NATI - Earnings call transcript Q2 2022 | National Instruments Corp

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Operator

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Second Quarter 2022 NATI Earnings Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. I would now like to turn the conference over to your speaker host, Marissa Vidaurri, Head of Investor Relations. Please go ahead.

Marissa Vidaurri

afternoon. Good joining earnings for QX our you call. XXXX Thank Starkloff, Chief Financial Executive joined today and and Eric by Chief I'm Officer; President Karen Officer. Rapp,

in it start on will an the performance quarter We before to up with opening your questions. our update

guidance, negatively statements, and include execution conform ni.com/nati. related measures this future the release of payment press demand dividend growth call any to financial forward-looking non-GAAP you refer contained realize results update in the We on revenue in disclosed We GAAP of A just events and Commission, statement and its identify regularly investment filed cause XXXX. our including changes are from exceeding plans, backlog, from contain documents files our the those today impacted results on comparable or or the to or statements differ limitation, including its These targets, and to on factors duty statements. you February expectations be to may without business expectations. quarterly contained forward-looking and such that We statements the acquired XX-K in discussion products, the predictions to those and including, results report that annual measures with actual forward-looking to our caution its important could by Form company directly outlook companies assume materially to our its reconciliation numerous results financial the disclosures company's Our and no XX, that actual of materially the capital our Securities ability meeting or actual in most of factors. Exchange financial wish will regarding company's and allocation, and future for documents are strategy. financing of to differ that could

the closing this believe release Systems have Kratzer ni.com/nati. and the of May of of to with announced Test the in area serve quarterly high-grade AG. space along website others at our supplement to business this find that our help ability On the We on X, investment, discussion You will we our acquisition accelerate we presentation customers in can of press today's made Automation acquisition transaction We vehicle We position the with credit in for technology purchased acquisition our of existing revolving tech approximately business this and joined million, view in leadership vehicle contribute with as NI. puts that under employees drawn this a electrification electrification. connection and software our cash will us systems. test for approximately XXX funded in roadmap a the we $XX facility to

As is be with in details we tradition, annual to September investor shared will an in weeks. more coming our the host conference

the that, In We over With to to our in will at Chief forward addition, Executive Sachs Baird Conference also now meetings the look management Goldman the November. and Eric will I Conference be Starkloff. September there. you seeing turn in hosting Officer, call

Eric Starkloff

Thank quarter. Good you, with us I'm afternoon. this pleased We our performance today. everyone joining appreciate really Marissa.

momentum exhibit earnings order in and of Our is demand, record XX% growth and and to revenue strong customer competitive The continue expectations, areas our share. focus non-GAAP year-over-year, takeaways strength we on up delivering drive we XX% orders, are; QX key QX year-over-year. revenue for exceeding where per

later floor specifically as to on as meet call. in well this this are leading chain we And well our in supply short-term our is year enabled half, strategy to focused to in the comment expense XXXX, above pressure gains. year-over-year XXXX I by level Our XXX unprecedented as up points expect our margins each expectations first we basis to in for of margin to and navigate as XXXX XXXX. due view expectations in expectations XXXX. a share will Earnings exceed of even expectations guidance growth ongoing deliver revenue or operating the XX% reiterating expansion non-GAAP discipline We on from constraints. our

including discusses industry, a the preview we performing for headwinds Karen topics, address the landscape, quarter in future for Before in expectations and current financial results are potential why industry the want believe I we quarter, our our well the results key few second in of our a to XXXX.

mixed. potential The our more discuss detail. let's on First, in headwinds outlook markets is

challenges product shortages On QX. limited of the chains the side, global in ship with The our strong ability demand. very certain in supply supply components continued line in to

headwind. to However, worse these quarter, suppliers, including made months, confident meaningfully components and are a products several this positioning the the did short-term to in succeed I'm decisions with from last past similar we've constraints navigate position not environment. we over redesigning in better get to well and are promoting increasing capability available current new products prices, us alternative the adding now use

some combination supply into the drive addition, our the In chains to these in loosening of financial tailwinds efforts purchasing and potential XXXX. has

