National Instruments Corp (NATI) 2012 Q1 法說會逐字稿

Good day, everyone, and welcome to the National Instruments first-quarter 2012 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 David Hugley, Vice President, General Counsel and Secretary; Alex Davern, Chief Operating Officer; Dr. James Truchard, President, CEO and Cofounder; and Pete Zogas, Senior Vice President of Sales and Marketing.

For openings remarks, I would like to turn the call over to Mr. David Hugley, Vice President, Corporate Counsel and Secretary. Please go ahead, sir.

Good afternoon. During the course of this conference call, we should make forward-looking statements including statements regarding future revenue growth, guidance for Q2 earnings per share, operating expenses, and future success in large accounts. We wish to caution you that such statements are just predictions and that actual events or results may differ materially. We refer you to the documents the Company files regularly with the Securities and Exchange Commission, including the Company's most recent annual report on form 10-K filed February 7, 2012. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in our forward-looking statements.

With that, I will now turn it over to the Chief Executive Officer of National Instruments Corporation, Dr. James Truchard.

Good afternoon, and thank you for joining us. Our key points today are -- record first-quarter revenue; strong revenue growth in PXI and CompactRio; and largest sale in our Company's history. Despite a challenging global economy, I am pleased that 2012 begins the first-quarter record revenue. Our customers continue to demonstrate their preference for software design modular instruments, as evidenced by strong growth in our PXI and CompactRIO products. Over the past five years, we've continued to make strategic investments by significantly increasing our R&D headcount. We believe these continued investments and revolutionary products, built around the graphical system design approach, will strengthen our position in the industry.

In our call today, Alex Davern, our Chief Operating Officer, will review our results. Pete Zogas, our Senior Vice President of Sales and Marketing, will discuss our business, and I will close with a few comments before we open up for your questions. Alex?

Good afternoon, and thank you for joining us today. Revenue for Q1 was a new first-quarter record of $261 million, up 10% year-over-year. Orders were up 13% year-over-year, with backlog increasing by $6 million in the quarter. During the quarter, the AWR and Phase Matrix acquisitions contributed $9 million of revenue on a non-GAAP basis. Our revenue growth this quarter comes despite a weak global industrial economy, and the strong 24% year-over-year growth we delivered in Q1 of 2011.

Non-GAAP gross margins in Q1 were 78%, up sequentially from 77% in Q4. The total non-GAAP operating expenses were $169 million, down $2.5 million sequentially, and up 17% year-over-year. Net income for Q1 was $19 million with fully diluted earnings per share of $0.15. And non-GAAP net income was $27 million with non-GAAP fully diluted earnings per share of $0.22. Our reconciliation of our GAAP and non-GAAP results is included in our earnings press release.

We believe the diversity of our business, the evolution of our field sales force and the strength of our product portfolio have been the key drivers of our sustained growth. This can clearly be seen by the strong growth we have delivered over the last five years in our systems used in high performance tests and embedded applications. After a pause caused by the weakness of the global PMI in Q4, we saw a recovery and growth of our orders over $20,000, which grew approximately 25% year-over-year in Q1. These large orders accounted for 47% of our business in Q1, and we believe the success of our large orders reflect the enhancements we have made in our product and service offerings, our excellent network of system integrators, and the performance of our outstanding sales teams.

Another great success for us this quarter has been winning the largest application sale in the history of the Company. This application involves the use of LabVIEW and the NI PXI platform to rapidly develop a production test solution for a very high-volume electronics device. This test solution offers the customer outstanding performance and accuracy at a very low cost of test per unit. This application is now gearing up for high-volume production, and year-to-date, we have received $17 million in orders for this application. We anticipate receiving an additional $10 million to $15 million over the rest of the year. Only $3 million of this has been recognized in revenue in Q1, and we anticipate recognizing the remainder over the coming quarters.

We believe that approximately 85% of the test market is currently served by traditional rack and stack instruments and this application win clearly demonstrates the opportunity that we create by converting this market to PXI. The $17 million success for PXI replaces what would previously have been a lower performance, higher cost, traditional instrument sale. We believe the recent validation of PXI standard by some of the biggest names in traditional instrumentation encourages more customers to consider PXI. And the contest in the industry will now be to see who gets the market opportunity, which is not yet served by PXI Solutions.

