Earnings call transcript Q4 2022

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Operator

Thank you for standing by, and welcome to the NI Q4 2022 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded.

I would now like to turn the conference to your host, Ms. Marissa Vidaurri, Vice President of Investor Relations. Please go ahead.

Marissa Vidaurri

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

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

business dividend limitation, of and or its Our targets, exceeding and without statements, its discussion demand its investment to outlook company's the capital acquired forward-looking its realize include regarding today process. strategies financing plans, the financial payment the expectations quarterly will allocation, for revenue including, of those alternatives of strategic of and execution guidance, results of future company's and meeting including and products, restructuring the outcome from ability backlog, companies, activities growth future

expectations. differ in February to caution cause refer and assume documents results that and XX-K actual files from the that the materially the Form and identify company filed factors statement actual update are just to to Exchange reports Commission on events and results by could wish on company's impacted you subsequent the our regularly no We our contained or negatively any materially including forward-looking annual with statements to you to numerous may report predictions Form statements. contain the XX-Q. or duty such important results those the factors. to XX, on changes statements could conform differ XXXX, These our quarterly Securities actual and that that We We documents be in forward-looking

related to presentation financial the financial in measures non-GAAP GAAP in ni.com/nati. disclosures most or deck on are comparable directly quarterly contained of call this our measures reconciliation our A disclosed

presentation the find and You ni.com/nati. on discussion can release our website at to supplement quarterly today's press

Morgan you look meetings March hosting to conference seeing San Conference X on York March be in there. and forward also on X. Susquehanna the We New Stanley at the in will Management Francisco

the call turn Officer, now Starkloff. will Chief Executive Eric over I to

Eric Starkloff

Marissa. you Thank and we today. you, appreciate afternoon, Good joining us

six take CFO, on moment leading introduce we our has and on and focus XXXX to speaks, to expansion first, various today. new extensive a growth success for And is Dan to significant for an our joined targets again impact Karen Berenbaum, Karen us want had want will thank of her for past to operations as the already immediate our to the our businesses, Dan execute and to So I XXXX technology financial After going achieve XXXX. I opportunity he's operating to January out strategy contributions X. close years. beyond. provide experience and Dan take recognize who outlook once Karen the margin over call QX

quarter fourth strong we and XXXX. in I'll line fourth we the of a closed business quarter is a with of off X% update key operating quarterly guidance. in And with for the fourth XXXX record on the kicking And $XXX in messages year all-time up out in We a and record hear year-over-year you'll an record non-GAAP The of which full margin revenue million, start an with by things quarter. delivered quarter. non-GAAP achieved our for XX% today are, year

points XXX macroeconomic in our more of resilient XXXX that continue and with tricks as up Despite on we shared is make a profitable company. more conference we to we of XX%, uncertainty, higher record a compared strong non-GAAP strides $X.X at up global NI year growth, delivered forming year-over-year investor basis and targets September XXXX. to operating into margin billion, XXXX XX% the revenue ongoing

XXX we scenario planning in are scenarios, non-GAAP September. exceed now what a wide of margin into And towards head target. in our the with growth range we even in downturn expansion point recessionary line we basis expect As we to XXXX, shared

Our in started XXXX. are the transformation due that results business our of to

have executed potential including of in and we have XXXX. a five non-direct changes transformational stood set in top up a transformed cost our the customer years, initiatives our strategy past and channel over on tier a channel in on significant leverage successfully driven based SG&A. These We go-to-market growth accounts into

business We formed industry those have industries in specific them. units hired and lead experts to

application-specific vehicles, We aligned and have fast wireless maps space focus subsegments, systems communication, growing road to our and including autonomous shifted software to electric on new at technology.

position bolt-on including product part fastest-growing our electric portfolio, of our structure and to keenly our additional tools, test transformation automated software enabling LabVIEW we leadership to accelerated our And the on strategic systems vehicle testing, growing We've application increase with adjacencies through companies development and focused complete expanded multiple us expanding analytics. and of into in our We've now on in cost deliver and been important adding spending. flexibility acquisitions number business. building to have software leverage of management our our offerings also a

our we point, to unanticipated saw expense margin operating to margin. improvement our of to to point largely XXX basis hit constraints XXXX, basis chain case yet of a in an still and As in managed operating supply XXX headwind due points, gross ongoing commitment

margin We this expenses continue efficiency to operating of focus in the and year. expect on strong operating a again uptick our

our organization implementing X% SG&A of approximately are targeted core We org. to enable global have our a leaner also operational of and restructuring made we In shifts our QX, in a consolidate headcount.

