National Instruments Corp (NATI) 2014 Q2 法說會逐字稿

Good day everyone, and welcome to the National Instruments' third 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 & Co-Founder, and Pete Zogas, Senior Vice President of Sales & Marketing. For openings remarks I would like to turn the call over to Mr. David Hugley, Vice President, General Counsel, and Secretary. Please go ahead, sir.

Good afternoon. During the course of this conference call, we shall make forward-looking statements including our guidance for second quarter revenue, gross margin, and earnings per share. 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 on February 20, 2014, and our Form 10-Q filed on May 1st, 2014. These documents contain and identify important factors that could cause our actual result 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.

Thank you David. Good afternoon and thank you for joining us. Our key points for Q2 are record quarterly revenue, strong order growth for our CompactRIO and PXI products, and significantly improved operating margin. We are pleased to see a new quarterly records for our orders and revenue in Q2, and we have remained disciplined in our expense management. Given that our leadership position and the improvements in the industrial economy in Q2, we are guiding to continued year-over-year improvement in our operating performance in Q3.

I am optimistic about our long-term position in the industry. The differentiation we deliver to our customers through graphical system design positions, our customers will to solve their traditional applications, as well as exciting new ones in areas such the Internet of things. In our call today Alex Davern, our Chief Operating Officer will review our financial results, Eric Starkloff, our Executive Vice President of Global 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. Today we reported revenue of $313 million for Q2, a 6% year-over-year increase and a new all-time quarterly revenue record. Orders also represented a new quarterly record, and deferred revenue increased by $5 million during the quarter. For Q2 net income was $25 million with fully diluted earnings per share of $0.19 and non-GAAP income for Q2 was $32 million, with non-GAAP fully diluted earnings per share of $0.25 at the mid-point of our April guidance. The reconciliation for GAAP and non-GAAP results Is included in our earnings press release. Non-GAAP gross margin in Q2 was 74.8%, up 210 basis points from Q2 last year. Total non-GAAP operating expenses were $192 million or 3.6% year-over-year. For Q2 our non-GAAP operating margin was 13.5%, up 330 basis points from Q2 last year. Non-GAAP operating income of $42 million was up 40% year-over-year, and for the first half we met our goal of driving significant operating leverage delivering a 260 basis point year-over-year increase in our non-GAAP operating margin.

Now taking a look at the order trends. For Q2 the value of our total orders was up 13% year-over-year, our best quarterly growth rate in two years. The main difference in the year-over-year rate of revenue growth compared to order growth is that in Q2 of last year our backlog decreased by approximately $13 million, while in Q2 this year it increased by $5 million. Our average order size increased by 10% year-over-year to a new quarterly record of $5,420. Included in our total orders is $27 million of orders received from our largest customer in Q2 this year, compared to $13 million in Q2 last year. We have continued to receive orders from this customer in Q3, and for the year through July 29th we have received a total of $49 million in orders from this customer, as compared to $33 million at this time last year.

Revenue from our largest customer was $20 million in Q2 and excluding this customer our orders from all other customers were up 8% year-over-year. Excluding our largest customer, we saw growth across all of order ranges, with orders less than $20,000 growing 4% year-over-year. These orders represent the breadth of markets and applications we serve, and account for approximately half of our total revenue. We believe this order volume and the broad-based reach are key to our strength and stability, and also provide the foundation for future system sets, orders with a value of between $20,000 and $100,000 grew by 6% year-over-year, while orders over $100,000 also saw strong year-over-year growth at 22%. We believe that this strength demonstrates that we are growing our share of wallet by providing more and more valuable capability to our customers.

Now I would like to make some forward-looking statements. For the Global PMI declined slightly in Q2 the improvement in June gives us increased confidence in the continued recovery of the industrial economy as we move through 2014. This combined with our commitment to deliver on the leverage plan we outlined in our Investor conference last year, leads to expect an improved year-over-year operating performance in Q3. As a result we are guiding for revenue in Q3 to be in the range of $298 million to $326 million. At the mid-point this represents 8% year-over-year growth.