macro. Turning to the

the acknowledge elements our a of we the that our to intentional a last revenue to XXXX bookings planning in us headwinds, the made shifts our even record in we robust, higher-growth and macro the strong taken recurring quarters, the is of in correlated environment compared remains significant and environment six are growing over very and down drive growth very We to strong ability Despite position, believe several strong and steps anticipating strategic to growth. over achieve semiconductor our quarters businesses. this the backlog macro manage and we've demand to earnings performance directly believe softening potential business the potential particularly our growth headwind, focus likely portfolio even on markets, While for these our in we've cycle. give last expenses revenue,

align differentiated space the segments technology. and automation and modular needs customer highly in with well and communication vehicles, industry critical hardware electric to new Our software growth including powerful drivers, wireless standard autonomous

point strategy. and Our the XX% first over of our over to proof a order growth of of the first through a half this both of XXXX and indicator XX% the half year-over-year success is leading business,

reported Across Now efficiency focus the target we've wallet, on seen second revenue keep to have expect business, our honed growth our Electronics to for we $XXX will of demand we for we up that the & serve, customers. of strategy for better the the our we increase from year-over-year, to robust million, top and remain our and accounts an focused including served we year-over-year. NI results semiconductor industries all-time as by on ensure believe market. technology, wireless in quarter. opportunities industry Though to on, orders the increasing millimeter and share up test record of to future cross-workflow QX more XX% slowdown up to with much than Semiconductor wave. the wireless on In In devices. continue as some areas offerings available are program well XX% infrastructure, wireless, production in drive capability our market standardization wins mixed R&D will tests, particular, industrial consumer expansion needs signal increase of of return, operational further

revenue As other the less production of we've And approximately XX% is half this noted R&D, of the business of in which segment before, comes cycle. semi our to exposed from the electronics considerably and fluctuations tests. unit semiconductor is

to automated ongoing large forward we as been fact, as well areas be semi intentionally fab R&D growth expect for industry's these validation, In investing the test in drivers. standardized systems and supporting investments have

wireless challenges time. complexity which devices, of the up makers face biggest One drives device is wireless that validation the of sheer

their time. reducing get enables to customers by products technology to market this Our faster

test Qualcomm, wave record delivering a time across our also at data up that revenue on in systems ongoing uses XX% $XX across exposure measurement and our technology. For and user believe million, reported the downturn combination enabled with XX%. a example, NI software in year-over-year. lead of and we millimeter the to business. in of up will next-generation our their This year-over-year the R&D validation workflow test of a soften reduction will for software Transportation workflow semiconductor progress our team analytics is have orders XX% semiconductor QX impact We

shifts and to will and bring and and allow market-leading the significant and expect we all to insights outstanding orders EV with delivered test business. to management to ADAS government And they focus where partnering are investments strategic we the them of $XXX of connect that making continue their our develop changed with quickly customers NI this need results trajectory and has deliver battery GM Our defense and growth platform year-over-year, XX% success expect technology for battery at represented QX, of revenue the transportation rates. market of EV ADAS by scale. Aerospace, year-over-year. transportation record QX exceed will data up our business, XX% we recent for data end to at One their year. up this to million, is with of their of approximately our business XX% and In analytics our XX%

is area business. relationships ADG And us the be fueled our to Our confidence current in growth with by growth here gives and demand the and spending. this backdrop this of defense continued growing along top accounts in continues healthy

see in $XXX continue revenue and to X% million, We year-over-year. up X% rapidly customers, opportunities vehicles QX the technologies, including our achieved satellites. of our up with in majority serves business, portfolio also of which On year-over-year launch orders new accelerating broad-based space

As area macro susceptible environment. softening to is this think a I an mentioned earlier, we most is

expect that year. tests. utilizing positioned portion business and company, XX% have of is in production. Today, the R&D our production customers providing represents business. XX% global leverage is transition we to across the will the orders XX% Longer traction, we of in approximately validation distribution on serve, improve digital of scale business. to gained in this Across industries optimizing channel resiliency better from our and industries position offerings to both term, R&D our our our last this XX% for business to opportunity broad subscription software to estimate Our and these focus in up growth further and We and well distribution our total

data these wallet key and of accounts. deliver share and us enable at value platform software Our gain across to two uniquely more analytics areas

