operating summary, economic of we when margins a during for non-GAAP committed operating delivering we record putting of through economy in delivered and remain tough a our improves, position quarter the In us margin environment, third to goal economic on strength the

will Alex closing turn that, over to for With comments. now I it

Alex Davern

Karen. believe our their new recession. options share platform increased market remain look We demands. as taking focused this We provides customers you, Thank to on software-centric opportunity industrial during for meet

are platform customers NI Our competitive to business. the to advantage their utilizing a provide

a technology opportunities within bring the technologies new direct to our customer market. market impact have today exciting innovation relationships NI's key Our and by is for inspired the helping differentiator, the and to of future. critical them I'm the that we are

years last journey. a rewarding X the has Now very been

and for a growth impact seeing NI I XXXX. QX, performance see have long-term now revenue we in that profitability, We believe are profitability on repositioned the our in XXXX the our and will growth and we in impact record with

to to employees our I excellence. our commitment for to encourage their for and operational to them to customers, NI and continue thank strive want

will we your that, with questions. for And now up open

Operator

[Operator question Instructions] from comes Our [ph]. first Neti

Your line is now open.

Unidentified Analyst

Nick filling Hizler Neti. This everyone. for [ph] is in Hi,

a Just questions. few

profitability with growth sales going more guys revenue departments, do off, the the you are just see on side forward the moving on you or First realignment synergies in of focused the forward? R&D

Eric Starkloff

Eric. this Nick that. Hi, take I'll

through that to yes, set bit this in and we've we've seen changes and many referenced already profitability the changes as we've think think were the So of all, years, of things that's increased as a result records other I I alignment, in the increase -- flow the significant Karen first over past pay that synergies. quite some variable of that of that of had made a well and she that couple referenced. and quarter, of the the

So that has been an impact.

that as we've years take a there's opportunity. achieving focus as expectation changes as, increase the as knew have team I I longer. sustainable We and drive ultimately, goals on knew our ultimate with growth focusing we've to those we kind committed mentioned, to committed the Going and those But of all well. leverage would over through is in along the and now, leverage forward, in as we along we X been both goals get revenue to the market areas increased revenue on growth continued this journey, well a leadership gone Alex growth where more all together revenue that

Unidentified Analyst

great. you. Thank Okay,

now we same declined consecutive happened the $XX,XXX quarters. back hasn't follow-up: XXXX, macro book another environment? should thing have is in the a over Just this bounced two in expect and What about for since orders That we XXXX, for? here look quarter. subsequent you Should or so

Karen Rapp

are put Yes, Nick, over us management. and $XX,XXX a pipeline it's Orders we for our real where Karen. focus

opportunities systems through. and to continue on work feed we with customers the so our And that

over look XX% $XX,XXX, X going if our X-year orders back So over years. time back up you a period are

strong a So nice, trajectory there.

Unidentified Analyst

you. thank Okay,

think the what we more should looking now assume and also operating how same XXXX? December? from one Just we expenses in about is we into have Should

Karen Rapp

so seen similar you Karen way. build that to you've trends for model what QX, continue guidance can your historic built to the assuming Yes, in we It's again. and out

Operator

comes with Our next question Marchetti John Stifel. from

now line Your is open.

John Marchetti

afternoon. very you Eric, And Thanks much. both. Good Alex and congratulations to

Just want real… jump in to

Alex Davern

you, John. Thank

John Marchetti

Just to quick. want jump in real

here. comment the couple a to last obviously quarter quarters. where downturns made at We're You made times typically four these now it you've three and five before

if things out of as sort from if better, you're you're signs a more of Just tangible history, combination curious pulling both. look seeing you of getting sort of

sort Just of of environment operating and/or state could now? any in right you that Eric the the color on sort of provide that you're

Alex Davern

Americas in clearly that's and to that uptick our expected of It impact us quarters, seasonal started the a QX business pattern the seasonal We normal last it kind impact didn't to downturn we've last that would've from of these of it definite to -- as QX saw for on happen. the broke, we see started well. this that came and year, and then to of when four in seen scale QX over course our Asia Europe, now