XXXX made, a in believe directly stronger to we've growth. strategic confidence which is have shifts high Our created we correlated for trajectory the

the million, quarter. we're our line accelerate up our areas revenue year-over-year, XX% reported results point to $XXX of orders are focused the believe Semiconductor intentional XX% XXXX to I down Now QX on expectations on a with proof industry. growth. and by Electronics in to for long-term of is areas expectations. our focus The right year-over-year, delivering that this with

impact have business. will semi the the slower to our our semiconductor has the that delivering our believe downturn the been While tests soften cycle in will and ongoing of we across R&D exposure combination anticipated, semiconductor progress software workflow on

those semiconductor, revenue several ever, won contract up reported in year-over-year. period up five contracts. Transportation large $XXX over contracts XX% including million, Last XX% of the software QX to software largest three will our with orders XXXX quarter, of next which year-over-year, predictable revenue add year analytics we

to this strategic trajectory in shift has changed and EV rates the we expect market-leading our business, in of investments are ADAS will and to significant customers where growth XXXX. focus making Our deliver that continue

Heinzinger, end-to-end competitive now we in for recent of approximately business. quarter. acquisitions, As Research these investments we fourth represent we than drive of transportation Through for Kratzer ADAS XX% transportation revenue accounted NH battery portfolio the long-term in acquisitions these growth and expected, EV capabilities now of XX% have our to the today, The and more the most and NI. test we expect believe market of

resulting results in revenue million Our $XXX a over recent million, will delivered with in with the battery of down up lab XX% large was government QX be that success of XXXX. course X% orders XXXX and $XX year-over-year, recognized strong deployment, revenue Aerospace, winning defense year-over-year.

we expected. noted call, year-over-year ADG, win the a QX in large and XXXX, QX our a closed reminder, in program orders As we in in was as so decline

expect spending. by see XXXX, driven business in We in this order robust defense to strength

strong launch vehicles opportunities We like in satellites. space technologies also and to commercial continue see

of million, to area a we that majority is most taking and of business this In year QX which our down historically macro susceptible year-over-year, with the XX% have year-over-year. to X% more broad-based has been revenue up the resilient. serves softening business, the orders our $XXX customers, make environment, for been achieved portfolio This steps

providing traction, to Our customer further focus better and base on offerings of utilizing gain broad distribution to this our to in our portion scale optimizing leverage global position this digital business. channel our and

and digital revenue our distribution XX% of to in up expect our of channels from total approximately to from We revenue XXXX. grow in XXXX, X% revenue total

resiliency the to growth opportunity expect improve will the also We for business. and subscription transition our software this

previously, resulted majority revenue. to seat to January transitioned the starting We of in is going XXXX, mentioned for revenue our recurring we targets XXXX. vast our year. this full our of headwind we were now internal software in pleased As the forward, exceed which a transition And in subscription, to licenses on portfolio single X%

weaker strong plan macro summary, head We position. in company of and to believe a took In softening the the in action and overall we a anticipation cycle in semiconductor economy. is

we in And exceed wide our scenarios, target. in what XXX recessionary even a to expect margin scenario point basis planning now in towards downturn we with are the September. We growth of expansion range line shared non-GAAP

over turn Karen discuss I'll and results that, in to it QX end Karen? to detail. With year our more

Karen Rapp

Thanks, Eric.

$X.X with and billion record X% QX a at growth was quarter year up year-over-year. was million, XXXX record GAAP revenue revenue for a XX% of $XXX year-over-year.

to Our QX end decline at plan a in for We year-over-year of were economy continue semi the orders as QX. started expected. and the we to that we macro the see in market and down September, X%

of anything change our confident capabilities fourth in XXXX. chain a Americas, for X% and provide a don't the this with double year X not Eric we indicate that to quarter approximately our backlog of that mentioned, off expense seen which down ease We QX revenue. knew in year-over-year order X% solutions with Pacific. to approximately constraints in $XXX last Asia capital We're up is X% we in incur we in risk, had region, typically of resiliency million, would quarter a ordering are in we down pattern. orders historic repeat the our any realize ability in haven't revenue delinquent would ended strong a year-over-year because and the unique and were supply in our EMEA ADG continue As backlog as customers, large and that year-over-year By weeks

lead cancellations times also to X%. We less to continue minimal than due see at

QX by and supply. components gross in down were margin Non-GAAP fees, was full that paid for year-over-year, XX%. XXXX gross XXXX points primarily year driven both for XXX margin was short basis broker non-GAAP

easing, constraints XXXX in technology, We legacy broker XXXX impact the operating constraints while see semi of especially half continue margin. purchases the expect chain to still first are to supply components, in our key the to ease there in positively golden we reduction supply and some