me driving increase margins. Now increasing ensure confident in efficiency commitments a customers, XXXX. increased are top our our we includes underway This ability It's and our to key R&D to operating deliver of broad-based meaningfully top in on look for margins. and channel team, ahead many initiatives optimization, G&A leverage We to share there at priority and cost to and wallet our expand management. my accounts, scale remain

should are potential revenue continue operating share an non-GAAP of of upside our our to from XXXX and committed year growth through XXXX each expectations. with exceed for basis to increase points achieving margin We our XXX

though believe that a fact, expect will we XXXX, order operating the XXXX. drive margin a growth basis for XXX point previous macro with planning growth expectation an rate, revenue XXXX's to approximately factors several on of our are deliver we In performance. over are weaker There entering increase we above our even currently well

secular growth transportation ADG. particularly in cycles, Our key opportunities in and exposure to

X-year impact growing Our recurring margin of our the impacts Conference the our outlook over XXXX, of QX. strategic gross supply focus. see these plan elements expectation favorable I'll there. to discuss for pressures to Investor strong in and and chain detail backlog turn mentioned, to Karen hope management model discuss impact and Marissa to through year that expense I With We the entering revenue our more as results it plan you QX and walk ease, that, our at all for Karen? full to

Karen Rapp

synergies was $XXX GAAP a X% Eric. QX benefit up systems recent are second accounted QX customer with to of of midpoint seeing up the companies of increases strong Approximately growth, the for with the was from price up with revenue Research Thanks, XX% acquisitions. revenue Core growth NI. remained in Demand integration strong had of year-over-year. these demand the approximately The test of XX% from of revenue Heinzinger, combined including negative We're transportation NH Hi, that approximately dollar and for Kratzer X% XX% the the ahead acquisitions year-over-year our strong orders approximately quarter. revenue previous our in QX. revenue our XX% of was and pleased everyone. QX. In in EV with we and The guidance. from QX, impact revenue million, business,

with in sequentially. year-over-year backlog second of We million the in in million, year-over-year approximately Americas, ended Pacific. XX% quarter, $XXX the XX% the about $XX EMEA up quarter up up year-over-year X% up and Asia orders For were

see competitive to eight in approximately firmly have issue revenue We times lead growth only. continue supply a to the constraints exceed our timing We expectations as weeks as demand of backlog and continued chain persist.

broker unique remain realize when expense ease, demand solutions was are not XX%, risk, the this would to find pricing and our supply Our QX provide customers. indicate our disruptions driven for often change components needs that typically anything we capabilities any gross ability the not customers. have we down margin eventually do and our a of year-over-year ultimately seen customer incur historic confidence difficult in chain revenue non-GAAP strong. as for Because capital double by to X% ordering pattern. to and a our that We prioritize continue to

headwinds second temporary the persist. supply continue the year, through We the expect constraints chain these to half of while

saw However, to sequential anticipated procure from in and improvement QX some broker in we ability buys in components QX. our our decline suppliers traditional in

We X% income non-GAAP for we record XX% diluted year-over-year. of non-GAAP record benefit of the expect purchases earnings million margin. of earnings $XX of $XX QX quarter. record share and $X.XX, non-GAAP second million to operating net per to net $X.XX. income income, for a per broker and of GAAP XXXX We We of our operating reported QX million an GAAP QX, margin and translating diluted $XX a increase into share reported our of reduce million operating $XX non-GAAP generated In quarter, of non-GAAP income

management. Now comment let on me capital

Our at the the driven the as $XX timing inventory quarter. minus from second of second $XXX the of quarter, revenue $XX of balance quarter. end sheet by Cash remains operations cash as the million well million million in flow strong of growth was primarily with in

In to customers inflow as proceeds in of guidance. fund systems a cash impact our sale of to to our available. invest property, The soon statement as approximately the the included offset impactful. income our donor-advised $XX net corporate to QX, This by is a the from contribution pretax support GAAP we continued million. in As represents components unused enable QX, inventory to us anticipated final expect to we in ship are

