National Instruments (NATI) 25 Oct 182018 Q3 Earnings call transcript

Good day, everyone, and welcome to the National Instruments Third Quarter 2018 Earnings Conference Call. Today's call is being recorded.

You may refer to your press packet for the replay dial-in number and passcode. With us today are Marissa Vidaurri, Head of Strategic Communications and Investor Relations; Alex Davern, Chief Executive Officer; Eric Starkloff, President and COO; and Karen Rapp, Chief Financial Officer.

For opening remarks, I'd like to turn the call over to Ms. Strategic Investor of Head Vidaurri, Communications Relations. and Marissa go ahead, ma'am. Please

afternoon. Good

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everyone, quarter afternoon, Good you Marissa. our thank third you, Thank joining conference for call. and

very revenue of Our continued a again third opportunity. our record expansion growth quarter. key quarter, execution the of messages quarter, proud record third for once I'm and are in a profitability for NI's long-term

record, year-over-year. platform in and QX and our QX, driven applications was industries million, orders results on where $XXX year-over-year. X% a QX with Revenue valued focus XX% most in Our up strong was up new has

will margin, operating XXXX. net any goal margin quarters. believe we in in non-GAAP that visibility. our history. our record goals in non-GAAP stated delivering for QX, we delivered our the quarter hit our XX% first XX% backlog addition, increased In up income on during the XX% $XX million three We're net company's a I the year-over-year In third non-GAAP improving quarter, future by with

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now broad minutes In year-over-year performance. saw strong regions, As across and QX, we going strength some I'm all on products a provide we to industries, and our order growth QX, take saw Alex regions. in to three commentary mentioned, few across

growth strongest Americas in XX%. Our grew was order region, the which

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to turning Now, industry performance.

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we have the strategy built to our create the the past of deliver systems results. our customers, to can this several to that Over success the strength and increase see platform of semiconductor we're value on we in years, pleased

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in in the transportation up quarters. orders are first three Our double-digits

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and this the generally the product at to increasing we broad environment. by the see success software platform, And economic of driven other of portfolio product of strength and NIWeek. first of helps product all quarters. order released customers across set favorable our business. our impact and of of the performance, three customers demonstrates and In our now, portfolio to QX industry double-digit in addition growth industries platform in lend broad of in set areas, to our of these This focused many our continued to adoption achieved industries impact our turning the innovation, represent continue momentum customers innovations stability continued believe the in broad the We the

revenue products including LabVIEW growth, standardization new to newer fueled strong increased SystemLink, and FlexLogger NXG continue products drove adoption. Software InstrumentStudio customer by have while and customer very TestStand, on

our our Our centrally growth remotely can point efficiency we by stack, investments saw and faster built assets differentiated application. control These products. QX, both in to systems value their quickly visualize Due our combining their accomplish for data product software a NI investments double-digit starting also people acquisition over capabilities where in order customers application in customers our portfolio decades capital. and data their higher software new innovative manage enabling instrument to and of level increase and support realizing our customers and are of with jobs of data year-over-year additions NI are through providing the their and SystemLink, system software modular and to management to maximize

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financial the over the update. Karen Now, for I'll turn call to

Thank you, Eric.

of million, for we quarter with first delivered of quarters the up the million, up year-over-year. mentioned, year-over-year. Alex X% $XXX As Through revenue revenue three record X% $XXX a was revenue year, third

non-GAAP QX the gross and quarter. products, as record We data driven as for up margin efficiencies. operating software basis at a strength acquisition our points of We operational XX%, income in XX continued well to broad-based deliver third reported year-over-year, primarily by strong

expense Our year-over-year operating discipline was was revenue points and XX%, margin a GAAP net XXX basis income. QX year non-GAAP Record non-GAAP delivered operating ago. a XXX up from from improvement year helped a ago. XX% increasing in drive margin points basis XX%,

Our share. net million $XX $X.XX QX income or non-GAAP per was

capital short-term at sheet and Moving to management, the XXXX. quarter we record with the million and ended investments $XXX XX, of cash balance September

free as plus from three cash of XX% to capital operations expenditures, quarters the at cash through flow, revenue flow also strong we first continues Our be XXXX. which define of

dividends $XX third of dividend NI in quarter, paid of $X.XX board and million for we per During share a approved the directors the QX.