record generated $XX margin we fourth million a million delivered We in of QX, a operating and GAAP income, operating $XXX non-GAAP operating for quarter. QX. XX% non-GAAP In of non-GAAP of income

operating record Non-GAAP our had full NI in for XX%, cost efficiency year-over-year, driving structure. had XXX variability points on was continued XX%. we have focus a margin basis the For operating was demonstrating an margin and of year, increase GAAP the

record million QX X% $X.XX. earnings of $X.XX, reported net net reported We and an record non-GAAP of income share QX per year-over-year. earnings $XX share income of of diluted increase and $XX GAAP non-GAAP diluted We million of per

record on of bottom full net both line and $XXX results with the in for million, delivered of line million. In delivering. year-over-year. XXXX year our expectations, was net we're income $XXX results strong year was XX% NI. QX and GAAP of the growth I'm income line summary, another were the For We XXXX, top non-GAAP up proud

last will help my to smooth have here call, be and as will is a to business. to transition. help understanding the the excited to skill confident although I'm and in continue I'll May I enjoyed earnings areas. us past background trajectory future ensure and be and NI, appreciate Finally, the His many interest your his addition commitment of excited you experience here. great grow a of many over know, this through set prospects. of to time, and six years, you all company's NI Dan getting I've in about our I'm

Now to Dan outlook discuss it our over I'll turn for to QX.

Daniel Berenbaum

Karen, you, be here we to to to welcome be look thank the ahead XXXX. NI. for warm happy and as this in participating very call Eric, I'm Thank to and you,

NI's the weeks first of across in in deeply As the engineering that level have of of talent It you followed customers. long to high NI the won't business. for organization, immersing time surprise a I strong can few a NI impressed myself imagine, to been I've who with those culture my testament commitment and you spent

to very clear It's also continues NI transformation gain of that the momentum.

over ability operational to confidence achieve more working improving to operations investor the continue as I'll short- margin expansion long-term generation, our our well in building management and customers, those on efficiency continuing targets execute as to and a our on long basis well products our I capital about As and as flow on and term. focus as improvements quarterly learn cash

we mentioned, least of operating at committed Eric XXX points in improvement basis our non-GAAP As margin delivering XXXX. remain to target of

planning We the improvements, a chain of of supply in control flight, and number initiatives which mentioned discretionary spending earlier. our have underpin which tight Eric restructuring, confidence including

we tailwind we gross see enter we constraints as price expect from to as lower chain supply variance ease. our Specific a XXXX, margin, purchase

been have also of quarters. see past benefit taken to which We expect the several actions, the pricing over

levels OpEx For more as from actions result margin start discretionary we point deliver while benefits that will restructuring of QX, we Eric XXX basis QX. than we reduction growth, a slightly X% to QX. QX respect from future rise around non-GAAP to that previously investments a QX expect improvement compared headcount, sequential anticipate SG&A. ensure our in to of gross our made maintaining in this mentioned operating approximately the most to We expenses, With The in primarily anticipate reduction in will that of discipline spending. targeted will

After go the percent we declining remain or over decline through revenue past in significantly to we as few revenue of a in flattish to as percentage increase expect to QX. of OpEx as absolute But a terms gradually XXXX. relation years,

Now comment let management. me on capital

challenges. the sheet to we balance ongoing the $XX In quarter. from to of delivery cash us enable fourth fourth of flow in million Cash the strong of chain remains the Our operations with meet to commitments $XXX supply quarter. in million QX, was invest customer end face inventory at continued in

normal expect net working to we cash historic focus more a our able to along management, expect improvement over be supply constraints we to ease, to to a with non-GAAP XXXX. aligned convert return capital performance at meaningful renewed As with more levels, at inventory and on levels income

strategy disciplined. capital allocation remains balanced Our and

We we ahead in ensure needs stay profitable growth. to to invest investments that in strategically and of prioritize organic inorganic align technology customers capabilities the business drive our will continue the to order to of

at we In dividend Directors And to given $XX of through February record already current the XXXX, our our on of to the of cash stockholders on strong elected very a quarter, March payable of per We've NI X, to share, dividend. of return levels, close XXXX. returned Board dividend of to shareholders. fourth continue has as $X.XX the business the shareholders approved quarterly million XX,

that dilution. roughly past average have has the share fluctuations, share we repurchase With successfully as our normal repurchase since five program not over note our did XX the We QX shares remained was weighted lowest QX NI offset QX. count would in some I used flat 'XX. years count to

shift guidance to QX. for let's that, With

growth expected is in the revenue of this range revenue the quarter, first At $XXX year-over-year. $XXX midpoint, the For to million to XX% be million. represents

impact guidance Our assumes similar currency to QX.