We down, to need generate position into inventory and levels Once future the the turn at supply expect has for or constraints enabling inventory cash. cash our to tailwind passed, we inventory build ease better. to a historic to us bring expect

will on second flow of record and We the sequential price and shares approved repurchases. of approved to authorization average on $XXX $X.XX quarter, stock deliver million revenue QX. August keeping X, available XXXX. to existing of of million our XX, flow its on XXXX, $X share repurchase to the XXXX. the double-digit Board on revenue from for anticipate flat help expect the in X We borrowing and approved NI dividend purchasing. of The billion. of remains in growth In per percent Board by we $XXX operations of Approximately XX, improvement maximum quarterly improve share, count to Board from of XXXX. increasing company our operations through broker million January QX Directors The an dividends We payable part Directors total amount August cash million reduced QX, a expanding $XX repurchased Directors approximately a facility cash shareholders credit $XX.XX, also through returned from this up to as at a stockholders our

and We deliver of guaranteed supporting to borrowing future our capacity our shareholder with their have only growth expect additional signed. in flexibility and secure This begun related will and future, value. negotiations near to commitment in once lenders deal was actually the the provide commitments anticipation

strategy allocation capital thoughtfully balanced. Our remains

programs. continue shareholders to strategically to we capabilities to needs to look opportunities ensure stay drive in same of will our investments technology repurchase and and invest to prioritize At dividend for customers' we business return stock to continue the We through time, cash will the ahead our that align order in inorganic growth. to organic

revenue year-over-year. million. midpoint, for QX range quarter represents be the guidance the growth we to to the shifting for $XXX Now of to this XX% and third XXXX, million At expect beyond, revenue of in $XXX

today suppliers. the our consideration deliveries know information the guidance best Our about takes into we from

will earnings XX% share the per of be range at range to QX, for the We midpoint. earnings with to share of $X.XX, in diluted diluted increase $X.XX in of $X.XX expected non-GAAP an $X.XX expect be to GAAP per the year-over-year

revenue XX%. We drive lifetime our of subscription-based expect We've services, predictability XXXX a through recurring meaningful and and transitioning uptick in be actively licenses tax will NI. rate our ratio to in to this to to a improve value software-related single our XX% seat been believe model customer between more shift

we are headwind in into approximately guidance. is to transition. We a revenue as our which and this XXXX operating And our factored $XX past, on of with the profit, expect said we've track million

than in and We We confident expect supply the year navigate impact work earnings share. of current the to reduce constraints. line seasonality situation to normal QX we've revenue to the expectations to done full our be estimates due revenue continue and our the for stronger per to remain are in consensus ability for with

opportunity the to our excess we our XXXX, supplies in leaving we focused As with be ease. will assuming backlog see to reduce the the From of constraints intend market revenue top accelerate profitability Eric of XXXX a on areas, next perspective, meaningfully strength mentioned, that we year.

We software a to licenses also expect tailwind. our shift to become subscription-based

In addition, full from of year we benefit acquisitions. from price our in increases the XXXX a revenue synergies and implemented will the

tailwinds we XXXX And benefits margin, of XXXX easing per to significant supply be of headwinds XXXX. share in first believe constraints we and to need for that business expected basis we in and have the XX% taken have temporary increase headwind improved to scale expect XXX We of the a point alone in the This half reduced into in begin to is will purchases. we in gross significantly broker margin with moderate non-GAAP model. year-over-year continue by XXXX. earnings see Despite gross the to actions the our

improvement processes additional to each increase back recessionary non-GAAP non-GAAP you. on our continue expect confident will margin our points points XXX to XXX many followed Eric, XXXX, for basis now [technical to XXXX. year efficiency. we to we in in environment, operating commitment of ability greater a are improvement. our initiatives by potential basis our we to by through key ahead, in Even deliver difficulty] margin With sharpen Looking underway, operating

Eric Starkloff

get profitability and better momentum proof to revenue the is is we a to believe we the taken occur. in the a summary, strategy. remain company including confident to and direct faster. communication, our believe and to committed and market growth even are goals actions momentum an technology And wireless In headwinds vehicles, the commitment Karen. difficulty] expansion markets, our you, positioned taken large We [technical ahead the to in for And economic orders that may result XXXX, our long-term have space technology within enable of growing autonomous we already current that perform new well despite even position customers leading of and are We software electric us and we've differentiation. environment. and to our to previous we in see looking exceed revenue to technology. our strong margin customer existing and expect point we demand actions uncertain grow enable Thank fast-moving

of working big while Finally, operations, our particular, also that, chain. supply our to demand employees working you to are With success. now questions. have I in to unprecedented your challenges our ensuring beyond very will take tirelessly customer drive sincerely we perseverance. in a and thank your determination been manufacturing navigate work, expectations hard Employees hard all and who in appreciate

Operator

coming Instructions] question the first SIG. with of Mehdi Hosseini from our line [Operator And

line Your is open.