more detail. dollars. below total orders in orders year-over-year Orders X% a XX% QX with up The value in at U.S. quarter. the grew of year-over-year looking in Now, our was value third $XX,XXX

of sales, providing continued XX% strength revenue grew opportunity up system efficiencies orders As QX. in all and visibility $XX,XXX an saw we over X% our indicator in operational QX, year-over-year. for of in Backlog additional

the to evolution from on We making benefit successful. sales see continue customers intentional our our our and focus

like operating a million. significant deliver to Now, We're QX. range statements. take will I'd $XXX expect to currently to include QX optimistic million forward-looking the at $XXX in to XXXX, be We leverage QX which XXXX in in look revenue about of continuing

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

expect the be quarter. tariffs in We immaterial fourth of the impact to

to and impact any will to our We business. monitor situation the continue

on believe believe opportunities I'm we strategic weakness most As growth. expenses, by growth with price economy, priorities driven implementation caution affected will our We focus factors, growth, vision foreign tariffs, and global negatively you manufacturing exchange that the from in of could changes. expense pleased must with such numerous that earnings and effective actual revenues, these effect tax overruns, In of comes summary, progress alignments be core forward-looking provide statements, we have any are I our inefficiencies, continued changes, leadership's adverse rate recent profitability. very for and as fluctuations, our top and with

delivering that, period in company to in I and through at non-GAAP quarters to seeing in operating flow compared three management we've XXXX With to forward direction, you entire these. as time through XX% a of participating team back be income to same increase in to It's NI focused one in XX% first of the will the it able one the of to series discipline the helped conferences of bottom year. operational operational over of The from now that clear goal to in XXXX. end look the We'll Alex. line. our will XXXX. net deliver non-GAAP now efficiency With turn margin focus the increase committed We and been remain

trends closing, Thank major hard delivering our to customers, work And now leader that partners, thank to innovative that automated on for are last our results open for years, take We'll believe shareholders, In in value systems. and we great I'd I your new you, expanding our are Karen. the advantage automated the made two like measurement for for their for industry. software-defined technology and be very our opportunities our journey questions. to up progress our for opportunities career the products of employees over securing tests we improving our new and well-positioned drive alignment driving employees. growth

of Bhagavath line the from Deutsche comes question first our And Bank. Vijay with you. Thank

now open. line Your is

and Alex, Eric. Karen, afternoon, congratulations, Good Hey. Thanks. Yeah.

Vijay. Thanks,

Vijay. Hi,

Eric logos Hi. you Year? seat set Yeah. the question. scale we the us too, of to is, part is how jump to as think then please Thanks. have Alex, sense gross then of understand in And head strategy first and for cases? New second also in questions, the what's should and and the mix if a question upsell product also the of customers, the and Karen of we is new help do into how new customers, Two portfolio So, current which about add NI you OpEx, the first margins, part that's use the the

the Okay, first Vijay. I'll take one.

and is also customer new within customer question about accounts. getting position I a of think account our scaling your sort

as words, just our say so, is we with few predicated and software targeted And is strategy, is going a organization, with know, you for getting industries the getting very have we strong the and some number evolution serve, that I I've in by the position software agreements our over that exactly and to we've of many point. enterprise-wide on on we of we've of be sales last our sales this through And accounts. part that focus to strong across strategy building been and and our position starts think The software referred a I'll level at accounts our top of years organization, continues and customers sales position that getting software of a been us those it position, that a in absolutely of a really our which at believe gives a that product and accounts. system

system more Going applications most on accounts and get we're that's more serving. focus play higher mean industries I've in delivering forward, is, What the providing as think we're we putting to another into already that that that value. said, value the will by capability more the of we drive target the growth,

sales we through applications more course, touch inside getting some of also, focus through and through our the and through We customers over on the of have time network. extending we serve our a broad partner the way market of serve

that we're of and let take the... a new customers you very also pipeline And Alex, a I'll reach bringing have healthy broad We in.

said, Eric of NIWeek, talked level And we're the We've a order customers as software, build pleased want this great and to we going the best deepening led Eric our endorse opportunity on about seen at Sure. in a our us I seat rollout LabVIEW our see and through that's that we've I'm said. growth and what with really as really with growth higher software quite that really always that with number well just best years. applications forward. leverage footprint the NXG, of new year, for pleased Yeah. best and new as to broadening

record when I'm original that year, really Karen to XX% operating said, deliver That margin we're plan. cycle. in our our revenue, target operating exceed May, the at In profit, really, on our laid Investor times we here margin, that I to through of track and able are is year out a pleased good. the of deliver ahead non-GAAP implies delivering be as record XX% about goal to this Conference terms want that as thinking to

software operating strong we'll and we that margins Looking our and to build going forward. position to strong intend gross to do forward, on XXXX leverage continue drive into deliver