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

additional of XXXX GAAP stock-based tax In discussed a non-GAAP between other credit. QX Our $XX.X compensation of expenses R&D changes tax for earnings XX%, restructuring today, no year the full $XX related will we tax acquired and rate excludes to acquisition-related million XX% million incur expense we QX, and and $XX assuming forecast $X million laws. anticipate items. non-GAAP and have an to million the changes for related to also amortization approximate in tax We intangible assets,

we summary, multiyear benefits to In continue NI's see transformation from journey.

management. growth on making control laser-focused investments while in are expense improving our working We and capital efficient our

to in in at half commitment by As basis the XXXX. to operating least Eric mentioned, our increase our XXXX. we first macro confident we backdrop, ability are of in non-GAAP recessionary XXX against are margin planning on points deliver environment Even the slower for our continued

to closing comments. I'll now it some back Eric over turn for

Eric Starkloff

Thank Karen. you, Dan, and

company confident position the to are including We environment. a perform, actions taken in better to weaker have we macro in the

we We have expect exceeding target a strategy environment is the our margin in believe XXX XXXX in remain strong meeting proof in revenue even and committed I growth basis place. expansion. headwind that of performance or point to right our

a work of have the yet. done of of key level performance, over we're change lot gained not past driving and a the The demonstrate to trajectory fundamentally traction hard higher success years in growth. the We've and the company strategy of the transform elements and our five done

on achieving a the with top return on focused Now investments these leverage and the the executing on growth, line focus growth on strategy earnings strong and bottom and we're line.

particular work manufacturing supply in have in driven and hard sincerely I Employees want navigate perseverance. our our of year. our incredibly operations and I to thank actions this to determination in committed a appreciate have a chain. And big and of to expense challenges not to significant hard unprecedented all know you I set management it's and easy. strategy been continued employees who throughout worked past everyone's

on do Before to your comment we review questions, strategic the take I want process.

on financial answering advance. in comprehensive not that know, the alternatives. of note a announcing and topic for that your planning regarding all will and issued you range NI today. include business review, the cooperation We consideration know XX on of options review Directors release our you We NI. to January are review regarding appreciate has some Board a strategic full As but initiated evaluation a strategic I'd available this of on have questions press A of like questions of we call strategic

that, now take with will we your And questions.

Operator

Thank Chatterjee of JPMorgan. first question Instructions] [Operator comes Our you. from Samik

is Your line open.

Angela Jin

Angela XXXX. growth is Jin this sort months mid-teens semi path few Samik. backdrop Hi, of you How given were macro down that just initially I of to ago, that your narrowed we're The guiding severe cycle expected. XXXX sort know a guide, towards for of level that On the more seeing? in seems growth is than

of sort thoughts growth? XXXX on initial what And your are revenue

Eric Starkloff

Angela, We obviously to the really and of take achieve the we're That's of a we on that. We in set expectations. guided focused at continue consistent XX% Yes, scenarios the I'll laid what I for conference, growth that's growth. full revenue this, we're scenario point view. as growth guide particular. still driving didn't on for anticipated the company with year. revenue recessionary And we an QX and commented So of that out our environment we in September seeing

well of and range areas the call that our within certainly to wide And a commitment of a in sort the performance And bottom for can you then managing line outcomes. we heard the control. control

Daniel Berenbaum

quarter bit at say little one a and again, we time. add color a of can guide just I

the comments on year. make So specifically going not to we're full your

obviously against Eric headwinds, tailwinds well. As said, that and we as But for are some there's of sort macro that headwind. backdrop, there is well-known planning macro think I that

acquisitions backlog have We specifically help the in in us that us have QX. are some we place that helping will

what bit our little would consider better we exiting QX what look our a If was little our seasonality. seasonality. XXXX below you you bit normal a than normal patterns QX guiding at consider revenue We're would

for another, tailwinds delinquent ship what be consider one in We would customers to from to have ship reason training see some QX or our there that to and we liked able backlog, backlog that meeting would QX. have we weren't in

going QX. have backlog. will about that I talked we talked comment of wanted have tailwinds a about scheduled quarters, those our as into some that of prior also backlog customers haven't So in really but we we historically orders measure

backlog add $XXX million million of scheduled - backlog roughly is Karen Our talked another that would delinquent that $XXX to worth about.