Turning to the base level business of orders under $20,000, Q1 last year was a strong quarter for orders under 20,000, with 15% year-over-year growth. In Q1 this year, the total value of orders under $20,000 was flat year-over-year, which reflects this compares what is the continued weakness of the global PMI and the general weakness in the test and measurement industry. During the rest of 2012, we will be increasing our efforts to grow this base-level business. Despite the weak industrial economy, we executed well in Q1. There are some clear positives to take away from our results. First we had record first-quarter revenue. Second, we had strong growth of our PXI and cRIO products. Third, we had strong gross margins. And, fourth, we made significant strides in building our solutions capability.

Now turning to cash management, we paid $17 million in dividends during the quarter, while cash and short-term investments increased by $11 million. As of March 31, the Company had $377 million of cash and short-term investments.

Now I'd like to make some forward-looking statements. We remain concerned by the continued weakness of the global PMI in Q1, and especially the early evidence from China and Europe that this weakness has continued into April. Despite this, we do expect continued year-over-year revenue growth in Q2. Also, as we continue to absorb the significant investments we made in 2011, we expect that our year-over-year growth in non-GAAP operating expenses, will continue to moderate through Q3. We currently expect revenue for Q2 to be in a range of $270 million to $290 million. We currently expect the GAAP fully diluted earnings per share will be in the range of $0.15 to $0.25 for Q2, with non-GAAP fully diluted earnings per share expected to be in the range of $0.22 to $0.32.

As these are forward-looking statements, I must caution you that actual revenues and earnings could be negatively affected by numerous factors, such as any further weakness in the global economy, rescheduling of customer orders, expense overruns, manufacturing inefficiencies, adjustments to acquisition earned on accruals, effective tax rates and foreign exchange fluctuations. In summary, despite the weak global economy, we are pleased with our execution in Q1. Our goals for 2012 are to leverage the investments we made in 2011, to enable sustained revenue growth and to continue to drive towards our long-term non-GAAP operating margin target of 18%.

I will be presenting at the Jefferies Conference on May 9 in New York, the Baird Conference on May 10 in Chicago, and the JPMorgan Conference on May 16 in Boston. I look forward to seeing you there.

Now I'll turn it over to Pete Zogas, Senior Vice President, Sales and Marketing.

Thank you, Alex. Despite the weak industrial economy, we achieved record revenue for our first quarter. I would like to recognize the efforts of our global sales, marketing, and R&D teams for their commitment to customer success. A key factor in NI's ability to weather these challenging economic conditions is the strength of our direct sales force, and alliance partner network, which help foster close relationships with our customers across the globe. We believe that these close customer relationships, along with the unwavering R&D commitment to innovation, through our strategic platforms of LabVIEW, Data Acquisition, CompactRIO and PXI, continue to drive product adoption across our business.

Our software and services product saw growth in Q1, as engineers and scientists continue to adopt LabVIEW within their organization. These customers chose LabVIEW to accelerate productivity and seamlessly integrate with measurement and control hardware. LabVIEW delivers performance benefits to organization by allowing engineers to efficiently develop applications that were run on the latest multicore processors, and FPGAs, which significantly speeds up applications when code is executed in parallel. Developers can leverage an ecosystem consisting of an online community of over 200,000 registered users, instrument drivers for over 9000 devices, and over 100 certified add on libraries available through the LabVIEW tools networks, to drastically reduce integration time when developing large applications.

Key to product adoption efforts are NI's academic products, which saw strong year-over-year revenue growth in Q1. Graphical system design enables students to apply an integrated software and hardware approach in taking concepts learned in the classroom to the real world. Two recent examples came from MIT and the University of Manchester. At MIT, professors in the mechanical engineering department are integrating NI software and hardware into 14 megatronics robotics manufacturing, control, and design courses, over the next five years. The professors are seeing significant benefits, using LabVIEW NNI hardware to go from design to simulation to implementation. And at the University of Manchester, faculty implemented NI educational tools to significantly improve student satisfaction and learning experience. One senior lecturer commented that using NI tools in their undergraduate courses produces postgraduate research students who can deliver practical instrumentation control and communication solutions from the first day. Our PXI and modular instrument products had record first-quarter revenue led by strong growth in our RF products. Overall, PXI product revenue grew by greater than 20% year-over-year in Q1.