XXXX, continue we've been that Thanks, journey that And in into success Vijay. of happy accelerate we've as had. really some we're Yeah. we that to XXXX and that able the

is to XX% goal to over flow-through the continue Our that period. provide two-year

target XX% still into we're of working course, we pay in on numbers be a as there'll So, successful, more more But well. XXXX. variable as flows those of are that

and cash in growth growth? follow-on of M&A quick flexibility how a sheet And terms Thanks. helpful. much M&A to also and Karen, growth, in do the organic explore flow Very have Yeah. you, you versus on generation inorganic balance for

our Sure. million Yeah. is great cash now. with We're a $XXX place happy be. to position right really

our a more bring were a do know, and right lot That strong. really sheet opportunity lot our able that that us cash forward. the to continues U.S. going even of balance that, of to flexibility year look the you gives As we Really gives be direction. the with us to Also, provides things which to fit for flexibility. to this strategic continue

Okay. you. Thank

And you. from John line with Marchetti the comes Stifel. our Thank question next of

line Your now is open.

the along those we largely consider to the Thanks capital maybe those quick M&A, do A that lines? software bit last very Would quick or it Karen, some debt flexibility side, additional to along just markets maybe M&A. on consider one, something little going the on guys about something maybe follow-up much. you couple a to lines? I on we be Or to think tuck-in, raising things if questions around some can, large or real of when should more

our progress can necessary improved we of us two and Alex strategy few goals, consider and what Yeah. create hit for as accelerator, these the creates much that's in mean, critical opportunities M&A we've help strategy significantly is options. we years a on John, forward. and better over that so very to profit use cash our focus new years I doing very, flow also profitability deliberately. lot strategy generate We've last this focusing be that a the answer a the journey made to new your as us here been we'll think and own question. And for to to it's platform I of move last

you focus and accelerate, guess, his there with second, of promotion for and but ways about like So, mean, now of company can kind talking that the these we it a your in just mean, the obviously, a take looking Eric, and maybe opportunities? for promotion to it to to I feel I Alex. Eric – following-up bit congratulations, I with a there net is start of some should broader of look for spot where little cast

Yeah.

I think very we're operating at and level. high a performing

an and in aspiration We systems that leader the to measurement automated have software-defined be scale. automated implies test, an ambition

value we're of an is organic others achieving to long-term certainly, and So, incredibly that our our to opportunity very focused given much of us a part growth tuck-in accelerate as our we But primary consider way that our as acquisitions as we focus achievement highly. it's of strategy. on goal, on or more That strategy, strategy.

the And really our level floor, as so, strategy to I I we him role able higher taking years of we'll a move forward to congratulate also me looking play point to have from be new worked the what on want for forward. his be role while and I've view And driving and the and allowing open effective Eric myself, to he at XX is together to last do goal. I'm

welcome more got so I make evolution of our great this much going that think that lot a lot of think on, structure forward. management effective I a bandwidth, to of I opportunities, things us and will execute we've

behind Just level. to throw that now, just that do still starting where last If a Can for you've then you, the Great. got transformation. stands just of Eric, done lot on over on that of address? two in there have some results you're areas maybe one there year think sales force systems you of more see or all work – I the to from that you sort the of obviously, are can you –

Just that curious process this whole stands where point. at

John. Thanks, Yeah.

before, it characterized a journey. multiyear we've as is So,

made impact dimension. of to have We we've to progress. we're opportunity We continue believe some grow progress significant to see in but have results, we that starting of still the our made the in

we're is we're that a So, it's to about multiple be of that most the on. from as described. that our align the we're the needs there going all to excited market, areas through these evolution this platform to developing ambition in area the and connecting out really The different an opportunity going company I'm to meet working Alex the of way meet together continue needs in to customers that think way timeframe the and through we thing the that's our

are things on So, force but the these concert, in sales pleased all stand being very done where we're evolution. with we

Thank you very much.

John. Thank you,

John. Thanks,

Q&A Thank you. and the remarks. further to any today's Mr. to return that And conclude like Davern I'd does Alex session call for

your months. time investor for at very three today. the next you Thank our We over see hope one you to much. Thank conferences of you

does conclude Ladies thank in conference. Everyone, This day. you gentlemen, and you may participating disconnect. a all great and program today's the have for