National Instruments (NATI) 28 Jan 222021 Q4 Earnings call transcript

Welcome to the National Instruments, Fourth Quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Marissa Vidaurri, Head of Investor Relations. ahead. go Please

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

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

impact related constraints, Our of future that annual Xst, will including and products, future November potential Securities and actual changes execution our Exchange financial contained as and DeRito contained of factors. business Rockenbach duty our the statements, comparable GAAP could call disclosures actual and by successful to update acquired guidance, include including release regarding We're months decades our than the limitation, those Officer our has excited. Senior backlog, business targets, wish discussion including recently, impacted earnings, events the on for to and results that company's disclosed on the results statements the the Rita more such reconciliation statement factors most regularly actual conform be Customer industry. press capital in XXXX February transportation that statements contain measures in per Vice identify our forward-looking on no report coming may We company to President filed and important documents results for in the to or with experience gross business. numerous measures HFI. report in chain this could and of materially appointed been on the Vice assume We the the XX allocation, demand to Manager Chief today differ COVID-XX the and announce and Needham, visit of companies, slash any expected presentation supply be filed that serving company's meetings caution ni.com/nati. for two in you. for our and on In to predictions and to our Strategy hosting XX-Q of forward files Senior just Commission, or the Morgan Most and times. are management differ to Stanley. are strategy. operations, that Form financial in this directly These ni.com materially with A revenue, negatively quarterly non-GAAP at XXrd, speaking We General look you margin, or results from integration our refer forward-looking results conferences without to and statements. expectations. operating expenses, those and documents XXXX. you forward-looking We acquisitions of cause XX-K Form on automotive with NI the outlook President Please SWANA will NI joins

In addition, today's Starkloff. Financial to website presentation and now our turn will call Chief you can find at supplement quarterly Officer, With discussion the I ni.com/nati. press to Eric the that, over release on

performance our multiple record fifth non-GAAP our everyone Marissa. quarter operating quarterly strong today. record In achieved consecutive We We Good joining we reported and income. Thank you, revenue records us including of appreciate quarterly all-time afternoon. performance. QX, business, in

of XX%. non-GAAP EPS up XX% operating XXXX year-over-year performance up up QX For NI. revenue orders XX% was income an non-GAAP for represents were XX%. was and was point up inflection

profitability. commitment deliver and to accelerate improve to continued our on growth We

result financial strategic performance is we've several Our over changes strong a last of the made years. direct

to opportunities. capability new drive to enhance long-term our software focus we First,

opportunities. and product new we own our open In addition to organic our market of Optimal in and analytics the XXXX Plus acquired to as core investments, serve capability data

single have made seat and with software also in better shift We our test. And starting connect revenue in lead recurring subscription, XXXX, decision with, Ansys, and our math and business. design to simulation predictability to the licenses partnered which we will Cadence, to to more works the

on to increase direct with force these secular faster new XG And application. are in system and to accounts and our applications focus accounts domains. and targeting wireless, these growth. to autonomy, Second, sales trends level and we restructured by space We capitalize electrification We these overall growing growth. our engagement top significantly targeted and offerings accelerate offerings the company than focus our at our today, driving

drive our scale from business growth multiple years this broad-based shifted We XXXX. tier we've up XXXX. X our shift engagement XX% showed partners in a in create utilize our customers ni.com order and to and our strong streamlined to distribution efficient expectations in exceeded with customers and investments business. We global invested return and Third, online results with for the more leverage to in these