Now company. that transformation tied to the the is of really of part

It's of the strategy years, different tied over the backlog. really very company. turns NI more to a business be to look you of the much little long-term with if back

solutions to the to the scheduled see built up. Now backlog acquisitions, with shift product EV more starting backlog, of and that we're

tailwinds. full have we're some we year. for guiding So Again, not the

We're really QX. guiding for only

QX sense puts specific QX. in think of seasonal backlog are year, the a going takes us some those if to and have us, confidence of a that than helpful. how give the full delinquent we for you better for But about We that's give just tailwinds to which that in help guide

Angela Jin

restructuring walk into points XXX operating sort the Yes, target headcount are Where that mostly then you - driving mostly improvement? basis of maybe the control. helpful. margin improvement, target? what margin of million $XXX sort of Is your and that really Could between it input like through that the margin is the on reduction? And sort other cost that your gross is that's gross of exceeding expansion

Daniel Berenbaum

increasing sort OpEx basis for about for QX. not QX, from of we're the talk given a to again, more you terms gross I year. points guide, really guidance XXX the that Yes in margin QX dollar of full commentary expect some little bit we pointed around going than that improvement for

might out the should shake So thoughts you that feel a give to QX. year. of the on sort Again, full just profile give for you the for

of the off. some have purchase price price some do rolling increases from tailwinds of the variances we and And some

have chain, in our mix some by business, of entirely of our business as vanish definitely there, changes. won't tailwinds we headwinds continued the So, the offset supply it and mix

terms internally. again, will So how as of in And over specifically the not you thoughts just course gross on QX. give but going the OpEx I think about to margin beyond we year, gradually to the said, we're some guide increase dollar

Angela Jin

All right, thank questions. you for my taking

Eric Starkloff

Angela. Thanks

Karen Rapp

Thank you.

Operator

Thank you, a please. for moment

Rob next Baird. question Mason Our W. comes of from R line the of

line Your is open.

Rob Mason

Dan, fourth capture built quarter And What price afternoon. to were first good realization, you're what that you quarter? first and quarter. in is hi price able price the quarter guidance, increase expecting into that Yes, the the and fourth was

Daniel Berenbaum

Looking through number… the

Karen Rapp

we with some This and expectations we've hey. of in Pricing QX, our into in guided. X% is Karen saw what lift QX, in Dan probably built revenue, line

Eric Starkloff

Yes. as before, about and Rob, strong changes been we've to already kind been, We've capture sophisticated our to those pleased, I'll on we've has as comment for XXXX follow-up. ability come think, in more we our about We've you you changes ability on I it shared just price. made pricing. really with expectations capture more we've predicated how gone are the to into been of

Rob Mason

the how other? or that's I'm plays favored price been area the capture or your just as across various Eric, SBUs one curious down? has realization, has even it price that And

Eric Starkloff

One Yes. that as of I So delivering BU, more - will greater we characterize it, - much is, value capability, No, varies we're we and necessarily about not of it deliver right? it's that's factors parts. question. it's sum a the that surgical by so it's a contribute. good than more but are couple And systems the there's we're

been definitely that's so favorable. And

efficacy of credit second channel, The the is gotten is our done price value is ourselves, sophisticated targeting how through our to factor and selling just teams. we've changes, our this more we've

to as the strong. pricing say been channel, to channel last to has more then been we've with able been And quite I've and is the good element the that introduce that. channel got we through pleased ability We've at maintain our that get more I'd distribution effective also

XXXX that an factors to those results were good which have and 'XX. efficacy continued in together in we saw, in very of led area very, that the expectation so And

Rob Mason

see. I

operating Just given - you in was of I'm was sequential I'm better frankly, expenses, revenue that was can sequentially. follow-up, but sequentially expecting. And down expenses the mean, that operating adjusted decline actually I I your a as than your came walk in the higher source curious through where and just

Eric Starkloff

Yes, Karen, take question? this

Karen Rapp

Yes, so we as year stay a know, we continue We on to XXXX. get and of some in saw doesn't the you in cycle ahead coming macro doing knowing early - always took what actions environment from been we've that semi the up.

we of know, XXXX, seeing continued on early you that in So through way end QX stronger. in as we of the that the - even ahead that got because, all come QX, at started

the disciplined in as So we and in incredibly stepped lever as continue that drive our you as know, now of we semi we year up. entire we is in and take go move hit and saw through and continue the XX% the pulled the we -- increasing team a the that that variability, costs percent we've forward, flexibility QX And been to also variable the we just are macro really stayed below QX, to as QX. PMI cycle

pretty become and demonstrated clearly thought I forward - really taking whole that basis we something with expenses aligning the of revenue a on in QX. live we So that, point just regular has that and

Rob Mason

And the, yes…?