Gross margins are expected to be up sequentially in Q3, and additionally we will be recognizing a $14 million, or $0.11 per share tax benefit in Q3, related to the completion of an audit of our US tax return by the IRS for 2010 and 2011. This tax benefit is factored into both our GAAP and non-GAAP guidance for Q3, and we do not expect similar benefits in Q4. As a result we currently expect GAAP fully diluted earnings per share will be in the range of $0.24 to $0.36 for Q3, with non-GAAP fully diluted earnings per share expected to be in the range of $0.30 to $0.42. As these are forward-looking statements I must caution you that actual revenues gross margins and earning per share could be negatively affected by numerous factors, such as any future weakness in the global economy, fluctuations in revenue from our largest customer, expense overruns, manufacturing inefficiencies, foreign exchange fluctuations, and effective tax rates.

In summary, we are pleased with the improved revenue performance of the Company with the progress we have made in improving our operating margin. Looking forward, we are working hard to take advantage of the improving conditions in the industrial economy, and we remain committed to our operating leverage targets. In closing, I would like to mention that we will be hosting our Annual Investor Conference next Tuesday during NIWeek. During my presentation, I will be laying out our leverage plan for 2015, and discussing our ongoing plan for returning cash to shareholders. We look forward to seeing you there. With that, I will turn it over to Eric Starkloff, Executive Vice President, Global Sales and Marketing.

Thank you Alex. Good afternoon. I was pleased to see continued growth in orders this quarter posting a new quarterly record. We believe this is a testament to the effectiveness of our organization in addition to some improvement in the industrial economy. Our growth in our orders was seen across many industries, including automotive, energy, semiconductor, and consumer electronics.

On a regional basis we saw order growth of 13% in the Americas, 14% in Europe, 17% in east Asia, while our emerging markets region struggled in Q2, and orders were down 2% year-over-year. Europe remained strong across-the-board for us, and we saw strengthening in the Americas due to strength in energy and some recovery in government and defense spending. East Asia was led by very strong growth in China, while our emerging markets region was adversely affected by geopolitical challenges in Russia and India. I would like to personally take this opportunity to thank our sales and marketing teams around the world for their strong execution this quarter.

Now turning to our products. In software our sales growth was bolstered by continuing strong sales of new enterprise license agreements. This is a strong indication of the value our customers see in our software offering. These site or company-wide licenses make LabVIEW and other NI software available across an account. Making our software available to these engineers and scientists drives increased software revenue, adoption and proficiency with our tools. Over the last decade we have had an intense focus on working with academic institutions to provide students with tools that enable hands-on learning.

For example, our myRIO product combines a real-time processor and FPGA into a small student-friendly package for teaching controlled robotics, mechatronics, and embedded concepts with LabVIEW. In just its first year, myRIO has already been sold to over 600 universities, and we estimate that over 20,000 students worldwide are already using interbuilt systems at their universities. For example, ETH Zurich is using myRIO to teach introduction to mechatronics, and for their senior design courses, and Leeds University is using it to teach their freshman and sophomore students introductory engineering concepts by building small autonomous vehicles.

We are proud to support the development of future engineers and scientists around the world, and our focus on engineering education continues to be an important business strategy. As it prepares these students with the technology platform they will need to solve future applications, in areas such as the Internet of things. Our data acquisition products, which represent our broadest footprint in terms of total units, continued to improve in performance with positive growth year-over-year driven in part by improvements in the PC industry. This was led by strong sales of CompactDAQ products across a broad range of application, from remote monitoring to in-vehicle data acquisition. This quarter we also released an virtual Bench, a new product, which combines the most essential instruments into a single device that offers integration with both PCs and iPads.

The Virtual Bench all-in-one instrument is simple, convenient, and opens up new possibilities for how our customers interact with instrumentation. This product was released in June and we are already seeing strong interest, and I believe that this will help us bring new customers onto our platform. For those attending our investor conference next week, we will be showing you a hands-on demo of this exciting new product.

Our PXI product saw their strongest order growth in two years, and reached an all-time record in quarterly revenue. We believe this is a positive indication of our ability to solidify our leadership position in PXI, building on more than 17 years of investment in the strongest portfolio of any vendor. As more engineers transition away from rack and sack instruments, to a software defined modular approach using PXI, customers and vendors will continue to recognize the value that this platform brings to test applications. One example of a recent success PXI adoption is at Subaru, where they are using PXI and our FlexRIO product to develop a new verification system for the engine control unit in Subaru's first production hybrid vehicle. Hybrid and electric vehicles are one important example where software is becoming more prevalent in automobiles, increasing the requirements to verify the software during its development, and where our software based platform is well-suited to meet this demand. RF continues to be an important driver of the success of the PXI platform. Our RF business serves a very broad set of applications, including software defined radio, wireless research, and wireless production tests.

