NATI - Earnings call transcript Q4 2019 | National Instruments Corp

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2019 National Instruments Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

to head conference of like speaker, to now Vidaurri, Marissa Investor would hand over the your I Relations. Please go ahead.

Marissa Vidaurri

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

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

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

the And New on hosting seeing forward in May Conference Susquehanna Austin XX. be you I March will look We on XX, conference investor there. to attending York our and in

With call executive that, turn I Alex now the the chief will officer, over Davern.

Alex Davern

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

business to positive economy global net growth been Our year-over-year income we pleased in X% quarterly showing as our and units has and today what our for across since the in projects the full quarter orders, and momentum QX XXXX. record increase the key are I'm of growth year, of a QX. messages with revenue renewed $XXX order IMF ability million, year for in deliver revenue record slowest XXXX, four net all enter and maintain record our income the

In QX, business enter differentiator innovation in growth reported order The economic and quarterly created investment market showing faster has a and our renewed meet demands always power way for and key centric of adjacencies software company our our of we growth. income, helps balance revenue accelerated as and platform headwinds. our The significant the diversity NI's customers record but to their the XXXX. record momentum been has net new

that vision, a leader automated drive team our engagement. of four and we the drive phase world-class evolve order in commitment. measurement to vision defined entire significantly growth, and objectives delivered our platform, company goal, phase software brand, market that the like and in stronger systems years. the the on of took three our as necessary XX-year and behind my I'd the I time a NI career automated strengths, growth our excellence. on core a a core call, with strategic that reflect earnings realign to opportunity, that expand the made new with to I core achieve To We operational As of believe over we our set plan be sustainable strategic to long-term company a to CEO needed to on to significantly the provides drive a to the growth. our way test for to we close out at last have leverages the of realign employee in NI ensure to out leadership my to progress key committed focus when us one-hundred introduce next our three-year to channel, first a our company vision with role next the I our profitability and future,

centric was The we execute units. as and customer facing introduce operating big our to realign change business new required transition us how objective industry model behind to business. was to more This and become for a a focus second a

For change around realign sales, services, to marketing, and customer. requires this the us

around disciplines, G&A, to addition products, realign and support realign and required to to manufacturing for us order us systems around in new it required it model. operating in R&D, to For the

profit cycle. to goal operating XX% margin objective non-GAAP by through achieve our delivering third The is the economic

margin deliver we exceeded a goal this two have the Thanks our despite for achieve XXXX, years. three on that reported goal our margin consistently. we to team, recession XX% XX% the to in demonstrating able years. to and across hard company, realigned were goal, of a be achieving non-GAAP we in As able structurally We to commitment XXXX, year, the work operating lot committed to company operating that reporting the and in broad industrial in we

the of the doubled we As non-GAAP a income result, over have years. net last three NI essentially

along has implementing us was to our NI employees. NI's Bringing critical at our always key our success culture on been with direction. people business in journey this the The new to

electronic companies also the growth, the we the not a reset executing an also and such communication of strategic leader Our globally, signal, improve for believe leadership OPAL-RT, our for between Cadence did increase but in both design Most companies engagement recently, Systems, employee NI team integration will we as mixed of ETAS. was over We ensuring design amazing partnered our with our job relationships transparent of of the MathWorks, and partnership reduce long-term this in and the allowing flow. with design the offerings plan tools. a analog, Design outcome over last plan, common lower significant three years. three position costs, shorten customers helping years To the their market, many while further entire through last only to to designers, property while time algorithms to reuse customers their intellectual and RF

a potential position of company with be of journey on the of an and strength I'm team. off renewed and years, in has the to our progress technology. reflect full increased as the personally, macro opportunity for the extremely can believe of impact success to leadership order three proud our over NI. last future am the the of platform I NI's by business customers me forward believe I It I of software realized a strong full XX-year I As platform. centric global a growth, company exciting handing business economy, I'm of have our we unique benefit shareholders. the I recovering been the are today. the benefits inspired our made very provides realize we look

to CEO, Now Starkloff. the our over call Eric I'd like to next turn

Eric Starkloff

the Alex, for the my NI. future before I'll update call and perspective with good outlook afternoon. you, first an give on Thank on ending our business

digits and a market orders difficult This revenue for automated the year-over-year for in of ability semiconductor, and is We continue positive to growth company across XXXX. We overall with the for dedicated In X% growth follow year-over-year R&D semiconductor automated QX up quarter, our and for to opportunity the up XXXX. the the a digits single take high early QX, year, testament to share validation and year our strong units XXXX of and and NI, a are guidance orders is in saw our business the as strategy despite beyond. indicator production we in market believe year expected our midpoint results X-G instruments very to believe our in saw we overall year. order exceeded up over over all XX% double up

