National Instruments Corp (NATI) 2015 Q4 法說會逐字稿

Good day, everyone, and welcome to the National Instruments Corporation's fourth quarter 2015 earnings conference call. Today's call is being recorded. (Operator Instructions). With us today are Alex Davern, Chief Operating Officer and Chief Financial Officer, Dr. James Truchard, Chief Executive Officer, John Graff, Vice President of Marketing, and David Hugley, General Counsel. For opening remarks I would like to turn call over to Mr. David Hugley. Please go ahead.

Good afternoon. During the course of the conference call we shall make forward-looking statements, including statements regarding our guidance for first quarter 2016 revenue and earnings per share, the impact of currency exchange rates, and 2016 effective tax rate. 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 19, 2015 and most recently quarterly report on Form 10-K filed October 30, 2015. 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.

Thank you, David. Good afternoon and thank you for joining us. Our key points for Q4 are continued core revenue growth, record earnings for software, strong gross and operating margins, and record revenue through partners.

In Q4 we saw continued core revenue growth across most product areas and record artists for software. Despite the currency and other revenue headwinds, the strength of our business model has allowed us to recover from the currency-driven decline that we saw in Q1 2015. Operating margin has enabled us to deliver strong gross margins and growth in operating margins for the year. 2015 demonstrated that the depth of our software position and strength of our ecosystem that lets us continue to grow market share and test (inaudible) markets, being able to measure or generate almost any signal and provide control with the same platform gives us a unique position to foster the ecosystem required to address the challenges of converging technology across nearly every industry.

In our call today, Alex Davern, our Chief Operating Officer, will review our financial results. John Graff, our Vice-President of marketing, will discuss our business. And I will close with a few comments before we open up for your questions. Alex?

Good afternoon thank you for joining us today. Today we reported Q4 revenue of $334 million, up slightly from Q4 2014. Core revenue which we define as GAAP revenue excluding the impact of our largest customer and the impact of foreign currency exchange was up 4.3% year-over-year in Q4. Deferred revenue increased by $9 million in Q4, compared to $6 million in Q4 of the prior year. For the full year revenue was $1.23 billion, down 1.5% year-over-year. Core revenue for the full year was up 6% year-over-year.

Non-GAAP gross margin in Q4 was 75%. Total non-GAAP operating expenses were $190 million, up 2% year-over-year and our non-GAAP operating margin was 18.5%. For the full year our non-GAAP gross and operating margins were similar to 2014 and while our results for 2015 were below our expectations coming into the year, I'm proud of our execution. Given the revenue headwinds that developed due to currency, a weak PMI and other issues, I'm proud that we were able to essentially maintain our revenue and operating profitability in 2015.

Our non-GAAP effective tax rate Q4 was 28% up from 21% in the prior Q4. This increase in tax rate reduced our fully diluted earnings per share in Q4 by $0.03 per share. For the full year, our non-GAAP effective tax rate was 28% compared to 16% in the prior year. This increase reduced our non-GAAP fully diluted earnings per share by $0.16 per share. The primary driver of this full-year difference is the $14 million release of tax reserves that we recognized in Q3 2014 on the conclusion of an IRS audit.

For Q4 net income was $32 million, or a fully diluted earnings per share $0.25, and non-GAAP net income for Q4 was $43 million with non-GAAP fully diluted earnings per share of $0.34. Included in our result was a $2 million or $0.01 per share loss in foreign exchange due to the volatility of the US dollar during Q4 which was not anticipated in our earnings guidance. A reconciliation of our GAAP and non-GAAP results is included in our earnings press release. Included in this reconciliation this quarter is a $3 million foreign exchange translation loss related to the acquisition of Micropross in October.

Taking a look at order trends, for Q4 the value of our total orders was flat year-over-year. Included in that total is $10 million in orders received from our largest customer, compared to $8 million in Q4 of 2014. Revenue from our largest customer was $10 million in Q4 compared to $7 million in Q4 of 2014. Now, breaking down our Q4 order values excluding our largest customer, we saw a 5% year-over-year decline in our orders with a value below $20,000 in line with the weakening PMI and the declining PC market. Orders with a value between $20,000 and $100,000 increased 1% year-over-year. And orders with a value of over $100,000 grew 9% year over year.