Mehdi Hosseini

Thanks your for no was taking Can my would if supply what question. disruption? Two there please elaborate be chain you follow-ups. revenues

Karen Rapp

that it it million historically. than that to that. about we much less about more before, still but portion without this have position longer to lead that have to year Mehdi, flow think historically carried take the and that that times. of as to to that, would down we the our maybe $XXX do supply is is We've systems the talked shift we've time constraints goal a levels with our is Yes. backlog expect not of way been seen. expected about X-weeks a revenue lead and have There being we've customers, about the we to through that into during our that at customers for solutions business of we've We significant to we --

Eric Starkloff

alone, million. was Yes, the quarter in the increase $XX Mehdi,

would maybe been ultimately revenue. model as think have for what So you can a that of

Mehdi Hosseini

Got it.

rate term? subscription. revenues. with And in Okay. me, dampen I'm software just new Remind this at And compared and the growing It near a subscription lower how is more would that software to and product is signing if revenue a factor curious then revenue you're more has revenue. with your do to that just

Karen Rapp

That's correct. Right.

the our that million shift renew the we expect to as to estimated model, of for we've launch, some licenses $XX seat single to we in So do -- about our see And decline the is subscription that customers a year. model.

a an we impact loss. that So into revenue year are that this flown would that as is have through anticipating

Eric Starkloff

And where a that Mehdi, years, then -- future and tails into that's tail we years the are revenue. we and recognizing XXXX future the subscription in going beyond that as mentioned in

Mehdi Hosseini

Sure. And quick apologies, follow-up.

future So software about. annualized should I spread the right that assume to way Is now is $XXX the year? into that million revenue think

Karen Rapp

difficulty] difficulty] [technical because [technical you're taking

Mehdi Hosseini

pushed over I impact I'm I years, software the like next that moving to out due to thought wondering should tailwind -- $XX revenue few sure million quarter. the of in is of to model. much just the understand a for $XX assume licensing on that recognition change software agreement million just revenue make at a subscription there's were want pushed that out I

Eric Starkloff

No. No.

we September. is of we Mehdi, recurring for forward it a subscription. that one year years. of several recurring So that in model The move licenses for delve want all subscription. be enterprise then estimate the we're revenue on the This can annually At conference create we business of transition in be longer-term to bit that be so larger next a because million I'll And point, to is software do the bigger portion that's revenue. our going seat we we software just will topics over most going do say the agreements. impact from single believe to our as also our transitioned of with the to will deeper in had that majority $XX a revenue the all of rest substantial we total the the previously

Mehdi Hosseini

you. Thank Apologies Got it. misunderstanding. for

Eric Starkloff

No problem. No problem. Thanks Mehdi.

Operator

Thank you.

of line Goldman Mark Delaney next from question coming the with Our Sachs.

is open. line Your

Mark Delaney

for Thank taking good very Yes, much the questions. afternoon. you

line few comments correctly hoping And the understood test production the to growth. there's XXXX. obviously, like for looking mid-teens top on in revenue understand correctly, strong in semi make I some breaking areas of better much like you're potentially view to those that And I terms of areas portfolio. you're I If how a the offsets. a Just weaker something am in believe in of understand contracting? sure start slowdown parts I hoping

So if little could view be you helpful. detail revenue more, the bit a that would