In low-single QX, for year-over-year down digits orders and digits up transportation, the year. we saw in mid-single

in we continue where and in the see areas These are significant to overall and automotive in accounts invest. automotive aggressively that safety, market. the to high-growth of active several growth electrification, wins continue our strong to top autonomy, business weakness helped offset areas expect We the to

uptick occurred ability allowed lifecycle to aerospace double applications and maximize control our orders defense digits software digits help QX, diversity meeting value intellectual systems. of defense most Our we spending year which platform represents for benefits to in and in highly our for this proprietary significant to The approach differentiation headwind high-single of year. and in demands centric with closely orders inclusive customers of business up the business. in nearly also our the of mid-single QX, that business to year. half of in digits for down that digits saw it business, our which In other is portion property, and add our grew government year portfolio their a performance industries, year. our the PMI, of the This was XXXX. from us while portion customized low-single correlates year and all for long This most continue the our and the their strength in over year This global industry, our is customers and over of the

to see beginning in market, in were QX stabilization business as we up unit. we our However, are for believe orders this

believe year the to growth significant strategic a our available strategy reach Growth company revenue Since maturity in successfully three in remaining the in outpace current place to a NI's strategy, adjacencies expand growth trend customers. of gives me our is seats market future and double of we our this over our realigned and indicator seats with as in ability continuing adoption. believe right along up executed and our enter XXXX. some summary, our for year We digits. customer new in uncertainty, are plan confidence have another In changes execute we year expand to vision years, have multi-year software our successful as software core growth. drive we overall positive I Despite of our customers to stabilization, market. the new make seat XXXX, continued around to we last birth growth company potential XXXX, served in

Chief our the now Financial to over Officer, that, With turn I'll Rapp. Karen call

Karen Rapp

long-term our for with reported Thanks, XXXX. operating Eric. record in quarterly in line and margin year We our is non-GAAP a sequentially, both strong, closed quarter million, with and year, a net which all-time full in up QX. had performance X% in revenue of record $XXX of XX% We proud income average. the I'm

$X.XX XXXX, billion. For was revenue

reconciliation A gross with over and year year. X% expenses XXX release. non-GAAP up is was earnings of $XXX million, in points non-GAAP GAAP year, our XXXX was net our down over included income results operating margin year Our news basis XX%. Non-GAAP non-GAAP over

and or customers. our net bookings Our million XX%. of growth Non-GAAP QX the gross year-over-year quarter at share. was QX operating our systems XXXX. $XX margin GAAP showing up were momentum year, to non-GAAP Non-GAAP year our QX under in our benefits We to reported XX% and up over orders margin year. remain testament was per strong gross and provide QX, of company income cents value providing million share. per down and XX%. income in year brand was over $XX,XXX the X% platform $XX were per and $XX,XXX $X.XX a significant over XX believe margins highest X% were in net $X.XX years Orders The the into

in to QX guidance, the $X.XX includes U.S. Our per included was our that not earnings share due

Foreign of we delivered reflects asset recording non-GAAP to XXXX. share related income from January $X.XX the income GAAP XXXX. per last AWR as years. tax improvement an a XXXX. resulting a December tax have business Also company structural We to in as implemented in In our impact changes earnings believe QX Tax increase we issued we three Regulations, the the our net XXXX, compared over this annual divested XX% the is Credit deferred included benefit in

Now capital allocation an our update strategy. on

balance remains strong million. Our $XXX at cash at year-end

the $XXX was balance solid puts our of I million, technology clear strong together Our platform, to capabilities XX% with believe of inorganically, revenue XXXX revenue. industry position increase our focus, cash our reach. customer company in representing and operations from expand flow our to broaden a the sheet,

outstanding paid and in an of average quarter of we repurchased price fourth million the our approximately at of $XX shares During dividends XXX,XXX common stock $XX.XX. XXXX,

our price to the we repurchases, year, and $XXX the X dividends repurchase For returned million of stock over million of at cents. shareholders shares an through $XX.XX including average