One example in the wireless research base that we will slow more of next week is our collaboration with Nokia Networks, to advance research related to fifth generation, or 5G wireless technology. By using NI's integrated software and hardware baseband platform to emulate a real 5G network, Nokia has been able to expedite its research and rapidly demonstrate the viability of high frequency millimeter waves, with a potential option for 5G radio access technology. Our CompactRIO product saw strong order growth this quarter with strength across a range of applications. One example that will showcase at NIWeek is the implementation of Airbus' factory of the future concept. Airbus has built intelligent network tools to increase the productivity of aircraft production, leveraging NI's compactRIO and new system on module products. Airbus estimates that on this project they have achieved a 10X reduction in costs based on productivity gains using NI's platform versus alternative approaches. This is a tangible example of how our customers are taking advantage of the technology and trends of the industrial Internet of things, where embedded intelligence, networking, and IO are changing the way our customers do their jobs.

At our Investor Conference next week I will be taking a deeper dive into the industrial Internet of things, which is a significant opportunity for our embedded systems software and hardware. I will also discuss our commitment to growth by serving more customer needs through the expansion of our platform capability. And at NIWeek, which will bring together several thousand of our customers and partners, we will be announcing a numbers of important new products, representing significant advances, and showcasing customer applications in the areas of RF, embedded monitoring and control, academic teaching and research, and semiconductor tests. We hope to see all of you there to experience it firsthand.

In summary, I am pleased with our order growth in Q2, and with achieving an all-time record in revenue. I believe our strong opportunity pipeline positions us well to benefit from improved conditions in the global economy. The differentiation we offer our customers empowers them to simplify problems, and adapt to rapidly changing demands, and it drives NI's long term sustainable growth. With that, I will turn it back over to Dr. T for some closing statements.

Thank you Eric. I'm looking forward to NIWeek which will showcase many of the technologies and new products that our R&D team has developed. For many years we have been serving applications now considered part of the growing trend of the Internet, and industrial Internet of things. We understand these applications well, and see more opportunity in growth of these systems. At NIweek, you will hear about our latest product capabilities and applications from our customers and partners.

In my opening key note I will highlight elements that create long-term differentiations in our platform that enable our customers to solve some of the world's toughest engineering challenges. You will also hear more about our impact with the current trend of big analog data, where customers acquire large amounts of physical data to drive scientific, engineering and business decisions. We have been involved in this trend from the early stages, and are enabling scientists and engineers to leverage those technologies to acquire and analyze vast amounts of analog data, such as vibration, pressure, sound and radio signals.

Our measurement hardware and software defined approach allow customers to define how the hardware processes and reduces data locally at the source before sending it to the network, providing greater flexibility and reducing system cost. In closing I want to thank our employees for their concerted efforts to deliver innovative new products, value and improved productivity to our customers. I am confident the expansion of our platform and these operational improvements will help drive our operating margins back to target, while we continue to innovate and drive long-term sustainable growth. Thank you. We will now take your questions.

(Operator Instructions). Our first question comes from Patrick Newton with Stifel. Your line is open.

Yes. Thank you. Good afternoon, Dr. T, Alex, and Eric. I guess one housekeeping question I always ask is your number of employees exiting the quarter and your average order size?

Thanks so much. The number of employees exiting the quarter is 7,121. And the average order size is 5,420. New all-time record,up 10% year-over-year.

Perfect. And I guess if I think about your guidance, several questions. One is on the gross margin. Can you walk us through what is driving the sequential increase, given that I would assume that your largest customer is going it be taking significant deliveries in the quarter. Two, how should we think about OpEx on an absolute basis in September, and then three, if this tax event is one-time in nature, why are you not backing out of your non-GAAP guidance?

