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National Instruments (NATI)

Participants
Marissa Vidaurri Head, Investor Relations
Eric Starkloff President and Chief Executive Officer
Karen Rapp Chief Financial Officer
Meta Marshall Morgan Stanley
Mark Delaney Goldman Sachs
Rob Mason Baird
William Kerwin Morningstar
Angela Jin JPMorgan
Call transcript
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Operator

Good day and thank you for standing by. Welcome to the Q1 2022 NATI Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Marissa Vidaurri, Head of Investor Relations, NI. Please go ahead.

Marissa Vidaurri

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

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

in supply including of in contained guidance, will earnings, or future ni.com/nati. COVID-XX and regarding transition, disclosed assume related disclosures to software measures factors. for or including strategy of our Europe, in may changes differ press operating expectations. successful capital you comparable expected actual on We that integration documents financial Commission, results statements, in results call the annual identify conform margins, caution documents the factors Securities and of numerous non-GAAP company’s the the could GAAP future of our and including cause products, limitation, our release are allocation, A those from and most on achievement demand materially the files forward-looking such companies, actual Our and financial report company to discussion targets contain directly regularly duty no shutdowns We forward-looking chain acquisitions to business our that related XX-K without targets. our that negatively and XX, of measures impact to XXXX. update in any just differ to on to today statements. model Exchange that filed important February These or wish forward-looking contained are on statement the impacted financial expenses, reconciliation our include and licensing actual the statements materially this war constraints, those could Form with the in revenue, backlog, by to results gross refer outlook and our you and events execution results our be We acquired and statements our predictions

the on We announced press business find have ni.com/nati. holistic others vehicles. investment, leader to for that today’s presentation purchase discussion XX, can we believe AG, Kratzer definitive of release European along the systems a a supplement to at electric this solutions website this March customer You in providing the our this help in tuck-in agreement quarterly with Automation to and for On X% test will serve is with expected synergies. in electrification. approximately year ability the acquisition no area made high test We customers of of space, business growth revenue our as accelerate systems Kratzer calendar view We $XX business growth The purchased immediate add cost XXXX. to during the vehicle million. we

our technology credit subject Officer, coming the the to close With for is now employees acquisition Eric over NI times. drawn we the for In will hosting and fund presentation call I We does Chief at forward conferences results expected cash contribute accretive puts leadership will meetings in is revolving to Bank the software is approximately May and with its us for expected joining existing vehicle NI look America. due deal months, statutory transaction speaking revenue calendar Starkloff. to XXX to this deal to turn approvals will to in XXXX, NI. from with this ni.com/nati be electrification visit of management you. to Please and be Cowen However, that, XXXX year test roadmap a The The systems. through our believe in facility. to position financial synergies. Executive

Eric Starkloff

afternoon. Good joining I us you, today. Thank appreciate everyone Marissa.

items on the In to addition few performance reviewing to plan today. the in discuss a first our quarter, we call other

steady was market want increase measurement into year-over-year our then and overall share to and in test those provide into performance that performance on we we that and our Demand But about commitment a about for the QX. before believe QX, to update margins. first details, well and have our provide a future. sustained get the I’ll growth I from to for driven operating our to in products growth exceptionally proof demand XXXX quarter our as was time strong QX competition our point model strong our take the order set discuss an will to some of the for come recent in XX% growth this year-over-year that which expectations. guidance to growth back that outpacing our NI in I talk Karen during strong. ahead will technology and can and well First, attributes growth will long-term financial apart fuel seen the as be over focuses accelerated revenue quarter, The a

record a a result first leading was our a business indicator strategy. is and of growth bookings Our for our of quarter and

be at The revenue the on we our will our factors. and believe caused momentum was explain why While the strong, continuation our we strong end quarter XX% double-digit below share. the suppliers performance believe performance differentiates earnings of first and at in is growth low guidance. the suspension a unplanned as demand, of delivery specific revenue per key demand a Shanghai top two offset strengthening what’s X we headwinds, business in for XX% with well The to business why quarter the of so in NI to from our strong of shutdown to and one strong despite very QX growth the was revenue reported our year-over-year of key growth our shortfall driving revenue of I’d spend line the as end past like A What over our quarters, the components pandemic-related resilient these truly Russia growth unplanned and and we challenges, earnings non-GAAP been continue. our midpoint. our ability is to record focus in in limited delivered moment recent

capability is systems quickly in evolve markets changing, wireless technology to performance fast get resiliency cost measurement market. needs, focus we architecture market capability, and technologies. flexible vehicles, those the grow to provide our our modular believe customers these contribute to is solutions product available We and customers testing test areas new provides today. changing This that and faster. modular to to space and of and autonomous adapt where it’s best their high-growth the to their we lowest as the and essential such an ability expect We especially customer First, test to enable provide on have communications the tests that these NI’s ability extensive faster than believe our for electric will and increase we constantly and