Eric Starkloff

Yes, absolutely. Mark. Sure,

So context. first, some just

not As we the things that said in so happens. the prepared a But really, to in some scenario to like? we remarks, these strong. if it's stayed and demand that's We has think from of calibrate prudent the of you minus for downside if a for potentially business it plan what Well, think even were really point that about we're what planning X% for prepare downturn view, does demand. XXXX, some, look

like of sort that's potential scenario. So a downturn

you As strong we've this Karen look strong when very, commented, very at had a year, position. bookings growth, backlog

end in year strong We position. backlog expect a to the

efficiently the to position be we what level we and is appropriate sort commitments. meet run backlog backlog of of think the fact, business above to expect In customer

expect And down to we so some come XXXX. in that

growth. scenario So means in revenue revenue scenario, that kind in potentially negative that translates that mid-teens rate downside a of revenue even that this into downside bookings, being of

Karen Rapp

revenue benefit we've next get pricing another We full in layer growth some this the that year be Mark, that of will acquisitions year also from next benefit of part standpoint. year, to the a also seen the year and EV of of a

Mark Delaney

where line better different on expectations. getting that margins? very And and EBIT mean Yes. piece see a maybe just consensus increase things mid-teens, and we the in may much of extent you gross are expense are anything be that's ahead Day. could to lower of is drivers. Is a operating leverage, revenue margin. the I Investor that on structural helpful, grow there that margin help follow-up considering forward it. at And there than do how margins is would to to That's then of the revenue of bad even in of into a structure much us more that Maybe perhaps the you're as if variability mid-teens top looking EBIT I it cost allow substantial level? in doesn't Okay. mean Thanks. understand that your you you how that terms terms reductions

Karen Rapp

growth we see to We've did different the we and versus Yes, little our be. the tailwinds that, modeled biggest one as the scenarios could factors the margin that about understand Perfect. think through to recessionary on makes in that that that in that like. difference are next of different revenue expect take look where scenarios, gross very we Eric what bit would pieces is a significant. situation And year mentioned,

this that terms of are start with used that have the the from to is QX probably XXXX timing start XXX flowing and early had impact having of through buying But flows actually points see basis about of year to this from been that pricing. where parts brokers the that because pricing You in when delayed we've we P&L we broker in we've We're absorbing less year. buying been. that previously, going them that to excess through we expect than

this of XXX tailwind of we impact see that that margin basis amount enables leverage. points year that next year So tremendous becomes gross a a in

we've that more much thing cost done variable. other our structure The is

We as cost XXXX well, more the to benefit on it depending variable see our year. and revenue structure, make continue a going the match expenses doing that the into what we provides throughout so can top that we with line

Mark Delaney

you. Thank

Operator

coming from Meta question line next Marshall our Morgan And the Stanley. you. of Thank with

line is open. Your

Unidentified Analyst

on [Crohn] is Meta. This Hi. for

a Just question. quick

So maybe sort last noted up business. lab ramping semi quarter, of your you

production on of business if versus growing wondering would lab in was think in business the any the traction that of maybe how environment? sort business you've just seen I so perform you how recessionary lab a at quarter? And And a level higher

Eric Starkloff

that. take I'll Yes. Sure,

cycle. position our business our that. sort labs in on of R&D in of for in strong less real half the to be been point, that and a electronics is sort a we in production. cycles. semiconductor R&D other validation facto But semiconductor in had business automated the spending I always is less lab be have on It certainly we've we about software terms your half noted to So in a position a call, especially focusing And correlated systems. of expect as and volatile de historically to to standard those tends labs, as

a so of and that an of the on and call delivering the pleased And and noted focus, we products example kind with is offerings an we're it's space, I that deliberate we're that's traction. of actually that area the one customer particular into in area customer been space. the technology have and

software in The and the that that They're across real is both. of and us and differentiator space. software a our analytics for both other that's used the production, piece in that in important in labs and point newer we think particularly actually scale we have

we're on semiconductor and the volatility. just one topic, more I'll While market comment make on

not positioned We're looking said of will our very I say in I the think we we're naive end down potential at business point As that -- closely. from that well view. the we're comments, market to cycle. an

to laptops Our primarily and so and wireless industrial into the processors and signal focus mixed less consumer is the exposure applications, forth. direct and going market phones part of the of and kind consumer

the those that be think to tend of resilient also the market. more we so And parts