Let me take, I don't remember how many questions that was exactly. Let me try to take them one at a time, we expect to see some improvement in gross margin as we go into Q3. We will continue to drive for operational execution and manage our own cost base as we move forward. So we anticipate that will allow us to see some benefit on the gross margin side as we move into Q3, and generally we also see as we move into Q4 if we see the normal seasonal pattern when it comes to revenue growth, we would expect to see that repeat with an improvement in gross margin in the fourth quarter. I think you can figure out the numbers through guidance. we're guiding to a mid-point that's $1 million in revenue below Q2. The EPS is basically the same.

Gross margin will be up slightly. I expect OpEx to be up slightly in absolute terms, that's kind of the generality of where we expect this to fall through. As I said on the call on the tax issue, we don't expect since we have two years of and audit release happening in Q3, we don't expect any similar actions in Q4. The reason we don't treat it as a non-GAAP item is that each year generally we see either the expiration of the statute of limitations on a tax year, or we will see a closeout of an IRS audit, so this will happen periodically, and so it will be an item that happens every year, early couple of years, but we do not expect anything in the fourth quarter.

Thank you.

We are happier to see it be a benefit and not go the other way.

Thank you. Our next question comes from Paul Knight with Janney Capital markets. Your line is now open.

Hey Paul.

Hey Alex. How are you?

Good.

Your Malaysian operation is up and running now. Where are we with that? Is that adding to your backlog, is it changing your tax rate? Could you give us some color there?

Sure. The Malaysian operation is up and running and running well at this point. We do have from a physical footprint capacity sufficient probably to get us close to $3 billion in revenue. So we will be leveraging that as we move forward for quite a few years to come, and that will be something that will help us drive an improvement in our gross margin we hope as we move forward. It has really no impact on backlog at all. That's more managing the business. From a tax rate substantially the tax rate in Malaysia that we have, and tax rate that we have in Hungary are effectively the same, so it doesn't drive any significant shift in the tax rate over time.

And then your stand out region in bookings was east Asia. Can you talk to that as well?

Sure. When we look at bookings overall, we feel really, really good actually about the breadth. 13% bookings growth in the Americas, 14% bookings growth in Europe, 17% in east Asia, that's a solid result. We're pleased to see that. Even in the emerging countries as Eric referred to earlier on, we had some challenges related to the geopolitical situations in both India and Russia, but in local currency terms our orders were actually up high single digits. And the emerging countries did get more impacted by the change in some of those more volatile currencies during the course, over the last couple of quarters. So I would call it fairly broad order growth around the world, certainly delighted to see east Asia leading the pack. But in general, even though it's a pretty solid result from order growth across-the-board.

Okay. Thank you.

Thank you, Paul.

Thank you. Our next question comes from Richard Eastman with Robert W. Baird. Your line is open.

Yes. Good afternoon. Perhaps Eric could you maybe provide us with maybe just a little bit of color on the split between how the industrial embedded products grow, first to test and measurement, and it sounds like from your commentary you're talking about CompactRIO, PXI, it sounds like there was significant growth in the embedded, industrial embedded, general bucket of products versus the test. Is that a fair comment?

Yes. Thanks for the correction Rick. It was a good quarter for both. PXI first of all we have talked about this before, but both of those platforms, CompactRIO actually served both of those market opportunities. We do generally associate Paypal with more with the test side of the business. It was a very successful quarter for PXI. I mentioned that it was from a growth rate point of view it was about growth rate in the last two years, and it was an all-time record in revenue as well for PXI. So that part of the business was quite strong in the quarter, and then in the embedded side which often you associate a little bit more with CompactRIO it was a very successful time for CompactRIO as well. So we saw broad success in applications across energy and transportation and in [Nil Arrow] as well, and so it was a very good quarter for CompactRIO. I will be I alluded to it, but during the Investor Conference at NIWeek, I will be kind of taking a deeper dive into those market opportunities, where we have seen success, where we see opportunity moving forward, and we'll also have product releases of course in both areas that we will be announcing at NIWeek as well.

And is there shall I mean, maybe differentiating a little bit between maybe budgets more on the production side or the industrial embedded side. Are they better than maybe what we tend to see on the test and measurement side, which is more steady? But are we seeing a bounce in kind of PMI driven spend on the embedded industrial side, or is that not all that apparent?

Maybe Rick I will add some color here. We definitely, when we look at the broader based macro numbers that we obviously talk about one being PMI. Things likes capacity utilization and industrial production growth. We're certainly seeing more encouraging numbers in that side.