their functionality evolve well our peers quality. and capability NI’s instruments offering, This complex highly devices from them interoperable to Second to as automation and fast-changing the and This software is atop time. open our comprehensive products as to test software both our their competitors. customers which Increasingly enables to systems and to processes. sits hardware automated require over NI market is their and bring ensure our enables and unique test rapidly customers automate

largest of in footprint plan to We We this automation test industry. to foundation the today upon have our software fuel future. build this and growth the into our

on the quarter. our first Now industry for to results

we for up order intentional XX% Semiconductor The communications, all year-over-year. million, areas electronics and record highest XG Order orders all XX% all first double-digit expectations. $XXX drives we’re focused up of with with at is exceeding had and electronics X% of that million, proof growth focus the semi business. roughly the QX our year-over-year. this growth quarter, areas focus both on at units regions. of industries across revenue business delivered $XX Transportation was We point up for had XX% in, believe and revenue In and Our are year-over-year, potential. a the in transportation QX, half wireless year-over-year. growth record organically across

example X an they’re satellites. technology on the autonomy. test NIO XX% like customer broad-based up investments applications strength and expect represents significant vehicles NI’s which has year-over-year, to business. to our Chinese record launch customers of In ADAS changed platform. the first a government the shorten our are transportation in was systems business systems, revenue electrification to XX% for and steady million, hardware of profitable quarter orders our for the The a Based by market where exceed to production of of portfolio record of later our year-over-year. year. leveraging ADAS XX% was a NIO, loop And year-over-year, these EV XX% represented making of transportation our in revenue engine approximately functionality automobile and shift with QX, up investments, One for and is in this upcoming upcoming million, trajectory Aerospace defense ADAS, Our business recent vehicle where orders delivered $XX the remains win to and revenue and record mass this this focus year-over-year. time with This Level business, the manufacturer, XX% and our $XXX and for vehicle of we multinational majority expect customers, quarter. growth success business, new led achieved XX% and up up with first space orders defense at

estimate distribution optimizing our customers portion gained position this in our both global business our Our focus business. software the this in is utilizing these serve, resiliency transition that our digital of subscription and our production. to scale in the R&D leverage to is has growth with channel in is and XX% of providing business. XX% to the validation improving better and well further in And broad Across We on positioned offerings test. opportunities long-term we R&D, our business traction, industries and approximately also in production

to those analytics platform data and software Our enable across value areas. drive uniquely us

facing fast-paced as that, confidence market. turn to Karen? the and to modular our solutions for our as for ability QX. discuss QX Now our continue and more gives I shifts, test With to highly automation outlook customers our ever, measurement and increased test in will flexible our over the Karen it than outpace results are need well to technology us software

Karen Rapp

QX Hello, and up compare. was than up $XXX everyone. Approximately seasonality. Eric. revenue GAAP acquisitions. year-over-year Demand QX revenue QX strong strong record million, QX recent better of XX% year-over-year XX% from orders Thanks, record was for X% historic our on a with was at a

Americas, orders times year-over-year and the to in For in XX% quarter approximately ended up were of the backlog first with over the X X in million, competitive quarter, year-over-year year-over-year XX% EMEA with We XX% weeks. lead $XXX up Asia-Pacific. just up

into million the translating revenue. difficult record non-GAAP We to for pricing cancellations XX% margin the find generated primarily driven quarter years. non-GAAP gross in non-GAAP our to broker QX, more for that our in year-over-year, by was XX continue operating GAAP quarter, In of margin we ultimately QX operating confidence for $XX for X% highest and into XX%, operating $XX down margin million will translate backlog, of operating quarter, income, of first this minimal first components. than income provides backlog which a our see

continue while constrained. to headwinds temporary the supply these chain expect We remains

continue also due normal from higher costs We global pandemic. to logistics to resulting challenges the freight incur than

We have headwinds points pricing. offset margin increases approximately gross through of XXX basis in

transition While into impact our time, we’ve we guidance. expect million over licenses built and expect during of revenue sales our that increase and profits flow to and recurring cash software approximately operating to our negative $XX we subscription-based XXXX, do to our

We customers the the are of on with far so as software. recognize our transition our track value

ability of these earnings convert couple have us our throughout as to to continue customers last our While given months licenses renew the year. over confidence their in