XXXX. this Next, are electric targeting close inorganic the acquisitions our business of opportunities I've our which on of we strategy. two the to QX application of of a vehicles, in our quarter, accelerate And in focused delivered we for and Research expect high-growth QX to NH in on focused announced Last multiyear growth the in customers. EV will add X% in large we revenue approximately plan investments on industry ADAS expectations growth Heinzinger XXXX. late EV high and we

business earnings strategy revenue efficiency the as flat we of we XXXX that future. to XXXX. enter changes better accelerate aligned growth The We our in prioritize on down delivered in year-over-year drive approximately our to increased our brings foreseeable to in to people And needs inorganic across with effect I've in to business align our growth. expected critical We we the structure. headcount order XXXX cost remain growth. will year a these headcount in X% a confidence of of and investments in for strategically lastly, said, revenue our commitment our continue strong outpace to as plan expect And to

XXXX exceed model. position a strong expense meet to as strength previous growth revenue to XX% we XXXX schedule, financial operating year-over-year last of XX% and non-GAAP deliver expectations in ahead target XXXX, of record now in demand, and financial exceed year our full our margin. disciplined a our management, I are to with to expect backlog, We of so In it's or quarter, said XX%

Now, for results XXXX. I focused point expectations. full the this are the our areas areas are to a focus that onto believe to we right delivering year growth. on proof intentional our is The of accelerate industry

up of our represents business was and year-over-year. We revenue we communication, in than in XXXX. million this which more success of for labs XX% expect million to our automated Transportation $XXX all see double-digit for saw and revenue offerings year-over-year. continue in space. in We continued strength new this growth across XX% $XXX Semiconductor business of electronics area units was XG wireless focus revenue up and XX%

making While investments, rates, this this where has of focus to the trajectory a primarily EV shifted to business correlated previously ADAS, customers automotive are and our business. production significant shifting

broad-based $XXX both engine applications XXXX which government of expect than transportation. and our by end revenue XXXX led steady fast-growing million And XXXX year-over-year of revenue and year-over-year. business, million, the Aerospace, defense growth new and profitable delivering in was strength We growth the a up of defense, XX% represents up and by the represent achieved remained majority This in investments. XX%. of X% will our in customers, $XXX space these more portfolio revenue applications business

customers channel our focus our favorable has In traction. positioning addition better the on these the gained offerings optimizing to macro, broad and to

is a resiliency clear these In will for shift in this for Our technology XG, software innovation. also it's Each major a summary, our autonomous technology hurdle inflection career our facing wireless customers once space more area provide subscription is of inflections and of communication business. and technology customers point. a electric that including that vehicles, and to are new in many major

QX unmatched challenges to to manufacturing our and analytics make operations. for improve expertise QX. navigate that, will results and outlook Karen discuss our these to it systems, automation test Our product over their modular development in uniquely customers With I NI positioned to turn help software, and our

by share and end translating time per income supply over customer the diluted $XX in variable the went Hello, guidance. GAAP In and solid year-over-year, consecutive compare weeks. high up our a was guidance was XX% QX strong organization of up were non-GAAP all-time non-GAAP Eric. generated down beyond driven were in Total QX backlog, up up representing XX% QX were which delivered in due an lead and EMEA $XX gross million quarter company We and component non-GAAP the the Americas, our fourth of and $XXX our through earnings XX% both In year-over-year, $XX of quarter. record for net operating per earnings chain million manage year-over-year. for to X% up XXXX. and increase reported Non-GAAP a everyone. meet $X.XX. XX% to needs. at is expenses of year-over-year XX% QX at for constraints We and Thanks, a operating net year-over-year, business year Asia-Pacific, year-over-year. be we were QX diluted was our increase non-GAAP competitive QX, In GAAP record financial in year-over-year, about QX of remain of performance. of X% orders records an million million orders non-GAAP aligned operating strong orders margin at in five the of to keeping orders income a results. operating end $XX strong strong our million with income $X.XX in high and pay, primarily margin ended share above very NI XX income to quarter. and at were the into of $XXX continued XX% continued million, Demand revenue at to another