XXXX, $X.XX XXXX. to of In a March of the to has February available addition, XX, X, Board on X% NI stockholders of approved per on dividend Directors share, increase record

to represented we January, sale Design our X.X% revenue. In of This our business Systems. annual close of approximately business Cadence AWR the

of from of expect QX this to our reflects the million. this AWR increase to in currently midpoint, X%, business. be We the range the guidance recently total removal divested financial Our our business results. At of represents million an revenue $XXX $XXX excluding

We impact are potential its on closely monitoring our the coronavirus and business.

priority this. is our have safety and address already first to the employees, taken steps Our of we

includes guidance one-week extension evolution. of of our further Chinese strategy, Year Our we In systems to New the the plan to invest impact to the XXXX, business support support holiday. our

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

non-GAAP company XX% through the economic operating margin Our target remains cycle.

non-GAAP This we be QX includes range earnings in of $X.XX which GAAP share of to the to will We the in diluted of $X.XX. AWR will This sale business. diluted $X.XX from be earnings per expect on from share, be excluded to QX expect $X.XX. our gain range per $X.XX our the

corporate non-GAAP the XX% effective XX%, adjustments. into we a rate was has and XX%, based risk subject tax XXXX to the the understanding looking This XXXX estimate tax to in new built our been guidance. Our our on laws, for range of of tax forward, rate of

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

the our a this delivered we industrial broad I platform, shows ability our in by summary, base and results operations. see our market of value stability customers to scale innovative and broad diversity, believe In then strength the in strong the provided our customer recession.

turn to to comments. over like for back I Eric call would closing the some Now,

Eric Starkloff

value. of at Tomorrow, and model a a a world to solutions has company you, and the the Karen. over for delivers the that in respected, customers taking success that I us Thank honor will leadership plan long-term XXX-year great have of large, and highly is innovative our anchors

a position we decade As we a of in head begin are believe into and new ever. I XXXX business, than stronger

have to customers. our aligned a We responsive created company more dynamic and

throughout decision-making ahead innovation We of stay sheet we improve long-term increased are customers' customer better and balance improved and our We responsiveness. distributing our so flow we've can profitability strategy. to cash the help that on use and to our agility our focus accelerate our company to needs,

believe We Alex will have for our a created strong we aspirations stakeholders. and to thank of for foundation, help all his want accelerate long-term our which our leadership, achieve growth I our so of to to commitment in company and And changes success this our ways. we've I their the strengthened which customers. want of the made, all many to thank employees for

will we that, your take With now questions.

Operator

you Thank first up. to you. and follow In the interest of John time, yourself we the limit Instructions] Our with Stifel. question from ask one of Marchetti [Operator one comes question line

open. Your is line

John Marchetti

across you us seeing orders saw well. sense some wondering Thanks if adding us a up like, maybe mean, similar could the I in about the geography. moment look all the different was by improvements geographies I'm and talked some very four you're just spectrum much. that and give segments. if of of rundown if you you of gave as what could you talking spend little orders a that I wondering about

Eric Starkloff

John. you are and It's Eric. XX% orders To the they I'll in view Yes, in and QX, were that. up down in our give in hi, math. X% geography APAC up region, Americas XX% were take

John Marchetti

four of the fold expect Maybe you or it's expectations for that be obviously to at see you growth similar Did this And you're different about way little up do being guess year as how of you're these in? can that should across into drivers your there, looking semiconductor of bit I X-G. looking out lead you? just continuing some into you think more some follow to relatively we when going these as XXXX, sub-segments a a a for

Eric Starkloff

commentary give I'll on some that.

last were growth very strong QX - really our talk the was as had years, and the QX, that area. as semiconductor what's growth. that what strongest over me spaces good a also double-digit We're we've we about that's double-digit We happening shared and strategy. of growth XXXX the seen combination first let in so, So, and along strategy over a well few before, of our been -- maturity the growth it's as furthest in those in excited with in

momentum is good. the So, there

fact the of mentioned most been instruments think box is sort millimeter as early in are the the of prepared sign strong second good in overall half second mature sales we transportation. that come As market I year. is the has the then and we remarks, X-G for R&D the -- a into and XXXX the wave And the

the contribute Defense market's and overtime, And more the business. as very been business, overall in we've and the XXXX, strong growing. get as in and environment with results is expectation are positive I in course, that that to of spending pretty the well. we're Arrow more scale mentioned, of that'll spending Of in very a growth environment automotive, has not invested but areas XXXX, pleased our area a positive that

the an And that to our as quarters. those to most portfolio then, naturally, we're a the becomes our follow the from of industrial that as We've closely, of mentioned, view, obviously indicators stabilized as and tends business economic PMI on so recession. in I compare is point the quarters we that to four view past more seen you mentioned, positive outlook and rest and

John Marchetti

Thank you.