Now turning to cash management, for the year we paid $98 million in dividends, used $75 million to repurchase 2.6 million shares of NI's common stock at an average price of $29.04 per share, and used $126 million in net cash for acquisitions. We ended the year with cash and short-term investments of $333 million at December 31.

As you know, 2016 marks the 13th year since we initiated our dividend. And today we announced that the Board of Directors approved an increase of our dividend to $0.20 per share.

Now I would like to make some forward-looking statements. Given current trends we are assuming in our guidance that the global PMI will continue to be weak in Q1, and as a result we are guiding for total revenue in Q1 to be in the range of $290 million to $320 million, up 5% year-over-year at the mid-point. We currently expect GAAP fully diluted earnings per share will be in the range of $0.09 to $0.21 for Q1 with non-GAAP fully diluted earnings per share expected to be in the range of $0.17 to $0.29. On other housekeeping items, we currently estimate that our non-GAAP effective tax rate for 2016 will be approximately 20%, with a rate of approximately 21% in the first half of the year and 19% in the second half of the year. Also given current exchange rates, the drag on our revenue from currency headwinds should reduce to a negative impact of approximately 4% year-over-year in Q1 and approximately 2% year-over-year in Q2 through Q4.

I would like to add one other note concerning your modelling of our non-GAAP earnings profile by quarter. The increase that you have seen in our average order size over the last few years has caused a greater proportion of our earnings to be recognized in the second half of the year. At a high level, for the last three years we have seen approximately 40% of our non-GAAP earnings come in the first half of the year and approximately 60% in the second half of the year. Our current expectation for 2016 is for similar distribution. These are forward-looking statements and I must caution you our actual earnings or revenue could be negatively affected by numerous factors, such as any further weakness in the global economy, fluctuations in revenue our largest customer, foreign exchange fluctuations, expense overruns, manufacturing inefficiencies, adverse effective price changes and effective tax rates. I would also like to mention that we will be at the Morgan Stanley Technology Conference on February 28 in San Francisco. With that I'll turn it over to John Graff, Vice-President of Marketing.

Thanks Alex. As we reflect in 2015, this was a year of unexpected headwinds led by the strong US dollar, low energy prices, and weakness in orders from our largest customer. That being said, we were able to gain market share, deliver 6% core revenue growth, and maintain our operating margins.

Our platforms provided a foundation for core growth and profitability across much of our portfolio. In line with our long-term strategy, we continued to focus on platform expansion by leveraging new technologies to bring differentiated solutions to the market. And I am excited by our opportunity to build on this in 2016.

Turning to product performance, in Q4 software saw record value from enterprise agreements targeted at large user accounts, as well as strong performance for individuals seats of software. With analysis, decision making and data management software designed specifically for managing big analog data, engineers and scientists can distribute intelligence from the source of the measurement, often referred to as the edge, to the enterprise level, whether that's in the cloud or on-premise. For example, Jaguar Land Rover uses NI software to manage and analyze measurement data across test vehicles, test locations, and test states. With over 500 gigabytes of test data generated per day, engineers at JLR were overwhelmed by the amount and inconsistency of their data, leading to repeat tests and inefficient use of collected data. By utilizing NI tools, JLR estimates that their data utilization went from less than 10% to 95%, and time spent analyzing and searching was reduced significantly. This enterprise-level software standardization has greatly increased the value and efficiency of the JLR engineering team, enabling them to resolve more issues early in their development, thus improving quality and leading to higher customer satisfaction with their final production vehicles.

For data acquisition products, core revenue was essentially flat. Within data acquisition, revenue was led by larger systems sales based on PXI and CompactDAQ as well as key wins in automotive and aerospace tests. These hardware-in-the-loop systems use NI software and data acquisition hardware to simulate large-scale electromechanical systems, like automotive drive trains and aircraft control systems, increasing coverage of test parameters while decreasing test time.

Sales of instrument control products, which are used to connect third party box instruments to the PC, and PC-based data acquisition products were both down. These products have historically been closely correlated to the movement in the global PMI and the worldwide PC market, which both weakened in Q4.

For PXI we saw core revenue growth and continued broad adoption of our platform in 2015, driven by having the largest PXI product portfolio in the industry, a unique and different-shaded software position for creating modular systems, focused sales and support channels that provides a significant value to our customers, and a strong network of integration partners. Our success in PXI is built on the success of hundreds of thousands of engineers and scientists proficient with NI hardware and software.