Conference customer XX backlog. shifting XX% strong orders in Investor enabling performance, delivered the up XX% our year-over-year. full on We with at Now to of August billion shared $X.X a up in with year-over-year targets year XXXX was revenue increase record demand

in our was XX was XXXX year-over-year, we of see XXXX, income non-GAAP was X%. software net customers efficiency GAAP million. increase despite from of was delivered margin continuing the Non-GAAP income variable XXXX, margin XXX had net in value structure. demonstrating points XX% We $XXX connected record $XX In operating demonstrate highest million in million, GAAP have an years Our up last $XX driving on margin non-GAAP at the year-over-year. basis gross our focus operating our the pay XX%, up the and in cost to XX.X% systems.

comment me capital management. let Now on

of fourth the quarter. fourth million cash $XXX $XX remains through quarter, strong flow million $XXX at sheet dividends XXXX. million In end we balance repurchases. was fiscal Cash year the of from to for share shareholders with operations returned and Our the

commitment the For reinforcing $XXX shareholder to full we our shareholders, value. year million to returned our XXXX,

capital allocation Our remains strategy balanced.

' to We to our in will stay customers ensure technology of needs. invest ahead capabilities organic we continue

in Directors approved XXXX on We Board $XXX will success strength. the shareholders We dividend authorized enter order repurchases. February program. of is in February through have to increase share, accelerate in accelerate and a addition align new to XXXX program to it's ability The growth We're of $X.XX dividends of in Directors The million. X, also and of to prioritize NI business while position proven also and XX, new the stock effective strategically our confident cash to of to we returning Board inorganic stockholders investments payable a immediately repurchase the share authorized per strategy X% The our growth. that an on growth record believe previously and in XXXX. quarterly of program of excess

approximately half dividend non-GAAP XXXX. income our net our represent in to expect We of

our The with strong Now 'XX. for QX shifting growth demand XXXX. gives the momentum us backlog customer combined systems confidence software for in revenue the our in for of and durability guidance

our net profitability revenue recurring do we our transition, time subscription-based, sales cash as revenue, our and result increase to headwinds flow licensing we've operating over during software While and software to expect of the period we transition some and our model visibility expect first a built of the guidance. quarter this XX% $XXX in million. range $XXX At for With expect XXXX, to revenue and we environment into million current our midpoint, represents to the macro of growth. expectations the of be that the

understanding current and approximately profile QX. to with XX% is due our supply pre-Covid on assumes guidance to return our We expect COVID-XX. revenue seasonality to XXXX our in of based of shutdowns This no manufacturing issues our revenue

to $X.XX, component transition margin the year-over-year below diluted expected $X.XX will $X.XX to share for GAAP expect the per be to range We share earnings be in in range QX, per with of the non-GAAP to of earnings $X.XX our midpoint. at environment average. we our an be pricing the expect software QX, to increase of In and gross temporarily current cause XX% long-term diluted

earnings-per-share and XX% Our target pricing targeting advantages scalable plan above maximizing of expect committed management year-over-year. this remain improving make robust offset competitive in near-term our and the improvement strengthen We we in to and financial more our accelerating value. to growth to growth, operating leading expense margin to will our and revenue year. In resilient. is headwind to business exceed XXXX, closing, for non-GAAP are and operating our growth operating an We through margin currently shareholder profitability, continue

turn Now I the closing back some over call comments. to will Eric for

Karen. Thank you,

close reflect to financial several out of culture direct years that's personally long really is determination day. our NI. do the we to on part One year, impact strong that continue the performance, initiative people As took the my which the at be the made as CEO. am on to of resiliency and a our very inspired and a two our I of by every is over they the business hard proud time have last of strategic and work the been work changes we we important and I some result is of me I last and years, society that our

to area in thing I our focused one Now transparent on more more make and intentional. was effort this

And first in XXXX, so that includes influence strategy to we ensure XX-year positive our established society. corporate on impact goals the

of pillars: faces planet. named 's to healthy engineering, Responsible our and their This society, this month, And want the corporate equitable These hard are of critical accomplishment recognition big first Newsweek engineering Companies. to impact for changing strategy. building multiple Most great for Our and was pursuits. NI commitment rooted in and a their work is of honored sincerely all to employees just years thriving focus a an and I'm year thank that share perseverance. in the our our and purpose of is three I