XX% share earnings of scale year-over-year. that net to income this deliver year-over-year in non-GAAP of per Additionally, and QX. reported million software increase non-GAAP QX QX We an business net us $X.XX, growth revenue and of $X.XX. model time. The to actions GAAP diluted million enabled our share earnings taken increase potential exceeded we growth increase we of earnings our of transition to $XX record into income $XX We have revenue diluted has believe the record reported over per

Now comment capital on let me management.

the the quarter. strong the remains operations was sheet in balance minus cash Cash at million Our $X end flow of first quarter. with million $XXX from of first

of pay plans in We million to at Board future quarter, share dividend out continue May of $XX.XX, to shares to and May XX, payable we keeping repurchases. on approximately a compensation approved first Directors X, and the stockholders repurchased returned XXXX. XXXX. QX, build The QX to price revenue. we shareholders inventory variable Our dividends an essentially XXX,XXX $XX our share for quarterly flat average record of on share In $X.XX of per through NI count XXXX,

Our remains balanced. capital allocation strategy

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

inorganic also the business to to investments strategically We growth. prioritize align order will in accelerate that

all outlook necessary quarter, as remains into order second Now shifting to procure to QX to guidance growth XX% demand for our date continue the QX, quarter, components over our ability the for but in expect QX to here the strong remains we headwind revenue with second constrained.

and expect the the For $X to quarter $X million. of this growth of year-over-year $XXX to million million XX% Kratzer approximately in $XXX second revenue revenue XXXX, represents the for midpoint, At the acquisition. we to be range million includes

a to decision. situation, this quantify the While predict fluid is it’s difficult and both with

guidance short the the specific quarter. Our suppliers that one of for from not improve quarter of does key duration components assumes of delivery our the

Our deliveries a information We the guidance backlog today in best revenue takes timing into growth firmly know issue see the we as consideration suppliers. our only. from about the

change that customer incur demand are not seen have not in to this the to remains double capital provide for confidence that unique supply when pattern. anything risk solutions typically Our our disruptions strong. we and do ultimately ultimately expense would a revenue our and historic and chain capabilities ability realize ordering customers, Because ease any indicate our

decline to basis XXX XXX gross margin QX. expect We from to points QX

adds basis decline, component increased freight points approximately of and continued addition headwinds Our broker acquisition costs. in XXX from the pricing mix to

to We’re including actions products alternate with use components taking prices, similar adding suppliers, mitigate increasing numerous headwinds, and products these redesigning to capabilities. available new promoting

continue managing to costs of drive portion expenses improved operating increase We our that the are across are the business. and variable actively efficiency to

quarter acquisitions. million expect of our $XX to return in-person due to recent sequentially and full million QX events the customer from to increase operating salary We $X our increases, a expenses of

QX expect the drive expenses the operating the We year. additional scale be peak for year, for we as to during

in the diluted the for non-GAAP the $X.XX expected in We to of at share expect year-over-year be decrease earnings X% $X.XX to earnings of with to midpoint. GAAP per a share range range $X.XX of QX, $X.XX, diluted per

expect rate to be We XX% between our XXXX tax XX%. in to

results, At be QX, the will of on first for the comment guidance for half. full Given impact want XX% headwinds growth QX midpoint we’ve the temporary encountered XXXX. resulting the for for and to and I our our the on outlook QX revenue our year-over-year year

expected. remain constraint a than We found we expect demand to strong specific components more originally but of to be

range that sight end line have We we full Given the suppliers constraint, highly range widening experienced XX%. to The year for we supply the our revenue believe our of low top we range. and growth to XX% the for particular, are the still of of challenging in key remain one QX. supply of in constraints constrained from assumes end to as the as

our significant resiliency in remain We additional of that Given the range, the business our would the strong strategy, XXXX low the carryover our the we creating we stability and demand to end at backlog revenue. expect backlog. are confident in of

operating to We also remain back focused basis you. in on delivering leverage in the at business, our This and XX% points we XXX non-GAAP of are outlook. end low approximately to would revenue in margin the XXXX. Eric, committed margin achieve improvement operating