Eric Starkloff

approximately a into as QX to said. that, one bring you you've we we're really That's you heard I things our non-GAAP know. just thing And and -- the is a ability of the that's sorry proud from wanted up record, and out, to good income then hit build Karen point, guy Yes XX% QX, come operating point the Dan in operating all income. XX% as

'XX. XXX QX that's So basis about of points above

of that the and we've variability, changes we're and really seeing done leverage starting we're that that the made on again, and through. So we've done transformation seeing to structure cost really we've come the the work

You in saw we're expecting in QX, it QX.

sets us more in up think get position. a to a Go So follow-up. we real that strong ahead, little

Rob Mason

what in from of $XX would terms charge, around that Just expect savings announced you fall million restructuring to you the that?

Eric Starkloff

is, impact see about being the are. that we're for And about just of selective a We not from specific starting QX. that So we'll to well. going in what little be positive said as areas investment really that a savings we're

wouldn't to straight I just a line restructuring. try So necessarily from the draw

Rob Mason

Thank see. in you. I'll I back queue. hop

Eric Starkloff

Thanks Rob.

Operator

Thank you. moment One please.

Our next of question Morgan of comes Meta line Marshall Stanley. from the

Your line is open.

Meta Marshall

any due just is a Great, Thanks. that the little this sales on be businesses strong structure? SG&A thanks. businesses, question, to of how sense And around most SG&A Just question, think helpful. through or a acquired existing more as Maybe was was more reduction edges? then very from channel? just just noting trimming be of you get kind trying if to obviously look to a that some there's transportation impacted. going second that strong the change context, to about cycle -- bit or quarter the that after going the Or of what's was kind did first headcount be would maybe sales it is like it or change going of Does a to the coming year, primarily to

Eric Starkloff

take problem. Yes, I Yes, that. can no

we're mindful of process. super investments also making as balancing level, at the And for noted, On and used, this first So they to like very scale, said, as just ability the consolidating are our restructuring, we end it's through went of achieve just growth. sales team. leaner on and you Dan some highest all, announced as but leaner the the of last were at our to primarily changes we the strengthening year, SG&A. sort this structural that be operations, which consistent of marketing then I'll right efficiency and say in of core with some about

some just I To areas there's factors. got question, a are more be your transformation. efficient. to There's specific mean yes, the about multiple really it's for areas us that bit

of before, we model. ends tiered to this said achieve we've both I've as As efficiency the gone at model,

getting So we're size account accounts. at average order the our and large really size tremendous structure, growth at top end of account in those

we're faster our than that revenue expenses. so And to scale able certainly

realizing there. And scale we're and efficiency so

expectations our X distribution level, to the we've much has exceeded been how go of At the digital It's channel. some the we year. as the gave I through of Tier move gone through quantification effective.

yes, accounts. there grows, that us more some serving also we're as for gives efficiency So that our in that the an way opportunity

I those, the that take of the So in sort those but way with improvement the some you when that I'd business, think strategy how natural characterize we together, have. highly consistent just along with run we that's continuous

about transportation. To your question second

good First of I And performance year. it excited really been for growth performance. is the really, that business. about mean all, we're really a It's XX% really good board. the across

in was but been on of growth primary acquisitions, has high businesses is the actually that as all very electrification, already electric a is growing to our well. focus we're And And we're reasonably first a organic, vehicle the rate done a in highly the parts added and which seeing that been organically. has So where which electronics pulled business then software safety, we've vehicles area, off all, critical of serves those active were testing you the the area other an growth the of where as NI they've those and grow we're what uptick continued good capability to part vehicle. of measurement seen we've the seeing to certainly that of in complementary rest business, well was had that take, that of existing capability companies

and deliver part to more our accounts, shift And we focus really in account has in primary our OEMs Xs, lot can and the value our that to autonomy Tier addition automotive opportunity the of area. we've these grown is in to that were EV customers prior the created that to a the which relationships just

on a point. but guess automotive to cylinders bad anymore, don't I get in things think vehicles much use cylinders are area. I the have things So you that's that -- hitting analogies. get analogy, These as are to all the

So all degree a factors we three contributing have accounts. of of outlook the pipeline an are that those our to and in high those in growth optimism and

Meta Marshall

Great, thanks.

Operator

please. Thank you. One moment

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

Your line is open.