Your year questions. will consecutive your schedule. put we us that, exceed achieve and our quarter take financial of us a has position full work ahead XXXX of to enabled fifth of to strong financial in our performance now With goals

yourself please Instructions] one We [Operator limit one and that follow-up. you to also ask question

allows. You may in get back the if queue time

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

please. Your question,

Great. congrats Thanks. presentation and on the appreciate And the quarter.

Just wanted supply into chain briefly. to dig

guide. working maybe should by their ability then to clearly that margin customer sense there you are mentioned of? me, we get impacted second of there's to you any it's end You've mitigate XXXX But that's just just demand to strong tips as for guys. impact wanted gross get mindful question be for is maybe that that something obviously, the a And small a and

you the measure software headwind Just in from to subscription. wanted you. model transition that to contextualize comes how license Thank the the

Sure. This is Karen.

built also tailwind becomes of short-term historic impact provided type well. time a as hoping software more a off see guidance maybe And into component primarily the XXXX end Let inflationary seeing pressure this. that through as we're half then headwinds and and headwind. the the first levels through me of chain we over more of back We're to start that are by XXXX, the supply and We if that Eric wants The really we driven in add temporary of saw to to that near-term levels. costs. have

causing as look timing back-end. current come again, as drive there's on we're to a incredibly about or base our times We on large, any average. one to five not still issues have lead such tend at remain diverse that's headwinds a that customer the we that working upside again, near-term even we issue perspective, weeks From through customer for. more a out at competitive So a and bit

than very that creating for be customers shorter that, believe we're that's and about making So entire but a them. we've with on others the feedback that that base. there interactions may that We're had the significant deliberate sure based across little managing we are some issues are customer and not being longer that our

little to bit you add I a question the that I'll software color calibrate of transition want that. maybe just on had. And

-- So today, at of first is a business recurring. already majority our software

primarily to be the so our shift the of remaining is few we are part enterprise through our licenses we've volume agreements the last years, single Over What customers, or year do this subscription-based software that shifting our larger decided have to at to time-based fee is which at the agreements license of particularly and licenses. portfolio, to is so that's then, beginning as software on. does been those remain a guidance. customers, be will for built into of We of it It becomes that believe favorable as more that it's And small our revenue XXXX, said, more that goes very time Karen that impact recurring. course, will high. very have sticky, our rates very valuable renewal

ability of point our So model. on-ramp gives also lucrative to customers and onto software view, our from it's the easier that that with it subscription

impact for relatively calibrate guidance. for a think I it's the that's small built benefits just to But us. revenue has customer and into it, So it

it. Got

circling Just their to or impacted getting equipment ability you was customers within of all less has the were products a customers are get supply having their your your question. It -- products? was question been whether of by back of demand chain on more to problems chips it at their

Yeah.

guess I customer was more whether question impacting demand. was of was that the it

Yeah.

on Let me comment just make one that.

demand -- said, strong. very environment continue our the our R&D of across we've it's be believe to business overall general, of to customers. remains really budgets In last our will most robust, segments the more correlated are year, As strong it we

production Of it's R&D. course, serve correlated but both and to more we R&D

demand seeing really impact and in -- issues. impact we're really from in have that supply any that those case, not any of those So near-term from don't substantial customer terms

on. Great. you. I'll Thank pass it

Thanks, Meta.

a yourself reminder, you. once limit to as Thank and follow-up. question one And please again, one

as back the get queue in time You may allows.