QX, through that to in QX to of that, Now in start itself, similar to QX is pattern seeing went back to reestablish saw 'XX. I having what from said 'XX, 'XX, and to we that more 'XX, seasonal we're normal me as

said to in that, a the show we in started the should it's recovery as So call, in signs I the see coming market. quarters

consistent what from would that So expect very we history. be would with

As our a we growth average. into is the little QX QX, guidance sequential for Karen below earlier said on, look as long-term

continuing a So our we reemergence to or patterns, be sequential we're definitely of patterns bit a see cautious. positive. little the and that's seasonal But definitely

John Marchetti

And you the on follow I think and much just least the sort still there, highlighted Huawei of of could what's a up from direct short-term last is going do Intel maybe impact then in at quarter? disruptions you that how [ph] if

Eric Starkloff

Yes, it. John, of take That I'll part that. is certainly

a said one really that's it's factors before think moving factor. to about addition broadly, a pieces that a to contributing The just in disruption digits. not overall about here. the industry, as overall much contributing directly we and as industry think there's of this talked Alex down-double it's is way we've piece. it I a lot the about, pretty industrial -- this see that's I with It's business just or Not that, we business, our a is supply of to characterized, broad recessionary semi-conductor of weakness, for in the environments see which overall think of think and so the big tension We down that number double-digits, trade you is a economic Huawei, I weakness then about things chain. is Huawei, and

John Marchetti

a Eric, bias maybe anti-U.S. as and just business how seeing decisions business basis? just China company's making that follow-up you do impact guys purchase total sort up on longer-term a signs are picking you me there, remind are a maybe might much are that the or of you in of signs And you as region customers can

Eric Starkloff

it, take John. I'll Yes,

So I China. mean is up held It's pretty about in business half of our Asia-Pacific well. actually

Our China business was the positive, positive in quarter. approximately actually double-digit

point is so made And of It's a disruption a seeing movement of of borders. you chain, in which supply this directly sentiment. is something we that What we're of we're are the terms moving cognizant seeing. not across lot

Alex Davern

Yes, Alex It's I'd like just add. to here.

provider to its service a systems to echo to tool supply the or and future and we a chain [indiscernible] that, Just China-based supply are provider chain.

U.S., some say So suppliers. or last We're chain that quarters think couple continue our targeted Japanese in is Taiwan, China of and as Korean-based ported and when that, let's in helped that example, moves or to support for I China, the over or to business the of and actually. of supply out and position to

Eric Starkloff

Exactly.

John Marchetti

at little you as I mean, is least I area. either could is for And help look XG; of sub shifting today X obviously, then gears to if us we eye the today sort bit or in opportunity of the it, you set bulk maybe forward? that spectrum where just can a

a a that of maybe to You but sense some think the wave millimeter signs it get the number of today with early and what mentioned of to years? stuff; you opportunities of get is the just over can some trying where of traction

Alex Davern

take John. I'll that,

that to for So, you. I'll characterize try

in encouraging that first prepared a that's in sells so an not the R&D So as seen sign successful all, and deployments this year, this mentioned market an I remarks; the companies very that phase much, into that have far that's at so encouraging sign. we early of participate it's boxes

then systems opportunity and production. automated validation comes Our the in automated

at adoption. We couple that's because X-gigahertz is point From set be of characterize wave required; view between opportunity of sort year. we wave of as size are will next to terms of in market but a the a timing the the seeing that, for and of production will after of sort -- us. validation -- this several There kind market millimeter now, mentioned lot in production pretty an timing ramping a that dollar the then, lead and repurchase of that's larger purchases and and systems with million will hundred of half customer capital of sub where with but of years -- where of opportunity start available small as be point-of-view a now success I there peak millimeter in that's second kind

Operator

question Eastman And comes next Baird. our from Richard with

now is open. line Your

Richard Eastman

I know Alex. you're what when Congrats, earnings these with do afternoon. to not call. I'm in Good don't myself going

Alex Davern

these actually; I many I Rick, and your call, I company. you Yes, shared and vast support earnings and a and the on think really for of appreciate years you have of majority good coverage phone the objective will have I