Yes.

Our industrial embedded business tends to be and area where we deliver an awful lot of value to our customers, so it's a very good margin business for us, and certainly there are positive trends and the economic indicators are useful, and I think support the strength in that business segment.

Okay. And can I just ask a question on the large customer side, it would appear as though our backlog is maybe $22 million there, heading into I guess maybe August, but do we expect to bill that all kind of pro-rata during Q3 and Q4? I'm just trying to think of it as revenue recognition for the full year this large customer.

I would expect that would generally be billed and turned into revenue in the second half.

Okay. The $22 million. Okay. And then again, I'm kind of looking at the large order growth, over the $100,000 number, and these are kind of rough numbers, but if I take out the orders from this large customer maybe in the quarter, it looks like the large order growth maybe was more like low single digits?

So I can play it back to you, Rick. We covered it in the call.

Yes.

Okay. So excluding the largest customer orders over $100,000.

Yes.

24%.

Excluding it?

Correct. They were up 43% including it.

Okay.

I may have spoken too fast for you to catch it. When we look at the trends in both of those, I would say first off, to see our order growth from our largest customer up 50% year-over-year, year-to-date I think certainly shows the success of our approach of penetrating into that customer, and driving value for that customer over time. So we're delighted to see the continued success of our efforts in that area. When we look at large order growth above $100,000 excluding that customer, I think that also reflects what we would normally see, and expect to see as a trend perhaps lagging the PMI over some period of time that as we see the strength of the PMI for a couple of quarters, we start to see the confidence and demand from our customers in that space start to improve over time, so what we saw here in Q2 and obviously what leads us to give guidance for Q3, indicates that we're continuing to see that correlation with the PMI that we would expect in this demand.

Okay. Alright. So you're comfortable that, again, the products that were developed the VSA, and some of the other wireless products, I mean are they gaining some traction with other customers? I mean can we at some point here as we get into calendar 2015, can we start talking about a second large customer, or a third, or do we have pilots in situations like that, that could deliver that kind of revenue?

Well, we've had this conversation on the call a couple times with multiple different people. I would first off, probably categorize the customer we are talking about is kind of unique in terms of its scale in the industry. Many people have often tried to compare a second or third, and there's a dramatic difference in the demand, so that's our belief. I don't anticipate that we will be calling out other customers in the same vein in the future. Just the scale of opportunity is much different. I would also use it as an opportunity to really reinforce the strength of the broad base of the Company. Where we get our strength is that tremendous diversity, and that gives us a lot of stability, gives us a very good market position, good gross margins, the opportunity to move upstream in a vast number of areas.

So we're definitely gaining traction and gaining market share. I think there's absolutely no doubt in my mind about that. When I look at our performance not only this quarter but over the last number of years, its kind of amazing the rate at which we have gained marked share actually, but our core business is going to remain very broad-based with possibly one exception. And just to emphasize since you brought up the VSP I think you were referring to a product released two years ago now.

It's been a very successful product for us in a broad-based way for wireless tests in thousands of customers, and I do want to emphasize that the opportunity we see in RF and in wireless tests, even specifically is a very broad one. You probably noticed that every device you use is getting a wireless connection and so there are thousands of customers around the world, and not only do we have products that can address that, but having a channel that can sell and support those products around the world where all of these customers are, I think is a very important part of our strategy as well.

So we will, Eric will be talking, his team will be talking about some new products in this domain next week, in the key notes at NIWeek, but during the Investor Conference last year we gave on update on revenue from new products and new hardware products specifically released over the last couple of years, and Q2 was an all-time record for orders booked from new hardware products released within the last two years. So we're definitely seeing the impact in value of our investment in R&D, allowing us to drive significant success with our new products and gain market share directly as a result.

Thank you. Our next question comes from Bryan Kipp with Janney Capital Markets. Your line is now open.

Hi Alex. Just a follow-up for Paul. Just in context I think your strong bookings you broad-based especially on the top end with your large customers in the quarter. In looking out on the flatter half of the year, what kind of order booking conversions do you expect in the back half? Do you think most of that will convert, or do you think some will trail into 2015?