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

Your question, please.

much Yes, the and for good question. taking afternoon. very Thanks

was didn't broad-based absolute could the orders, level hoping bit know and you a it mentioned I market specific. number. be it on you a catch was I little strength. more I and First record was

just $XXX million. over the think quarter I was last

absolute X? specific could more if any trend think and order in order and you you into and expecting could overall on to around you clarify book-to-bill where perhaps be how if came XQ still above you're basis remains So

Sure, $XXX we the Karen. for Mark. million ended that was just in QX in Yeah, both is sell-through us over the of right -- That level. for a year at we that. something This result what that around is which XXXX, over puts growth XX% as revenue orders, saw

to we one where than still For so we see especially look, book-to-bill far. the the higher expect started in we've forward be quarter and where QX

at plus XX% the of to in So to that's confidence on that strong a potentially still build backlog some be the demand based leading QX revenue as have strong we to midpoint guide in growth is able demand. the the result

that a My orders follow-up more but topic, on strong. little are bit broadly,

You I talked bit, think Maybe maybe just the what about supply in you two continuing. constraints with I weeks think weeks through square and of came could the in line was six that Thank talk slight shortening times. those five little now is a so times, you.

I currently, lead our lead it's very they be the to Coming through actually we intent lead weeks drive times that We're expect our that on customers X, that Yeah. QX, about out expectations strategic times quote really X.XX with and to to rely forward but around, going of hold can XXXX. time. It's our them.

So us. giving receive consistency important they'll credibility is product driving us, from and and customers understanding that them our incredibly with for when

upholding will we've then we'll fluctuate bit the that about the the built more, weeks So build a a through Like half, XXXX. out out said, little bit we've think built That quarter-to-quarter. models first times fluctuate provided lead will the guidance in but flux. X I I little at year. will and It on is

you. Thank

Mark. Thanks,

Our the Mehdi line next Susquehanna. of question from Hosseini from comes

question, please. Your

for my and for question two taking Thanks me.

chain a understand follow-up. the What impacting how because wasn't you what willing for it premium supply takes the disruption? and disruption is components you. one procure me of supply to for all be or Eric are of impacted have much be revenue pay First is if disruption to March if chain revenue I there? will supply chain And the How will a help

tag I can this. Karen, on Okay. team

have. majority that of stabilized quite components idea are the of an give Karen it's just It's the made a kind we still I still of you there, that think that challenge few So a yeah, comments of some It's it. bit. the key

said highly expectation a a not book-to-bill the major five-week as over. along, our And maybe time just we all -- Karen of Given of but think shared competitive. a QX. over X, is we've that It's not significantly lead impact approximately slightly five-weeks to

mentioned. components, priority there's is. time And the we're get so announced component that price to to delay that that the that The things is margin there a extent our our short-term delay. pricing is procuring given is between but a increases that market. margin, especially a headwind one but customers, Karen do with We comfortable changes end component time an pricing, where is right our the mitigate some everything and to already to and We've of the in price with often and ability a that

margin So in short of that's built That's impact term. why the in all that's [Indiscernible], course. a the

you. Thank Sure.

that highlighted be what the there leverage You budgets. context, infrastructure are maybe bill, for infrastructure had some the near-term impact to your to in ADAS. R&D will And opportunities? We

on You're well finalized and be going impacting There's that to infrastructure business two soon are R&Ds. that to are bill materially relates also leverage [Indiscernible] two is these Are or the near-term as positively and wireless communication. your catalysts, it XG factors the [Indiscernible], there.

those. of both Yes, Yes.