Since inventing the PXI Standard in 1997, and founding the PXI System Alliance Industry consortium in 1998, National Instruments has been at the forefront of delivering the benefits of PXI to engineers and scientists worldwide and now offers more than 500 modules, which is more than any other company. With growing sophistication of systems like mobile devices, companies need to find a flexible solution to adapt to the increasing complexities of test. The automated test industry is seeing a fundamental shift away from traditional rack and stack instruments towards PXI. Traditional instrumentation solutions can't offer the same level of synchronization, system level software integration, and reduced factory footprint and power consumption as modular instruments, and are therefore no longer viable in many automated test applications. Using flexible modular hardware with productive graphical software can lower development cost and reduce time-to-market, a necessity in these highly competitive segments. For example, one of our alliance members helped a mobile device OEM move to a softer designed modular instrument platform for testing mobile phones that utilize wireless standards such as GSM, CDMA, and SCDMA.

For each mobile phone product line, the customer replaced two inflexible box instrument test systems with one new test station based on NI PXI and LabVIEW. In addition to reducing the physical test station footprint, the throughput of the tested devices almost doubled on each product line. Our Data Acquisition products continue to deliver increased measurement capabilities to our customers, led by our USB and C Series devices. Our CompactDAQ products showed strong customer adoption delivering revenue growth of 20%, year-over-year, during the quarter.

One customer success comes from Ronsberg, a global leader in designing and manufacturing electrostatic finishing equipment. In order to test their next generation finishing product, they needed to decrease test labor, while ensuring product quality. Using NI CompactDAQ and LabVIEW, they were able to combine multiple measurements into a single solution, increasing throughput six times that over their previous Data Acquisition approach. Sales of our NI RIO hardware products have reached a first-quarter record, led by CompactRIO, as NI continues to invest in this highly differentiated platform.

Unit growth of RIO products grew by greater than 20% during the quarter. One customer taking advantage of our embedded technologies is Diverse Energy Limited, who developed an off-grid base station to deliver mobile phone coverage in rural areas of Africa. Using LabVIEW and CompactRIO, Diverse Energy was able to reduce the amount of custom hardware needed, reuse LabVIEW code for their next-generation system, and work with smaller design teams to ultimately lower costs and accelerate their time to market. NI's culture of innovation is a result of the inspiration we get every day from the founders of the Company.

This quarter we were extremely proud when our CEO, Doctor T, and cofounder and technology fellow, Jeff Kodosky, were recognized with the Lifetime Achievement Award by UBM Electronics, the owner of EE Times and EDN magazine. The award recognizes these two leaders, whose efforts have had a significant impact on electronics technology advancements for more than 30 years. Since 1976, under the leadership of Doctor T, NI has grown to a multinational organization with more than 6300 employees, and has seen 33 years of growth in our 35 year history. During that same period, Kodosky, who is known as the father of LabVIEW, has earned 68 LabVIEW-related technology patents and garnered hundreds of thousands of loyal LabVIEW users.

To close, we achieved record revenue for our first quarter in the midst of a weakened economy. And through our world-class R&D and field sales organizations, we continue to deliver innovative products to customers, to help them solve a large diversity of applications. We believe our core platforms of LabVIEW, Data Acquisition, CompactRIO, and PXI, will continue to deliver increased value to our customers in test, measurement and industrial embedded applications.

With that, I'll turn it over to Doctor T.

Thank you, Pete. In the midst of a challenging economy, we delivered record revenue for our first quarter, which I believe validates the strength of our business model and our long-term stretch -- strategy. As we drive toward our goal of $2 billion in revenue by 2016, the key elements that will help us achieve this goal will be our growth in large orders and the value we deliver to our customers through our strategic platforms of LabVIEW, Data Acquisition, CompactRIO and PXI. NI offers differentiation to our customers through an integrated platform approach which combines highly intuitive software with modular hardware, and I'm optimistic this will continue to drive future growth as engineers reap the benefits of user-defined flexibility.

In automated test, our belief is that we are transitioning away from the era of rack and stack instruments to the next era of software defined instrumentation. Commercial technology has developed to a point where modular instrumentation is a very credible alternative to traditional instruments. Traditional instruments providers are now helping in the transition of the industry to modular software design instruments. In contrast with traditional instrumentation, a modular approach with PXI has proven to be the most flexible platform available, with over 1500 products from 70 vendors. We believe that really opens up the opportunity to significantly gain market share in the 85 percent of the tested measurement industry that is still served by the traditional instrument approach. But the modular hardware alone does not provide an integrated platform, which is why LabVIEW is so important in making our customer successful through software designed modular instrumentation. For over 25 years, we've been investing in LabVIEW, which allows our customers to increase their productivity over text-based languages when building test systems.