I something… be or this number So, like, your think XX -- must

Richard Eastman

Is that I mean… insult or an

Alex Davern

at not all. No,

Richard Eastman

No, off quite think adjustment going to my Age-wise? -- the come train. it's Well, is, quite congrats; okay. NI I guess down an to be

congrats. So,

Alex Davern

sharing excited the broader board of forward I'm company quite with the looking so my some the to experiences actually. continuing audience; support and I'm on to

Richard Eastman

Okay, that's awesome. fantastic, and well, congrats to Eric, you as

Eric, market of hundred mention this opportunity about the of couple does your market or couple of things; millimeter thought the kind that as share NI's when millimeter is -- of it maybe when dollars; when the wave? a of million Just you wave opportunity ramp around a kind is talk you on production that

Eric Starkloff

characterizing; No, and said what I'm several you million dollars? hundred that's

Richard Eastman

Yes.

Eric Starkloff

in our of that that's able address. or in of will of us; certain sort lot today. That automated in of R&D parts timeframe for early the There to businesses is that what focus the be less other course, market it's the are we so are market; like validation the in capability currently production call focus available this

Richard Eastman

is kind soft of production as on or that LTE weakness orders the double-digits; the you -- I smartphone or real flagged is spots side is And it or test at -- fall-off Okay. the where for the in big trailing Kind the chip of of there? test? semi-market, smartphone XG when look analog

Eric Starkloff

Let a points that, of me at Rick. put couple

First longer time. the of that at looked period all, I over thing also of integrated

if semiconductor yes, look in So semiconductor business of our fastest was business, it's year-to-date, quarter, of couple I years up -- still a -- over the down up growing it's our double-digits. part the

-- time it is -- growth have a part there last very this and so component that's So that of year; at we deployments strong larger was one element of it.

is, serve a The analog look industrial the sort capital we broad is there in sort semiconductor of a sort terms of the ago. that other general mean, element I a in others you of spending of in results broad-based and and of at PI weakness market. compared signal and you a see environment space; to spending year so is in mix less and capital lot there friendly weakness semiconductor, from

Richard Eastman

it know, not software as good. down? in Should the I up revenue that revenue; the you just down it is that kind deferred around say? up quick very was As shows of X% year-over-year; why then, it question And the maintenance a up? shows be should Okay, quarter,

Karen Rapp

for Thanks that us. for highlighting

As of license on revenue and the benefit and more growth, EA's Eric to our that the us seeing that recognize a is from to we're more talked more that. with that line come in, product perspective we're into EA of about able

both revenue. the as deferred piece we as for well in sales, in that will you call maintenance will overtime, see you that see So that net some of out transition and

Eric Starkloff

both as Rick, said, up our Karen clear; absolutely revenue be lines. to those So in software shows

Richard Eastman

back to -- just from Okay. XXXX Karen, you And flow-through question. be for maybe earlier, to circle will want XX% so last cumulative then, something -- XX% not I said XXXX. sure to one just I'm

Is adjusted EBIT four incremental mean? those be that does what years? the that meaning take So I average will if XX%, that

Eric Starkloff

we've to Thinking we've obviously, we're and have about hitting -- high we -- in that kind XXXX out, the profit that XXXX have flow-through's of we this a as little and set front-loaded to long-term target start seen our hit on Rick in And the targets, the to are moderate. shop is very and advance originally delivered very, those bit.

to drive sure want growth. are investments organic continuing see to needed to make the we we So that

Richard Eastman

Okay.

of for moderate will way that incrementals kind to our is So rate another 'XX say XX% that? into

Karen Rapp

to the on you'll it. Yes, need do cumulative

Richard Eastman

Okay, awesome. congrats very thanks Eric, both, And and again. Alex Alright, good. that's

Alex Davern

Thank you.

Eric Starkloff

Thanks.

Operator

showing am I at time. no And questions further this

Alex Davern

So all of today. you and the again offered joining last appreciate XX to Thank time listening NI by thanking over support let to really for me myself, the sign-off have that those you. and personally I years. us And

Operator

Ladies and gentlemen, disconnect. and this may you now concludes for Thank today's conference you participating call.

National Instruments (NATI) 29 Oct 192019 Q3 Earnings call transcript