The flood of new connected devices creates new demands and expectations for power consumption, connectivity and device integration, while the development teams designing and producing these devices continue to be squeezed on time and budget. With PXI and the vector signal transceiver as the underlying technology, test systems targeting vertical applications, such as the semiconductor test system and the wireless test system, prove their different-shaded positions by enabling manufacturers to leverage the I/O breadth of PXI from the catheterization lab to the production floor.

By leveraging a single platform across the design cycle, software IP, measurement characteristics, and test data remain consistent across the design flow, reducing the translation burden between teams, resulting in faster time to market and reduced costs to test. The early success of our semiconductor test system and our wireless test system and the strong performance of the vector signal transceiver were instrumental in record revenue for all our products in 2015.

2015 also saw us further demonstrate our leading position in the prototyping and advanced research for next-generation communications technology such as 5G. Leading researchers in industry and academia are leveraging our software such as LabVIEW communications, our software-defined radio products, and our FPGA technology to advanced areas such as waveform definition, massive MIMO, multi-gigahertz bandwidth, millimetre wave, cognitive radio, spread spectrum as well as channel sounding and emulation. Achieving this position reflects the significant investments we've made over many years in our software and hardware, and positions us well as these communication technologies evolve and go mainstream.

Sales of CompactRIO and other embedded products continue to be impacted largely reduced spending in oil and gas exploration. That being said, we have a strong pipeline of new products that extend our processing capability and I/O coverage to meet the needs of smarter power generation and distribution, smart machines and other industrial I/O T applications. For example, engineers at the Central Advanced Research and Engineering Institute at Hyundai Motor Company used CompactRIO to develop future mobility technologies. This research center creates new mobility devices targeting the elderly and the disabled. These wearable exoskeleton robots with NI embedded controllers use LabVIEW and CompactRIO to acquire data from various sensors and control peripheral units, high-speed communication devices analyst actuators. By developing within the NI ecosystem of software I/O and LabVIEW FPGA, these engineers can measure, control and analyze using the same tools, meaning they can iterate on designs faster and dramatically reduce development time.

With industry trends such as the Industrial Internet of Things, and big analog data driving the proliferation of data, we believe that software-defined systems are best suited to extract value from the engineering challenges these trends present. With LabVIEW and NI software at the core, hardware platforms like PXI, CompactRIO and CompactDAQ enable our customers and partners to create flexible systems that combine measurement and control to make data-driven decisions and evolve quickly as their application requirements change.

Additionally we have been forward-investing in our software platform to help ensure that our customers have the competitive advantage that they need. You can see the results of the significant investment in recently released products such as LabVIEW communications, and InsightCM enterprise. Over the next 18 months we expect to release additional software products that address applications for our software abstraction and productivity will increase our product relevance to both new and existing users.

In summary, over the past five years our platform level investments and measurement processing and communications technology have yielded immense value for our customers and growth for NI. Since 2010 we have seen significant revenue growth from RF products, strong growth in PXI adoption, greater leverage in our differentiated FPGA technology, and strong growth in soft receipts led by enterprise level software sales. As we look to the future, our platform-based approach will provide our users with the foundation of software and harder to solve their challenges as they test, measure and control complex systems in a smarter connected world.

With that I will turn it back over to Dr. T.

Thank you, John. I want to reiterate that we have built and continue to run our company for long-term sustainable growth. Our highly differentiated products provide very strong gross margins, which in turn fuels investments to drive growth in profits to return to our shareholders. With powerful software tools and flexible modular hardware, our platform-based approach serves as a foundation for an ecosystem of growth, and we see immense opportunity for National Instruments to be on the forefront of technology as our world becomes smarter.

With major technology trends like the explosion of wireless devices, increased strain on the aging power grid, increase in renewable energy sources and connected autonomous vehicles, the need to better understand the world around us has never been greater. At the same time, our mobile devices, wearable technology, cars, homes, factories and machines are convergent, becoming connected elements in a larger cyber-physical system.

This convergence of technology has led to an explosion in the amount and types of data required to characterize these systems. The data management challenges of big analog data can at first overwhelm the opportunity present in these data sets. However, utilizing the power of a software-defined platform, these teams can focus on solving the unique challenges by using flexible tools designed specifically to measure, process and connect these sources of big analog data.