As Moore's law continues to hold true, we believe LabVIEW can take advantage of evolving processing capabilities, such as multicore processors and FPGAs, delivering increased performance to our customers. That's why companies like ST-Ericsson have seen a 10X improvement over previous box solutions, when performing semiconductive characterization using the latest RF standards. Our embedded customers are designing next generation control and monitoring systems in rapidly innovating industries such as energy, industrial control, life sciences, and transportation.

We believe that embedded design teams are getting smaller, while embedded systems are becoming more complex. To achieve their design goals, embedded design teams need to leverage an integrated hardware and software platform to quickly implement and realize new ideas. LabVIEW and CompactRIO provide a complete platform for designing prototyping and deploying embedded control and monitoring systems. For the first time, these technologies make it possible to create a system that can have both advanced measurements and advanced control in one platform.

Our innovation strategy is centered around finding the best and brightest R&D talent around the world. Our products serve a very broad range of customers from science, technology, engineering and math students in high schools, colleges, and technical universities, to some of the world's most sophisticated and complicated science projects, such as the large -- CERN Large Hadronn Collider. We worked closely with colleagues and technical universities, worldwide to help educate the next generation of engineers and scientists, some of which we expect to become the next generations of leaders within NI. NI is also helping to shape the future generation of engineers and scientists through our partnership with FIRST, a nonprofit organization that inspires elementary to high school students to take interest in science and engineering.

This year, FIRST programs are projected to reach nearly 300,000 young people through robotics competitions and Lego leagues. This week in Missouri, at the St. Louis Rams football stadium, thousands of high school students are using LabVIEW and CompactRIO, to compete in the FIRST robotics championship. National Instruments is proud to support the development of future engineers and scientists around the world.

Finally, I want to mention our annual investor conference coming up August 7 in Austin. The investor conference is held in conjunction with our NI Week User Conference, which will showcase tremendous innovation from our customers as well as demonstrate the latest revolutionary technology from NI. The investor conference provides investors with great access to over 3000 of our customers and key partners, so they can talk directly to them about the use of NI technology.

In closing, I'm inspired by the bold initiatives of our customers and future engineers who are solving some of the world's most difficult problems with our LabVIEW, Data Acquisition, CompactRIO, and PXI products. I am optimistic that our platform-based approach, which combines highly productive software with modular hardware, will continue to drive growth and allow customers to future proof their investments, through user-defined flexibility.

We will now take your questions.

Today's question-and-answer session will be conducted electronically. ( Operator Instructions). We will proceed in the order that you signal us, and we will take as many questions as time permits. As a courtesy, please limit questions to one, with a one-follow question. (Operator Instructions) Our first question comes from Zach Larkin with Stephens.

Hey, good afternoon, gentlemen. Congratulations on the quarter. Thanks for taking my call.

Thank you, Zack. How are you doing today?

I'm doing all right. Hey, first question, I wondered if you could maybe give us a little more color on what you're seeing from a geographic basis, and given the overall macro uncertainties, were you surprised at all with the strength that you saw in Europe and Asia? And as you take continued macro concerns, are you expecting any changes in what drives the growth, as we move into 2Q?

Sure. It's a good question, Zach. I mean, when we look at the distribution of revenue growth by region, it's fairly evenly spread. We're up 7% in Europe, 10% in the Americas, 13% in Asia. From the execution of our teams worldwide, I think across the world, especially in Europe, where we've seen very difficult economic data out the last six months -- and also in regions in Asia like China, where we've seen the PMI be below 50 now for six or seven months -- we're very proud of the execution of our sales teams in that circumstance to continue to drive strong growth for the Company, overall.

Looking forward, the most recent data is not particularly optimistic. The Flash PMIs for China are below 50, again, and in Europe we're seeing the Flash PMI drop quite a bit of in the month of April. The new order element is particularly concerning. So as we said in guidance, we're cautious about the macroeconomy.

At the same time, we see a tremendous opportunity for NI to continue to disrupt this industry. We see significant opportunity for both our PXI and cRIO products and platforms. And we're very excited about the new products we have coming at NIWeek. So as we look forward, we see opportunity for NI to continue to grow despite these tough economic times.

Thanks. And then, maybe on the follow-up -- I wondered if, on the large orders, obviously very strong growth in that segment. How much of the growth in large orders was driven by existing customers making more large orders within the quarter, versus new customers moving up the value chain and falling, finally, into the larger order category?