Operator

question from our Eastman line Baird. you. Richard the of next Thank with comes And

Your line is open.

Richard Eastman

that? or for a Is backlog could Could book there Eric, that you I quarter? just bill on to follow the up a number, share

Eric Starkloff

Yes.

Karen Rapp

Eric, Yes. it's Hey Karen.

to we end starting a QX, built transition the a of and seen me maybe backlog We decrease. Let QX compared where QX point. had that off at of 'XX,

some with coming in backlogs. So, strong

starting so the As you growth we quarter forward, to to systems from continue transition as more business, a and viewpoint. that we going backlog know, have

Richard Eastman

bit I the Is of Eric, a revenue skewed at look numbers of function -- growth I up segments, growth all is in vertical? your orders guess the but by that when surprised semiconductor function I'm how And little that were geography, the in a Okay. a is.

Eric Starkloff

Rick. looking basis, saw this two-year a in Asia obviously weakness, It's It's a a I over little the more year. bit think out of that last make you'll We couple things, sense. time also of see kind

see it even out you'll think I more.

The the really thing. is an continues grow, to to the talked are which which and our about between revenue increase We I software. our other shared deferred delta good in thing going the we was that strengthen a on, as that agreements, revenue software is orders enterprise subscription-based on to comment

The first a that to software revenue is also delta. contributor

Richard Eastman

Alex, okay. say did see, calls? Alex XXX I Did earnings you --

Alex Davern

Rick. XXX, Only

Richard Eastman

think didn't old. were you I that

Alex Davern

mid-quarter have the timeframe. Well, we did a couple of in back updates 'XX

Richard Eastman

those. counted You

Alex Davern

you've I think of Rick. been on most them,

Eric Starkloff

was to say. Rick? What's I Yes, count, your going

Richard Eastman

Yes, -- well, at keep you they you I know look luck, telephones, NI and When Week have started some what? count in of perhaps. didn't to I business, those. running Best events I so into this Alex. forward

Alex Davern

Thank Thank Rick. Hopefully so. you. you,

Operator

Instructions] [Operator you. comes SFG. from of Heisler next Thank line with Our question Nick the

Your line is open.

Nick Heisler

It's I'm for here Nick, Maddie.

a up. and question a Just quick follow

first on coronavirus. So the is

You being guidance said taken that is for into for your XXXX. already account

confirm wanted that. Just to

Karen Rapp

Yes, Karen. on correct. this we into been built has we Yes, the Based this know know guidance is now, point. what Yes, at everything correct.

Nick Heisler

Okay, verticals, all across do for change you XXXX, in semi, the share any see perfect. but on others? And market then also in specifically

Eric Starkloff

continue been on we've path going on of terms our We're strategy. the to in

question just our different that the we mature mentioned, I verticals. last of outlook to in of it's of -- another terms made refer back the - in As on the and I can the commentary first terms the in where I'll year differentiate, one

Nick Heisler

Okay, you. Thank perfect.

Operator

Marchetti line Thank you. with Stifel. John of follow-up a from the And question we have

open. line Your is

John Marchetti

sense revenue faster? about grow more initiatives to as little we over those at when I support looking grows EPS growth looking growth, Thanks out perspective. into just I'm Karen, line? about should the Does an as -- things slower you're we to having just I'm a we're curious because Does ask in little to went it a some lines. the 'XX the year I whole growth along bit grow EPS of -- how and call, of I relative last on to trying new very OpEx just expect bit that talked some year from get of think wanted of a investments? the much. spend those it to

Karen Rapp

that, through Sure, Yes, for make about continue the the line drive goal talked in thanks operating We've is our focus clarification the the there. to to for cycle. the John. And we're going margin with driving our capabilities to XX% system's on investments to business.

that, about invest in So, growth to we're revenue XXXX. putting throughout going know, efficient, make the you we're continue the to coming our with services the But our piece also to we pay it. variable balancing around is systems channel as support and we're that think to to have business way more maybe help

John Marchetti

one you a I'm know to just if Okay. of clarification revenue. overall to that exposure as much out ask is. And of last the well. for that break China? trying what get then, is can the I just APAC China I market How the percentage sense

Eric Starkloff

shared half We've that business. APAC approximately that's our of before

John Marchetti

Thanks so much. Perfect.