We have had some increase in backlog this year. It has been about, $13 million or $14 million in the first half. A couple of percent of revenue. We will see how it plays out the in second half. The vast majority of what's in the backlog at the end of June will ship and turn into revenue in H2, we will see how backlog ends at the end of the year depending on customer demand. I wouldn't imagine it's going to be significantly different in dollar terms than where we are at the end of June.

Okay I mean I'm thinking in context, too because I think still you have that $16 million in orders I think you said $7 million from your largest customer in 1Q, $20 million in 2Q, and then orders through year-to-date are $49 million, so you have got some support there on conversion. I am just thinking in context to historicals here, it seems like a lot is already baked in, and you have some strong visibility here. Is that looking at it backtracking historically, is this a stronger position you guys have been, or is it typically high visibility as you guys kind of were alluding to here?

Well, I think as the economic metrics in general strengthen, and we look at our pipeline and our customer engagements, I would say that visibility is certainly better now than it was a year ago. I would put backlog in perspective. The $22 million differential between bookings and revenue from the largest customer as you mentioned, on a revenue in second half we expect it to be well north of $600 million. It's not a big percentage of that number. So we're still be very much a turns business, but I would say in general, visibility is quite a bit better today than it was a year ago.

Okay. Thank you.

(Operator Instructions). Our next question comes from Patrick Newton with Stifel. Your line is now open.

Yes Alex. On the headcount side. Can you talk a little bit about the headcount reduction sequentially and year-over-year. That's quite an anomaly for you as a Company, and remind us expectations of how we should exit the year, and then also if you could talk about how you have been able to reduce your R&D expenditures?

Yes. Sure. In general we're very focused as we come to this time period, Patrick, in driving operating leverage. we're seeking to try to get very much back on path in 2015 to our target of 18%, and we would like to make a lot of progress on that this year. Obviously we have in Q1 and Q2. Adding 260 basis points in operating margin in the first half is crucial. Our headcount year-over-year during June of this year to June of last year is down about 21. At the operating expense level headcount is flat and in manufacturing it is down about 21 people. So we'll be continuing to drive operating leverage as we move forward. We made significant investments in the R&D in the 2011, 2012, 2013 time frame, designed to accelerate our platform completion. We are now, certainly at NIWeek next week, you will see more and more evidence of the success of bringing those products to market.

As I said in Q2, we had an all-time record for orders booked for hardware products released within the last two years. So we're starting to see that flow of products from the pipeline. We're starting to see the uptake from customers, and the bookings related to that new product investment, and we feel like we're in a position as we move from 2014 into 2015 to continue to leverage that investment in this timeframe. I will talk a lot more about the 2015 leverage plan next week, so I would like to defer that until we have a chance to talk in more detail at the Investor Conference.

Alright. Just one more if I may. Eric, you commented that RF was a very broad opportunity, in the past you've had Wi-Fi vendors and application processor vendors on stage with you at NIWeek, you have talked about power amplifier strength. Can you help us understand and gauge how broad of an opportunity this is, perhaps given us some semblance of how big your RF business is as a whole, relative to the rest of your PXI portfolio?

Sure. Well, yes. Good point. As I said, it is broad. It goes all of the way from early research like the example I gave, and you will see more of next week, through an area called software defined radio, which bridges from research to areas in defense and aerospace, into the area of wireless production test. Obviously that one gets a lot of attention. The enclosure to wireless technology. We use both in the verification of those components, and also in the production test of the devices, so we see it as a growing opportunity across that breadth.

Next week I will talk more about some of the specific areas and quantify them a bit more at the Investor Conference. We will certainly see it as a long-term growth driver for us, and we just believe that more and more things that we're testing over time will have a wireless connection to them, and so it's a very important part of our growth play for test overall.

Just a reinforce Eric's sentiment, at the trade show floor at NIWeek, you will see dozens of different applications that include NIRS, in a vast array of different areas, so it's a great opportunity to see that firsthand.

And it is a little bit about our position of modular hardware and software does enable that. So it's not like we have to build a bunch of different products to address these different market opportunities. It's fundamentally the same hardware with different software personalities, and so that's how we get leverage on our investment to address these different opportunities.

Alright. Thank you for the details.

Sure.

And I am not showing any further questions at this time. I would like to turn the call back to management for closing remarks.

Thank you for joining us today. We look forward to seeing you at NIWeek next week.

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