Mark Delaney

one I little question. new taking even my very with the Yes, much based book-to-bill were though on X% Starting still thank the year-on-year, above or a Dan, orders And even you been role. near math. for down orders, think may have bit on congratulations

order And So came the where could level have orders fourth total perhaps perhaps linearity you you trended on into comment how orders also of sticking quarter January? the then the and could in? in us set topic, orders with on

Daniel Berenbaum

orders can about of level a about We little bit. So of talk bookings. talking patterns specifically level we're not maybe our or

Eric Starkloff

Yes, expected some get talk we level that that I'll talked with October of example, in of we what as minus I about the business with units, what line even built similar the expected the all, characterize the was, but quarter sort consistent consistent into headwinds first mean in would patterns. different a commentary Mark, September, into we of on coming I I just we expected in of can just and the it's QX. where say, things as But and for is our sort for about and with sort so guidance call. three

the rate rate overall the units. by and both in order So order business

So that's coming what QX. built on our into is expectation

Daniel Berenbaum

to Karen forward. bit we you that a that we're Obviously, into previously thinking that liked that of little backlog from that have about comment little delinquent customers orders we bit the to how and able a back about, earlier has a have again, moving ship. the maybe the we been go backlog have bit business understand me to commentary, how want of this you And to further, to draining had would go how as how transformed help QX, shipped Mark, little talked tailwind let

towards as business system longer-term have organically building those and very both through gone The solutions, also acquisitions we've focused we as in the is transformed backlog.

backlog delinquent we're year for our that year. the drain scheduled would is the we our more drain on backlog bit build start backlog continue to how thinking and will we as of specifically you're start that of little to focused backlog to that going not book-to-bill tailwind talk the then you I we get revenue in backlog business and part as throughout for about to about those So look longer-term a -- then early as as and that And pieces grow.

Mark Delaney

could of in helpful. experiences take you some opportunity Maybe the I at your margin the led for CFO is you've Thank That's elaborate encountered more, on with about if very NI talk to what how expansion other could, one Dan. you, you career? the role And you. please, analogous and

Daniel Berenbaum

Mark. Thanks,

parts engineer, NI the support long excited technology a technology user, of and that. that a to chain. important like supply and the industry, company to join So about engineering of like I listen, opportunity back NI history that to obviously customer an was company all be a is is That's the exciting incredibly mean, goes an able lab extremely I'm a with and to I I was foundational route just when technology critically

improvement improvement the years. past over course, transformation with a the for that of I've opportunities that transition has These systems commensurate exists transformation into the exists seen still the been very operating capital. working five in opportunity of that exciting more opportunity solutions for that that business. the and NI are And And on margin, that in

So that's why I'm here.

Mark Delaney

you. Thank

Eric Starkloff

you, Thank Mark

Operator

moment of the next Jefferies. from of please, question our Kelley you. Thank comes line One David

open. Your line is

David Kelley

and it the visibility good QX, afternoon. on like questions. year you helpful? my the sounds margin Maybe that if taking a pricing in baking Thanks give some guidance will maybe Can you're end? on into can some us Hey that be supply broker sense - following give for us impact how pricing into broker you on discussion, seeing chain improvement. improved if on color up XQ we're And

Eric Starkloff

higher we to some so balance paid Yes, in going our that inventory sheet, specific that be We of have there. not obviously, about the for. again, numbers do still we're prices on

chain we move not we QX a be we We pricing, at supply point expect about to we be will broker through. ease, we it and still XXXX. pay in it but conditions expect that having those flush most not through go Again, to XXXX to, we're flush inventory and as tailwind to through as what much be how as and through specific have, said will going of

Daniel Berenbaum

that issue quite just have view - about we bit. We broker supply add seen chain. this I'll talked And Dave. definitely improved has a a market improving qualitative certainly, of

in it QX. think, So I peaked, really

see her hard, still necessity in to of said we And broker using golden components. remarks procure some those started screws. Again, as less to there's, so, very markets Karen to procure the

tailwind to XXX on that the improvement over this thing we're set the basis a an additional kind broker headwind - bit. we've quite and has to of we're that a And going last point and better purchases us like a a the improvement expectation is still gotten down to that, a and led it's with from - of And we quite unconstrained in - doing that's gone quarter. but not of margin seen it's that what's seeing based bit working environment, necessity gross it's

David Kelley

Got it, ahead? And maybe, that's helpful. go

Karen Rapp

on that some just Yes that, our get Karen. website color year-over-year for this is well. posted look bridge on that can that There's, we've to as some slides some of you NATI, on at

Eric Starkloff

line, increase, I gross margin believe. Yes the

David Kelley

quick meaningful appreciate it. your Got the maybe it, that. you follow-up contributor one and automotive EV referenced, thank really been acquisitions And traction to you, on clearly a

talk you business? the those your trajectory acquisitions maybe and core transport can So about versus margin those are how trending of