Eric Starkloff

Thank John. you,

Operator

Thank another you, Baird. and have question with from follow-up we Eastman Richard

is line open. Your

Richard Eastman

Karen, be that should and given, maybe around be restructuring if listening that mid-single saving of savings, like about X% thinking you some the to incrementals again, there's again. incrementals of of and -- kind XX% you of because the when like Eric's just up year? we the XX talking little Thank than we're could think words, could and clarify looks were going to points your want we just this of that in be kind some maybe lower grow more incrementals that about -- should I growth, that It's redeploying model are Is areas or bit, also realignment. our the digits outlook. exists, you've -- it maybe we investment, at model In and -- XX%? other given, how a lot but might in OpEx presentations a discussion Basically, to this, I kind

Karen Rapp

flow-through of do? Is to back what there, Rick? you're going kind that to model You're trying a

Richard Eastman

incremental the of kind just side. Yes, on

of out. figure to you're some reallocating investments, because out into savings again, cost know some trying Just some -- I that growth.

Karen Rapp

of talked but ways doing restructuring growth. some is the the about things for to out is it think I some the -- think maybe Eric of about we're Rick, earlier, cost

into think coming I to, day, out addition When maybe right But will a is investment NI at do to costs the that may some and longer-term restructuring a the time we model putting good to spend and So, that. the help be around well, future and the there's laying growth place out also while for services week. in you. that standpoint, as places capability investor a there's from systems

For cycle, now, I'd XX% through can into in do just we centering a operating around margin more the then May. and the little get detail

Richard Eastman

again, -- But, it when your a margin the suggest and that and you above would use if suggests if XX%. obviously phrase, sustained is you're would level, when your growth at accelerates be higher

So, but that versus I headcount 'XX incrementals a helpful, target, number? be Is of year-end, the could if you the against growth That be us would think I get that more using do there to number? number. sales headcount in it's you expect the change helpful 'XX. would How give that year-end

Karen Rapp

of coming to Sure. similar or to X% that and into over We looking out ended XXXX XXXX year, we're year up be XXXX. about

Richard Eastman

growth Headcount X%? of Okay.

Eric Starkloff

XXXX. Yes, Rick.

year know, real issue. the that you I expectation biggest you that was - think a element given in, thing low just in back the here, just is the finished, of XXXX the of with variable quite finished, and obviously, compare this, the we as given year growth is the we that comes get pay variable so

Richard Eastman

you. got I

you. thank right, excellent. Okay, All

Eric Starkloff

you, Thank Rick.

Karen Rapp

Thanks.

Operator

from Thank our you. with line of Nick comes SFG. Heisler last And the question

Your line is open.

Nick Heisler

Thank you.

Just more one question.

the you're wave half on of millimeter more second information want bit what I earlier a seeing with just being now. to touched a right You maybe get little year. millimeter wave on

Eric Starkloff

spread We wave, in wave May that that Yes, to probably already product a we validation I expectation in certainly more labs. last automated so be for millimeter of product broad released similar so the millimeter others, of market have out year, than will demand the cycle think is sub-six gig. than

serve this space. to then continue expect early We production the And that year. in automated we later the opportunities validation it's

Nick Heisler

Thank on or Okay, the side, infrastructure both? devices, that's perfect. And you. or

Eric Starkloff

of typically infrastructure these and first markets, Well, then devices. like most

Nick Heisler

perfect. Okay, you. Thank

Eric Starkloff

Yes, no problem.

Operator

And I'm not at you. this time. questions further showing Thank any

Eric Starkloff

earnings Alex calls, well of as Thank joining everyone, years Okay. XXX as a Thank position. good put that's you, very, three you, in the us. for company leadership very for

a Have So good thanks, everyone. day.

Operator

Ladies and today's you this concludes participation. for call. conference Thank gentlemen, your

now disconnect. You may

National Instruments (NATI) 30 Jan 202019 Q4 Earnings call transcript