Certainly the majority of that revenue growth is coming from existing customers who are continuing to deploy more systems and as they have success with our technology they find new application areas. But we are also constantly bringing new customers into the fold. As we expand our capability, in particular, we 're now able to solve problems we weren't able to solve before. And that gives us a tremendous opportunity to transition our existing GPIB or instrument control customers onto the PXI platform. Certainly, the endorsement of PXI by some of the traditional instrument players in recent times really encourages more and more customers to consider looking at PXI, and once they make the decision to look at PXI, NI is inevitably where they're going to seek -- look to to seek for their solutions.

Pete, would you want to comment anything on that?

I think you said it. I think we are having a high leverage going after existing customers who we've been serving for years. The opportunity to penetrate further into their business, into their test operations and transition from rack and stack into PXI, that's where our opportunity and that's where we're seeing results.

We'll take our next question from Anthony Luscri with JPMorgan.

Hi, guys, thanks for taking the question.

Hey, Anthony, how are you today?

Great. How about yourself?

Good. Good.

Given your comment in the prepared remarks regarding moderating your expense growth in the second half, how should we view the timing of the productivity gains from the 2011 investment plan, and how do you view the need for another burst of hiring in, say, the 2013 timeframe? Let's assuming the world economic environment stays about the same between now and then.

So, I guess, I mean, just the first part of your question first. Our general rule of thumb is that investments we make in sales, particularly in field sales, have roughly about an 18-month time period before they start to pay off. And, obviously, a significant chunk of that hiring happened in the Q2, Q3 timeframe of last year There's still some time to go on that.

From and R&D point of view, we really expect that investment to take several years to pay off dividends through product introduction and then ramp-up in terms of meaningful revenue. So we tend to think in terms of the R&D return as a three- to five-year timeframe. And obviously, we have a considerable distance to go on the return for that particular investment.

But from a profitability point of view, and a management of expenses point of view, you know, last year we saw very significant sequential expense growth between Q1 into Q2 and into Q3, as we made a significant ramp-up in hiring. And then that started to moderate in Q4. So, as we look through this year, we'll see a little bit of the reverse. We'll see the rate of year-over-year growth in operating expenses decline as we go from Q1 to Q2 to Q3. That certainly will be a significant help to our -- to our relative profitability as we get into the second half of the year.

Okay. Thank you. And then as a follow-up, can you give us a little more detail or color around the large application sale that you mention? What market does that address? And maybe you could give us some metrics around comparative cost of ownership or cost advantage you're providing there. And then, I guess, finally the expected revenue timing of that order will roll out. Thanks.

Sure, Anthony, I'll share with you what I can. Obviously most of our large customers do business with us under [NDA]. So I can't, I'm afraid, tell you anything more about the application than we put in the press release.

The basic transition here is -- or the basic business case is for us to transition what would've been a traditional instrument sale. This customer seized the opportunity to leverage LabVIEW and our PXI modules and instruments to dramatically improve their economics of tests. That's, I think, a tremendous success for the whole company. As we look in terms of revenue recognition going forward, this is a significant order. We're working through the production delivery schedule, as we speak. It will be over the course of the next several quarters. Our expectation for delivery in Q2 is built into our Q2 guidance.

(Operator Instructions) We'll take our next question from Richard Eastman with Robert W. Baird.

Yes. Good afternoon. Could you just follow -- I just wanted to follow up on the large order. And maybe Dr. T or Pete, I'm just curious as to what does the sales cycle look like on that? How long have you been, you know, trying to develop this opportunity, and if this $17 million order -- was that -- I think the way it reads in the press release, it was received year-to-date. Does that essentially mean that $17 million of orders came in in the first-quarter? Sorry, lot of questions there.

Yes, Rick, this is Pete. So let me talk about the sales cycle. Then I'll pass all the revenue recognition over to Alex.

But regarding sales cycles, it's no doubt that an order of this size is a lot longer sales cycle than going in there and demoing LabVIEW and DAQ to a smaller application. So, we -- in this end of our business, the sales cycles are longer. They can be up to a year. And by the time we work together with our customers, to prove the proof of concept, and generate the benefits that we are committing to, that's really where we do get the return of this increase investment in our field. So, yes the sales cycles are longer in this range. We're investing in field sales to accommodate that. You can see the result, as our average order's continuing to increase and we set records on order size.