Eric Starkloff

like now I’d turn Thank you, business model. Karen. our to longer-term to

of XXXX our discussed we our ahead that originally the us calls, in several year and schedule. is focus operational As on expect prior reach the communicated allowing we our to strength goals markets a financial

margins enable set we our on have better objectives business We our focused our our on Given to next business sights the of we’ve strength and outlined as to XXXX and expansion long-term scale XXX our margin based increase each our model, are operating the of we’ve non-GAAP to and committing time meaningfully on to see made. over points XXXX. of from an opportunity margin changes our an increase year we basis in set structural changes Slide presentation. seen X in the made remain we’ve investor on leverage, operating In

even market flexible on with that high-growth space and vehicles, shareholders market. take to a tirelessly scenario we hard a long-term on us enables driving confident ability technology all. are and wireless we leading for our electric to interoperable share in sustainable the forward demand are processes and I’ll deliver leverage measurement the focus revenue now faster reported They take we supply systems. in working questions. our With in communication by ability seriously a employees gains. test will situation, areas successful contains test a and trajectory are autonomous scenarios particular, and our thanking their to quality. We headwinds for make commitments and higher our work that solutions and products grow provide their automate confidence Our our to for operations, Thank your I’m brings end the goal, of can market overall software dealing example, our manufacturing their to growth with our on than our customers customers incredible as operating faster new challenges modular from to such we downturn. to test employees built short-term chain and and in remain The to meaningful issues, you, customers. achieve manage Despite and chain range And targets. consider supply in and confident while continuing perseverance. wide unprecedented the our that, when these bring to products drafting difficult our deliver

Operator

question first comes Marshall Meta of from Our Instructions] [Operator Morgan from line Stanley. the

is line Your open. now

Meta Marshall

that. Appreciate could kind from maybe That’s throughout Shanghai for as headwind And of what we would two thanks. the chain. question quarter. different first the margin just those and kind headwinds would from Russia both you isolating identify just the Maybe the question. those buckets a the of accompanying that what isolate just gross maybe as supply be maybe me, buckets? separating and of first Great, then kind of If

Karen Rapp

of so Hi, short Yes. million Sure. midpoint $XX not that. for down able had being the in very of QX and about to of about COVID the of at miss. contributed the that to as ship happened and business the quarter that majority end shutting as Russia well Shanghai into in This shutdowns that impact revenue $XXX guided we is Karen. to a came million The

is we we where a In a constrained, offset levers have ran when offset under-delivered unfortunately, shortfall margin our on So situation into use consistent expecting we’d is higher QX. that we and gross X% quarter, had being significant And that. to in average what perspective, ways supplier gross had products to we to QX that that that for entirely about, to expect other was specifically. caused our factors. quarter not two saw a did do beyond. broker that in quarters what gross parts, represent so for margin flowed From this the impact and a on be decline who not those due able was supply almost would margin through And we a prices misses were there see and gross much normal across margin us margin pricing continue to of that. to impact gross those than the this pretty have into those from at not we The generally

Meta Marshall

it. Got

also when so Russia? things is guidance. XXX attributing attribute the – we widening basis should I then of range or year reduction And going points in think supply year, the sure say to about going most the range the kind just we just throughout of think your would correctly want in about of that of remainder forward, chain that of we’re that the you or of to we the kind as make the just

Karen Rapp

Yes. We our shipped scheme revenue. about so of the X% that. revenue the sized was outweighs Russia the of impact Russia year, things, supply chain – we last In into

much trying to knowing too going that, I more is some guidance what that without It So wouldn’t of things we that there happened the whether there – think Russia short-term get to ascribe to situation. that that QX. happened in change. And was was had in unexpected surprise built We that QX. were was a I to was

future. that of we’ve Now those we’re aware built that the into situations,

Eric Starkloff

million than China, was question and to just It’s the X% of higher that, similar from Russia similar and Russia, from quarter, has impact demand to higher sort the our expected remained Meta. And expected. comment than the – $XX on your on

the so for all we being about more be would And optimistic year. things equal, the revenue

a be is of So we a constraining. does, that’s this that, the this situation it put the particular prepared in the in kind for why primarily constraint we end lower that’s assumes in remains and supplier the down environment, QX to result transparent it that year, come range end, the particularly on the the And rest and that end range. really that said as worse of wanted the remarks, we to and that’s in that low supply got concentrated in then to what that of around would thing bad

Meta Marshall

Thanks. Okay, will perfect. I off. hand it

Eric Starkloff

you. Thank

Karen Rapp

Thanks.

Operator

Thank you.

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

Your line is now open.