Unidentified Analyst

Is if fair those the taking factors way gross XXX sort gross a bps. line, tailwind? sort of operating order Okay. to margins margin I and sense. follow-up margin the of looking becoming channel out operating of the take of But That at more of margins maybe areas effective mentioned to a or you I just like portion And if sort off? that know you a the sort rank makes of is upside. larger there that guess within Got the relationships it. then just sort you're

KarenRapp

the done And historically. ability that those through creating SAM, couple that right? It top been distribution that don't expense have new to and additional relationships operating the that customers. on we support are because an from invest rate we're a of leverage We out provides find building same out we to there's transition does robust and growth ones focus that there. has at expanding pretty we've successful. that that accounts leverage impactful, our to flow had on continues really Yes, of customer standpoint The the opportunities that amount incredibly a things. top sure tremendous you've make It called to are to our and

making truly our operating quarter-on-quarter possibly expenses so and cost standpoint, fits and enables time is that we incremental what with our right on line flows expense with exactly like really to how variable that. which revenue even do it in as in with is, of flows the profile. even fluctuates, our That distribution align an short we we're us as through goal the much costs to it the ability focused align And revenue as from want as can,

Eric Starkloff

freight. of of the other sort and we've supply those XXX muted of basis the from the XXX by as to and constrained, fact broker are year, point areas is this business. of this a cost way there's just a taken cost pricing that impact This efficiency of is on the some a the that a past think think SG&A of structure, years, number add actions I including the structure variability many to we've our to of year, the said, revenue on both of and over way and our impact

expense is And so really, operating start those the flow that view, and starts to start in to and our operating to of to through the get two more income things moderate. really talking the issues efficiency We done point revenue investments to to we've as from starting an improve the show we're through margin what about reverse.

future actions in more on. get focus always actions, efficient it's not of actually we've about much something about so we'll It's our cost So substantially position. to course, taken structure a already it's

Unidentified Analyst

Got it. Thank you.

Eric Starkloff

Okay. Thank you.

Operator

Chatterjee coming of the question from our next Samik with you. Thank line And JPMorgan.

Your line is open.

Angela Jin

first is the estimate rank outlook. your guide XXXX for this of way a ballpark largest or at to drivers on Thanks one Samik. my Hi, be, of sort mid-teens of there looking sort of My revenue growth. that would order Is questions. taking Angela for

So synergies I have between the increases, your the from a backlog your down follow-up. pricing acquisitions, And then so on? and working

Eric Starkloff

We've I'll about Yes, another in to that. layer market that we our This objectives more by one in plan Samantha, growth. investor models. of on terms frankly, of talked that some and take update our is do the specifically, end market end conference

of in And through a for walk outlook just three-year time of September give kind bridge horizon. we'll of a detailed that be for is a booking things way, in that refreshed we we'll of into more were we previous how one book-to-bill 'XX, XXXX. there'll discussing on go stacks different big scenarios turnaround sort sort that to the between one from also a do So revenue. a the the we it pretty a think Because questions of and -- do not sort of up but as

So that your account well. you What's got as into take to follow-up?

Angela Jin

just a question. Yes, quick

point gross pricing sort margin. you can the impact that that that comes work freight of sort level that that to get Does XXX basis and broker to sort down XX% imply a through XXXX? of being gross to exiting as you the of back XXX and for margin So

Karen Rapp

know back of up spike Yes. it a not exact That's still because this probably right like. to of end rates, in on what in looks to historic we through full kind range. But the will XX the gross be margin back that I is don't and that which levels, the XX, through a XXXX at is point to timing the that bring percent. I to working straight year. have get We're goal is outlook our historic intent

Eric Starkloff

more that over just expectations. just period Probably time your than one-year

Karen Rapp

Yes.

Eric Starkloff

Yes.

it for a tailwind a than it. way be more probably of It's year. to think So one will

Angela Jin

right. All Thank you. Okay. Got it.

Eric Starkloff

Thank you.