In closing, I want to thank our employees for their efforts in Q4 and throughout 2015. Despite the revenue headwinds, the strength of our business model has allowed us to deliver strong growth in operating margins for the year. Our platform-based approach built around highly differentiated software has created a large ecosystem of customers, partners and technologies that are the key drivers to long-term growth and profitability of the company. This ecosystem multiplies the productivity of the engineers and scientists we serve. I am confident that we are building a new product pipeline, channeling operational excellence to better fuel this ecosystem and drive long-term growth and profitability.

Thank you. We will now take your questions.

Thank you. (Operator Instructions). Our first question comes from the line of Ben Hearnsberger from Stephens.

Thanks for taking my question.

Hi, Ben.

This is Brandon in for Ben. Thanks for taking my question. Just real quick, on the long-term adjusted EBIT guide of 15% to 20%, just curious what kind of global PMI range you had in mind when that came out, and kind of where we could be in terms of margins if we were to dip below 50% and possibly remain there for a while?

Sure, Brandon. I mean, when we look at that kind of long-term guidance for the business model and targets as a company, obviously the framework you have to have in mind is what the average PMI is going to be over a longer period of time. So that's the setting for that range that the kind of expectation that -- when we set that range we also want to be able to execute within that target range of adjusted non-GAAP operating income through what would be a reasonable degree of variation in the cycle. So when we talked about this at the investor conference back in August, we made it clear that it would probably be difficult for us to maintain in that range if we saw a repeat of 2009, for example. But within the normal movement of a growth rate cycle we would expect to be able to stay within that target range.

Okay. Understood. Yes, that's helpful. Just a quick follow-up on the 1Q guide, how much Micropross is baked in there?

Microplots is -- it's a great -- Micropross is a great addition to the company in terms of technology, and our intent is to leverage their key market position and be able to expand that position as we move, and make them a bigger presence in the production test side. But it's a relatively small company, so it will be maybe 1% of revenue, or a little bit less, in that ballpark for Q1. So we won't be breaking it out because it's not really material to the overall revenue performance of the company.

Okay. Understood. Thanks for the color.

Thanks very much, Brandon.

Thank you. Our next question comes from the line of Patrick Newton from Stifel.

Hey, good afternoon, Dr. T, Alex, and John it thank you for taking my questions. Multiple housekeeping questions. Can I get your number of employees ex end of quarter and average order size, also expectations around the full year tax rate, and a reminder of where your current buyback allocation stands.

Okay, let me try to remember those in order. The head count ending year the 7,742, so up 71 people from the end of September and the majority of that was from acquisition. The average order size was a new all-time record for a quarter. It was $5,637, up 4% year-over-year. In terms of full year tax rate, our non-GAAP guidance for full year tax rate is 20%. We are expecting to be a little bit higher in the first half, at 21%, and lower in the second half, approximately 19%. In terms of the allocation of buyback, we have, I believe, around 1.5 million shares remaining on the existing authorization.

Okay. And there was no change to that in the most recent board meetings?

Any time we would change that, we would make that public.

Okay. Just wanted to make sure I didn't miss it. And then one thing that was impressive was the orders above $100,000 growing 9% year-over-year even excluding your large customer orders of $10 million a quarter which were better than expected. I'm curious if you could elaborate on what is driving that order growth. Is there any specific geography that stands out? Is there any end market or any product that would be most demonstrative of the strength?

You know, a couple of things to share. Obviously when you look at our orders from revenue below $20,000, if you track, we share a correlation of that with PMI over time, that's the element of our business that's most closely connected and correlated historically with the PMI. And the weakness in the United States and the PMI going under 50 certainly had an impact on that.

When you look regionally at the overall performance of the company, I think there's a lot to look at from a positive point of view. While the US was down 1% in local currency -- not the US, the Americas down 1% in local currency, we saw high single digits, almost at 9% local currency growth in both EMEA, Europe, Middle East and Africa and in APAC. Those are pretty positive signs for us to take in terms of our ability to continue to grow the business. Where we have put a lot of energy investment has been in improving our ability to deliver assistant-level solutions to our customers and tools. As we've moved up the performance capability in the value chain, we've seen a steady increase in our revenue coming from orders over $20,000 and between $20,000 and $100,000.

Patrick, this is John. One thing that I might add that's kind of helping fuel the system-level business was that key point of the record sales through our partners. They play a critical role in us serving the growing system-level demands. I think that's also reflective of the success we're seeing.