Eric Starkloff

I can Yes, that. take

headwind acquisitions slide a So on in those EV we can also Karen investor the in the - you coming actually actually you on margin. deck, the had that to that it's same pointed gross see

time, there's our in that system company leverage trend improvement an own components can margins, area up. happen and think those and pricing company come in improve we scale given of they focus. ultimately, as So significant gross lower will some margin that our of capabilities gross had the at a a will over the and that's that We and

margin these components. a we've and strategy got things through margin is also include answers of the acquisitions, that's the these the of measurement - cyclers here our And as also course. is, software, complete rest built high very of previous these big into the then expectations, of and that previous pulling that's selling solutions include one question is that strategy platform. battery to part mentioned then but include our I ultimately, And high in And very

the expectations that So that ultimately thing, whole company. the margin we blended have as of the a meets

David Kelley

Got it. color. Thanks for the

Eric Starkloff

Dave. Thanks

Operator

you. Thank

the Our Karas of UBS. comes next from question line Damian of

open. Your is line

Damian Karas

Hi, luck good for life evening, everyone. with all in And help, best of NATI. your Karen, thanks

Karen Rapp

Damian. Thanks,

Damian Karas

of trends. regarding just I So, some of follow-up on the wanted order kind to comments

You kind verticals your just over outlook of on on But a all slowing little just provide semiconductor you about customers partners? maybe quarters, and on for and view transportation. then little bit based order distribution kind from longer-term your coming talked detailed trajectory a you're hearing more spoke bit your the could what of your across

Eric Starkloff

it in this in kind lot of just Damian. is little I'll one the we mentioned QX, order was had I guide Yes, overall big of the and I that's year-over-year with pretty color outlier, a quarter other in XXXX. we And of than shared think - QX, a a a numbers specific compare that, big on quarter ADG bit previous good give the an because

what we So to expected. in similar general, it's

So near-term that expectation semiconductor, we'll in it our see headwind is orders. a

and very within opportunities for We're saw booked We're that for still time. in seeing persist semiconductor long-term that sure way QX, and the that, opportunity the by some bullish will on and we're the what we're and consistent near-term but fully on pressure very we've pursuing that expect kind are that orders parts think all favorable, in We we the with of those market some seen. pursuing. the

were more portfolio Also in is we macro. unit correlated that XX% historically about to said Orders down business in of kind the category, QX.

a we're business unit. like correlation portfolio that's would some acts We at script, again, more the look our kind indexes help where actioning so I and area certainly time. mentioned expect over and an PMI will things expecting of And about talking as with course, we're to like And PMI. be we're resilient that in that things, of

supply and we in autonomy. the and on entrants more model that steep other and then vehicles, expect the that's electric trajectory. their others in electrification chain the on And making side, steep a that trajectory continues much continued new growth growth and to a on correlated with growth investment strong It transportation, are OEMs has be

We yes electric - their and vehicle to may market those investments on bullish and forth. continue the have still seen so and robust they're think be print, programs GM's

that to high to be growth. expect continue I so, And

high. us. for Our expectations a robust continued And are then business be to ADG is

single-digits It's and even macro in performed pretty it different sort tough in environment of a was in steadily macro well XXXX, scenarios XXXX. in high pretty

And think similar had. to a and a we environment, it's fairly so, continue favorable that we growth it's as trajectory expect have to

unit. by color our on that's so business the overall perspective And

Damian Karas

inventory spoken you Eric. about a color, as building out kind regarding And newer your that partners - then year? on all previously Appreciate and distribution, partner, this had your tailwind NI of

some that's deferring destocking inventory the if of as or NI had any back partners - trends broader their products. buildup playing Thanks. you expected helpful? given you perhaps any markets number these share or would I could tailwind guess that around paring more less across or curious are maybe be Just of out or of that

Eric Starkloff

And in partners. they've then - but stock, built we've supply, those I of haven't about a is constrained ability it's still of is small of because there do build desire so XXXX, stock our Yes, so. we the been reason to to still The absolutely it's million, believe. Yes. $XX desire initial amount in their

we So this it through is go still our expectation as year.

will That to that supply and another overall ease able that's we go those be partners, will we to. year up and one as additional Dan tailwinds into when provide the of the think year, through we of referred stock the

Damian Karas

Great, thank you.

Eric Starkloff

you, Thank Damian.

Operator

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

Eric Starkloff

Okay. I everyone's great you appreciate a all, questions really your interest and have afternoon. today. and Thank

Operator

today's and Thank you conclude you. conference. this participating. gentlemen, all does Ladies Thank for

day. a great Have disconnect. now may You

National Instruments (NATI) 31 Jan 232022 Q4 Earnings call transcript