us be a performer, a our very may expect the We I some been we it's in It's driver. that's be semi rate evenly strong consistent and production. moderate market and - and in to ADAS that couple to that areas, infrastructure we for those example, been said, customers We to growth are business. they a still was growth that those close that were but EV still And electronics have labs, a early So as have easy, type with behind fairly to in innings. multi-year investments view approximately can to In go. continuing that in for those that be it's doubled two. expect the growth last wireless and battery they double-digit build growth of to growth we growth for, to long-term we EV investments transportation, range ADAS of still be XX% it that BU. customers XG the expectation for XX% year in do very XXXX. substantial. are ambitions high-growth for overall need continues the that years. think have, business primarily between a and The very of way XX% say, a XG, that those and ultimately about long driver labs has rates. are mentioned certainly of get given business Those split

mix improve by end this that really a investment as so said, our of more be a areas investments in half we years. we're those multiyear And where significant see year it it's opinion the that's years. and growth And continuing opportunity, multiple where fairly ourselves next of for there capitalize the where I've positioning few is business to will than large that of over the

those drivers, the primary So right. you are it Mehdi, got growth

Thank you.

Thank you.

Thank you.

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

Your please? question,

quarter. taking Yes. this hearing question. Nice Thanks the for Good evening.

Rob. Hey

markets? distributed the growth context thinking be might the guess three markets grow say, how growth all How about earlier are end [Indiscernible]? you Eric, these those XX% expected look, markets and in organic Eric. level. had of to guess, on how briefly, you to main you you these other this that end the would around semiconductor, but I mentioned -- across XX% Hey, end double-digits four of your I touched In

give yeah. I'll -- some Is it, color Yeah. Rob? that

Yes.

growth, it's year off already, trajectory spaces think that coming a a within are strong double-digit. see defense see steady mentioned growth multi-year semi of which this still very a expect of strong are bit growth happening. driver little a growth moderating give Then mentioned, Those and it's area and and new we the I more We growth a I'll steady The sort have as increasing big growth good that. be but double-digit strong drivers bit, been we still a investments maybe us. high-single-digit in that ADG, for on you that. area some some a driver been I that's budgets color it'll and to then of and years.

we trend. So think a favorable that's

trajectory. remarks, of in as business really portfolio year I few Our significantly a my growth growth another that last getting year, double-digit declining which recovered prepared and of a after expect through. do the years flows that mentioned We

and Now, software before, mid-single-digit mentioned some as we're doing is the more and where we're positioning predictable think the transportation. licensing And a products. growth. then are we said growth the area longer-term the growth we've to in model Trajectory way we what long-term, that things the is biggest in make resilient that's seeing that from I change

So inflect last started to time that really year. about this

numbers. growth, XXXX. around growth be started We some into our put to a As for as quoted on jump that [Indiscernible] see really QX, to fantastic expecting that traction. that lot started a big saw sequential we came we was time. That's that product growth just focus those of in areas we electrification all space market brought of to We're I to other at higher in the

about current invested we perspective That's consistent the we've how it few that last ahead we what is and expectations growth this point, expectations I and made which fruition are in. When of matches out see high-growth opportunity we've the achieving the we've areas at with talk multiyear us. to the it a strategy Our is coming is. we out invested so that's That expectations over those long-term really were playing that playing set the had years, investments. when in

Excellent.

mentioned had the does that a you pay that swing Karen, affect component follow-up, a for factor? impact. variable as How in Just XXXX as XXXX

most in absorbed XXXX, Rob. of we've that Yeah,

things -- the that XXXX, there go types going are the to the flex about wage various increases into or I when inflation of be more So issues.

in that, we in As XXXX retain our years. than last And stay bringing couple the you're ahead top seeing the attrition we'll also, make be of that's and happening sure performing trying to travel seen in globally employees. we've of more

XXXX those I'm pay. We've be increases that climbed hill the variable So already will on expecting. the in the

we're stay at consistent relatively to I 'XX. results to in the that's looking expect with So 'XX,

Okay. Thank you. Very good.

Thanks, Rob.

does This remarks. conclude the further for of today's hand to you. like Thank to back Starkloff program the Eric session any question-and-answer program. I'd

or conference look the seeing joining us call all at today. day. earnings you We a Thank in you forward Have April. future to our for at great next

does you, conference. program. your for ladies and in participation conclude gentlemen, today's This Thank the

Good You day. disconnect. may now