Okay, that's helpful. And then just within that system-level side, is there an outweighted exposure to either the industrial embedded side or the traditional modular side?

I think it's very balanced. I mean our product and sales revenue in both those spaces, they fall across that whole spectrum. There's no noticeable bias for one or the other.

Okay. Thank you. And then I guess shifting gears, I wanted to discuss the market opportunity around your large customer. I know this is something your guys are intentionally opaque about. But would you be disappointed if you did not see a return to growth from this customer in 2016? And then could you also touch on the Micropross integration and how that acquisition helps position you both at this largest customer and across the wireless test spectrum as a whole?

So on your first question, we're glad to see an uptick in orders in Q4 from a year-over-year point of view and sequential I think it's very difficult for me to answer your question without giving some opinion without the technology evolution of our largest customer, so I'm going to refrain. What I will tell you is that we will be in a much better position to judge their full year revenue when we get to April call. Our expectations for revenue to that customer in Q1 are obviously built into guidance for the quarter.

In terms of Micropross, I would put it in a broader context. Our intent is to be very highly competitive especially in high volume production tests for all the wireless standards that are going to go into mobile devices now and in the future. Micropross is a critical part of that strategy as they help us expand that coverage. The team has integrated very well. They have great technology, very good people. So we're excited about their performance so far in the three months since the acquisition and look forward to leveraging that further as we move forward.

Great. Thank you for taking my questions. Good luck.

Thank you, Patrick.

Thank you. (Operator Instructions). Our next question comes from the line of Richard Eastman from Robert W. Baird.

Yes, good afternoon.

Hey, Rick.

I was under the impression that Micropross was maybe a $20 million in revenue a year company. And I'm curious. Maybe that's incorrect but at the same time if it's close, is that business that cyclical in terms of spend? Or seasonal? Or why is that maybe not contributing a little bit more here?

Well, I think we're really starting to parse very fine grain details here. First off in Q3 -- in Q4, they were only part of the company for two months. So they weren't in there for a full quarter. That might help answer part of your question. And then any business in this market space is going to have quarters that are slightly bigger than other quarters. So I wouldn't read anything into that other than they have a little bit of seasonal variation in their business but it won't be noticeable at the company level.

And their product, is it kind of a system-level sale? I mean, are we talking about business that, again, would fall into your order buckets as greater than $100,000?

Certainly I would expect the vast majority of our revenue going forward to be north of $20,000 and quite a bit I'm sure will be above $100,000 as we move forward. Not much of it will be below $20,000.

Okay. Understood. And then on the large customer here, in the quarter we had orders of $10 million. We had sales of $10 million?

Yes.

And so we carry some backlog into the New Year. The $10 million of orders in the fourth quarter, is that not somewhat of a positive omen just from the standpoint of the past couple of years, orders actually fell off in the fourth quarter? Or is that just -- again, that's just timing?

You know, I wouldn't read too much into it but it's always good when your customers' orders are up year-over-year. That's always a positive thing. So exiting 2015, that was nice to see.

Okay. And gross margin, can I just ask, it seems maybe like it's running a little bit low given large customer business is down a bit in the mix. Is there any kind of inventory step-up there with Micropross or anything that may have impacted gross margin here a little bit?

Well, obviously -- specifically are you talking about Q4, Rick, obviously as we look at the trends going through the quarters, Micropross is not going to have really any noticeable impact given their relatively small scale and their (inaudible) on margins overall. You're going to have some mix issues. You're going to have a little bit of the currency that we obviously saw as we came through the year that has some lingering effects on overall gross margin. But when you look at it for the full year I believe we're down roughly three-tenths of a point for the full year.

When I reflect on 2015, maybe I'll share a couple of thoughts that go beyond your question, 2015 was a tough year due to some of these factors that we couldn't really control. I think we came through it very well, maintained our revenue, had core revenue growth of 6%. Operating margin and gross margins very, very close to 2014 despite the tough currency. So looking forward I believe we're very well set for record revenue and hopefully record profit in 2016. We will continue to be working hard to maintain our gross margins over time.

Okay. And just maybe last question for John. John, could you give a little bit of a perspective on some of your end markets? I'm kind of thinking in December, late December, we saw the US budget pass this omnibus bill. What was interesting in there was R&D funding in total, through all the agencies -- DOE, DOD, EPA, everybody, it was up about 8%. And is there any trickle-down effect that one should expect at NATI, on maybe either the academic piece of business or the defense side? Any benefit from that?