Just a -- you know, a short answer to the second part, Rick, is that the majority of this order has actually been booked here in the month of April. We did see a chunk of it booked in Q1, and that was a definite contributor to the increase in backlog at the end of the first quarter.

And then just -- maybe, since I didn't put a period in behind any of three questions, I'll ask my follow-up. Alex, what was the mix, or the percentage of sales in the first quarter on the traditional instrument side?

The instrument control side of the business was actually had a pretty tough quarter. It was down over 20% year-over-year in Q1. We had some good-sized orders in Q1 last year, so that skews it a little bit.

But it reflects the weakness that, I think, has been seen across some of the traditional instrument players in the first quarter. As a percentage of revenue, I think it's down to somewhere around about 5%. 5% or 6%.

We'll take our next question from Mark Douglass with Longbow Research.

Good afternoon, gentlemen.

Hey, Mark, how are you?

Good. How are you?

Beautiful day in Austin, so we're enjoying the spring.

Good. It's ugly here in Cleveland. Wish I could be there. Can you talk a little bit about the RF and wireless business? How is your penetration into that market and then kind of a follow-up to that -- the addition of AWR. How important is that to the future -- to your future success in [NRF]?

Sure. If you look at the whole of test measurement -- RF and communication is a big part of the marketplace. As a vendor in that space, we view it as very important, that we invest for that area, as well. That's something we've been doing. We have expanded that investment over the last five years. It is an area we've seen very good growth in.

The acquisition of Phase Matrix and AWR give us the kind of technology we need to be a leader in this space. We may have mentioned, before that, for example, the front end of the [LaCroia] (inaudible) is actually designed and manufactured by PMI -- one of the acquisitions.

Some of our competitors in the test and measurement space use the AWR software to design their instruments. All these things are things we see as giving us opportunities to continue to grow and build our presence in the RF and communications space.

Will you be at the very high end oscilloscopes too? Given the -- at what point?

In this timeframe, we certainly have good technology to continue expanding in there. However, we are focused first on the ones that best continue to fill out the platforms in PXI and move us upscale with time.

( Operator Instructions) Patrick Newton with Stifel Nicholas.

Yes, good afternoon, gentlemen. My first question for Alex, if we look at the revenue growth and the difficult end market gross margin that continues to be maintained and has been maintained for a significant amount of time over your long-term targets -- and then a commentary talking about a deceleration in OpEx growth rates, is it reasonable to think that in the back half of 2012, and into 2013, that your 18% operating margin target is not only conservative, but potentially could be exceeded?

Well, obviously, you know, Patrick, we're just giving guidance out into the second quarter, so I don't want to comment too specifically on numbers beyond that time frame. We do have concerns about the broader, you know, industrial economy and how it plays out later in the year. So, I would just echo some comments you've made there that we do anticipate a deceleration of expense growth as we absorb and lap the expense increases we made into last year. That creates an environment that gives us a better opportunity to be able to improve our operating leverage.

So, we certainly are looking towards our goal of 18% operating margin on a non-GAAP basis. That continues to be a serious target for us as we look at the longer term. In the shorter term, while we have a good fix on our spending plan, we will, unfortunately, on the revenue side, the broader economy will continue to have some impact on that.

That's why we 're a little hesitant to give guidance out beyond the end of June.

All right. That's helpful. I guess for either Doctor T. or for Pete, a bigger picture question on the industrial embedded market. I was wondering if you could talk a little bit about progress that you are continuing to make in that market.

If you could discuss some of the applications or end markets where you're gaining the most traction. If we look at your goal of growing revenue at a 20% clip, how important is this embedded market to drive meeting that goal?

Fortunately, in this space, we are able to use much of the same technology that we have been using in test and measurement. Our LabVIEW plays a key role. As we said in the call, we now can have very advanced measurements in the same platform for very advanced control. We've seen good success in big physics, for example, where that technology is really used well.

We also have seen success in the area of the energy. I think in the previous calls we've talked about some of these applications in the oil and gas industry, in monitoring of power and the like, energy savings. So these are all areas that we see our customers making investments. We see opportunity to continue to expand our role in that space.

It appears there are no further questions at this time. Mr. Davern, I'd like to turn the conference back to for any additional or closing remarks.

Thank you very much for joining us today. We hope to see you at our investor conference in Austin on the 7th of August. Thank you very much.

That concludes today's conference. Thank you for your participation.