Operator

question next from line Rob with of our the Mason And Baird. coming

open. is Your line

Rob Mason

Yes, on second good want to I afternoon. a portfolio spend the business. Eric,

how we've that curious in time segment? rate to health what aware trended at what is at it lot that the academic remind kind pieces the we're some of some But of Could the care I'm the some into within exposures that, as PMI? I responding larger it course, quarter is you piece? sensitivity, are just you of then there. of larger July, us historically. Of medical there order have that because of market are maybe are through just of PMI real well gone of end and that's And the the the just know some exposures -- lower, part a was least where

Eric Starkloff

put points. let some Rob. context me Yes, Thanks, Yes.

your answer reason it's to we just together First, direct question, pretty in a of portfolio it is long the industries. of tail is part collected

macro. of I particularly of And small, it the in as right. pretty academic there, it's none number does is them, but include is a of them but So sciences. as it large, Energy well life are some, is say industries. more that expectation. from you're just that smaller a That it exposed will mentioned, our to other still is as decontextualized I one

years, XX% If business. It's of XX% back now business. was our you look few or that of our about above XX% a

trajectory business, less. So revenue, on then at you of the if the the if and will, is company, QX, X% look And orders. significantly the sort mix, exposure as X% you of a we're

So area. growth line rate that's We expectation. said a really in of with our kind of longer-term kind mid-single-digit market

the to a impact believe, And that finally, seat Now of on slow-down disproportionately of percentage reception are still it the terms spoke business. distribution fit pretty that QX that revenue. in then focus the of recurring of QX from We're a license Those big, channels. offerings territory did customers, area. the response way, of then resiliency. terms our create more we're making going and traction. Karen to working the The on for gaining growth. that channel in the and products the and done real of in what good big And of, certainly and of steadiness really forward software pleased and are we how but That's that's portfolio software, we've things in better positive work single going, been transition digital distribution higher a sort with

that than, all that last said, immune a impacted not is that being XX% of say, going our cycle, our macro. is macro that to completely be that, that that, will The just the it of percentage way business smaller and expectation business is our we means expectation the the forward. have think it's of our by we more less Now in

Rob Mason

Okay.

a And your Is within quick Understood. just about backlog? current just backlog to then your revenue expect question risk do or your what your how backlog. cancellation to around think would proportional be you then the mix, it And Okay. backlog? you

Eric Starkloff

you mean In revenue risk, market? by end

Rob Mason

Yes. Yes.

Eric Starkloff

due your fluctuates Rob? answer because and you it to availability. question, it all market component yes, Yes. by I end Do it's -- always mean

on And quarter-to-quarter, sits. so have backlog the shortages which depends where it just components in of terms really

over between to But fluctuate does quarter-to-quarter. overall, lead speaking, real you significantly And canceled that It's proportional units still cancellations, time. due then business about watch than it are So time. less it's of it X% we generally question if closely. the orders your look

better many if lengthening competitors backlog even quite up times sooner, highly are to we're peers. sooner confidence So like them I think our the is lead in into industry. you the still lead our revenue. But peers for turns And our as know product times backlog we the the ultimately compare certainly significantly us. competitive. of Karen And of of than have still able it mentioned durability that remarks, stacks X most than in on the that mean, customers and though that, still well, of industry, expectation most a would of to our weeks it the I deliver we in

Rob Mason

Karen, third the within one. quarter I If guidance? guidance third expectation one could the quarter sneak what in the the I quick see. margin is gross -- within underlying what's

Karen Rapp

it expect pretty QX. similar to be I to

RobMason

operating would that in case, expenses sequentially. be And down Okay.

Karen Rapp

that repeat large Correct. our event, in Remember Correct. in QX. and QX, I we customer won't had connect,

RobMason

[indiscernible]. Thank Okay. you.

Karen Rapp

correct And let me margin.

between so I think -- XX% that. XX%, in or somewhere maybe right it's think I XX.X% and

Eric Starkloff

Yes. Great. Thanks Rob.

RobMason

you. Thank

Operator

now you. back turn And no remarks. I'm any showing the to like time. questions to at Starkloff Thank Mr. further for this call over would I Eric closing

Eric Starkloff

hope all you a you questions. Thank at you investor us great Thank day. joining Okay. for in We your September. to today. our see conference for Have

Operator

you does gentlemen, and participation. the for today. conclude your Thank for Ladies that conference

disconnect. may You now

National Instruments (NATI) 28 Jul 222022 Q2 Earnings call transcript