Again, Rick, thanks for the question. Let me start first with the industry color that you touched on. So when we look at Q4, obviously we continued to see pretty strong headwinds in the energy business so it was down significantly. We saw a slight weakening in automotive transportation, and some weakness in academic and some of the foreign markets. On the positive side, mobile communications and semiconductor definitely were helping lift. And then aerodefense that I know we've talked about in past calls was essentially flat.

To your question about the government funding, I mean, first of all the fact that they got a budget in place obviously helps, because I think some of us remember from a few years ago, continuing resolutions and other games by Congress didn't help. It's hard to comment on the explicit. I mean, it's such a big number and there are so many aspects of government spending and so many areas. Obviously there is a derivative, some into academic, some into the research lab, some into aerospace and defense. Let me turn it over to Dr. T to add a little more color.

Yes, we're very active in academic and especially in areas like 5G where we see activity and funded activity, as well as cyber-physical systems where we have a lot of active work -- I think I just attended a National Science Foundation conference jointly with German professors as well, and we see these guys getting funding for their work. In areas like energy, there's also energy, funding activity. We see some evidence of interest there. So yes, it definitely helps. There is a lag, especially in academic, where it takes some time before funding actually gets out there and gets where we would see it. So but definitely it's always a positive sign because R&D is one place we look to see how business is going.

Very good. Thank you.

Thanks, Rick.

Thank you. And our next question is a follow-up from the line of Patrick Newton of Stifel.

Thank you. I just wanted to dig a little bit more into guidance with the -- I believe it's 9% constant currency growth at the mid-point. Alex, correct me if I'm wrong. But I wanted to kind of walk through how we should think about that through the remainder of the year as you sit here with the potential of the large customer returning. Should we think of an accelerating constant currency through the remainder of the year? Or is there any type of direction that you could give us on an intermediate term basis?

No, 9% core growth is the right math when you look at it from that point of view. 5% year-over-year growth in dollars. Then we talked about the currency impact obviously being about 400 basis points.

I don't think we're in a position at this point or want to get past the first quarter, Patrick. And in relation to that large customer, like I said, we'll know more in April. And I don't want to take up -- obviously it's an important element of our business model -- don't get me wrong. But we really want to focus everyone's attention on the 97% of our revenue that comes from the rest of that broad-based business. And long-term when we think about the value of the company and our ability to execute driving sustained organic revenue growth through the 97% is going to be the most important value driver of the business.

Okay. And then just on PMI, periodically you'll kind of opine on your opinion of the general direction. Do you have any opinion over the next several months as to steady state expanding or contracting, as you sit here today?

Obviously we've seen the turnaround, especially in the United States. A year ago US PMIs were in the mid-50s and now with a massive surge in the dollar, and obviously it has a knock-on impact on commodity pricing, you have seen it turn around to turn negative quite rapidly, while in Japan and Europe it's gone in the oppositie direction. It would be hard to be optimistic about the US PMI and US industrial production for the next three or four months. It's likely to be challenging. It seems like Europe and Japan will probably fare better.

Obviously if you can tell us what the Fed is going to do in March, we might be able to share some more thoughts. The exchange rate is a big issue, so anything that happens there will certainly impact it.

Okay. Thank you for taking my questions.

Thanks, Patrick.

Thank you. And that concludes our question and answer session. I would like to turn -- actually we do have another follow-up from the line of Ben Hearnsberger from Stephens.

Hey, thanks. Just a quick follow-up kind of to piggyback on the last question. I was trying to see if we could get any extra color on OpEx spending in the 1Q guide and kind of the cadence throughout the year. Yeah, any help on that would be great.

Obviously we kind of made clear our leverage intention over time. So I would look to that. The overall OpEx cadence during the year is going to be somewhat relative to how the revenue profile rolls out as we see that as we go through the year. So at this point our intent on head count is relatively modest on the head count growth in 2016. It's going to be very low single digit. And beyond that, overall spending will react -- I'll be like Janet Yellen here -- We'll react to the data as it comes in. We'll be trying to stick to that leverage plan. And obviously our expectations for Q1 are posted in the guidance.

Understood. Thanks.

All right, Brandon, thanks very much.

Thank you for joining us today. Again a reminder we'll be at the Morgan Stanley Technology Conference on February 29 in San Francisco. Thank you very much.

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