Mark Delaney

in located cause the Thank you of this I key causing underlying make hoping supposed ship Shanghai for questions. was that afternoon. their they Is product whatever under to to you. a was to couldn’t much the cause very Good where is some and they there understand are to was get situation to the – underlying deliver? to Yes. they the better taking employees unable supplier supply? other them that were in Or supplier

Karen Rapp

Yes, Mark, it’s Karen.

know, Shanghai logic we as things having you that to level a of demand It’s right like not now. of trouble situation. far things handful devices, parts, programmable attributable that it’s that FPGAs also or As meeting and others see

impact So was had – to of of issue. fraction a we what miss I that what the we is don’t get was supply. a to the It just get. was expecting in expected getting to significant think were it we’re not alone It

Mark Delaney

figure of that thought a going to parts broker number how kind saw with to and broad-based a to quarter, buy you had purchases as that is broker Or is a didn’t I’m try or we across linked Okay. you handful broad-based were get components? And you of in those broker I these them out in also was then go buys? get some of guess, of trying that elevated with you are associated the the and terms the more that of it phenomenon? of offset kind

Karen Rapp

that full parts really to good a gap in the those the receive, we couldn’t shortfalls ones be a were chain, the continues to not for It across of right? was supply the like being still felt we meet There it for we ones is broader, we our related rest were that QX. it not little that fill get. but position to on able and Certainly, to able Yes. was certainly to guidance

Eric Starkloff

comment. consistent we we’ve you five, that just if – we shortages. we out a set of ago. thing commentary zoom if shortages this before, had, we Mark, kind It And X,XXX-plus to really was off quarters with given started If of six recall broad-based that

of a good situation, Our really address of to that team’s building job that ahead situation. that managing getting inventory kind done situation,

the couple Over of quarters, of past and it a characterized we’ve smaller components. as number smaller

couple I think a I handfuls said on last maybe the of call.

So the fairly affect sort think situation that’s this quarter. set the on evolved quarter. to Karen that’s the be acute way those QX has of to tend parts And It – as broker in particular coming consistent more into continued over in environment, was this buys did of from these I But handfuls. couple a than supplier time. expectation be said, of this the with that our then we of a have the trajectory us just way with

Mark Delaney

that’s That’s part just of just year helpful. the in. I NI. of assume If question I sneak acquisition, as the the revenue, part X% could The last one of

what size through for So year full of revenue we are what EBIT so growth just Thank you. think can is could the acquisition, modeling of And you the then basis? margins the that? that the in on a

Karen Rapp

intended The though context, year it revenue, QX. the on total full Yes. even close size X% put not it’s NI to of X% until in is actually is year. the Mark, to just

benefit software leading won’t synergies us takes the bottom believe in really the how XXXX. that to EV expect capability this that line point, and at In the actually expecting we a line we’re And to primarily revenue we that start at with going The more on benefit becomes across accretive the the next be did to of is bottom from in services solution seeing XXXX, So in it platform. it overall. a won’t level the on It’s line. the that in in we but what and the NI negative, revenue entire this vehicles. a when accretive – it we about talked also across bring electric puts us – show synergies They not it’s We side. are say position QX. terribly

Mark Delaney

you. Thank

Operator

you. Thank

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

is now line Your open.

Rob Mason

I the of for having talked happened China Good you actually happened any in late are you dialing recognized And the the you headwind having clear, Russia, that just question. region? shutdowns be about Yes. Thanks in revenue actually from China difficulty in into shipping to in or taking China? we evening. group – wanted quarter. kind – Are Are order.

Karen Rapp

There main might what we some able it’s in this and to has impact that do if what’s in is end the situation China. predict goes opening QX, the What’s different extends the out customs. Karen. Rob, significant we in size anything, What happen after quarter China. or the is The is our had is built by Yes. that up that is quarter. a there of aren’t is Shanghai and broad-based was But within helpful at through of the to anticipate is quarter. for that in into what there guide. happens a hub We Shanghai the impact hard region an way. at end not region overall of The

Rob Mason

how you account did in question that – you guidance? the is guess, I have for the

Karen Rapp

It’s range there. widen of that reasons the of because the one we we the see uncertainty

Rob Mason

Okay.

Eric Starkloff

it is so fact in quarter. thing end was much QX, in The at hit Rob, that of right the the

could it of challenging. would weeks disruption overcome. of if have But was it so quarter, or six was weeks last like that so pretty a the had that we mid-quarter, the four And feel we been happened have sort obviously

Rob Mason

Okay.

well, mid-quarter kind right. assuming are as you but of – reopens So it

quarter… The second

Eric Starkloff

yes. Shanghai, For

Rob Mason

some strong, you Eric, of Okay. quite color semi-test – could XX%. orders the in look

to Just provide some added strengthen? you color there that are – semi what parts test seeing of

Eric Starkloff

– as I I remarks, just going broadly to then And and think comment semi, the sure, and we about Yes, will order the really said I just Rob. in growth more pleased, mean XX% in the exceeding focused the growth XX% order order previous are we strength the QX in our a the strategy growth to expectations. places year. really The compares of and where are

growth a it’s are I focused. the really said So, on strong areas And growth. in we like

it a know even the a biggest So, and was areas but in over XG wouldn’t that’s I time, in wireless. the the of was way, orders kind strength by between and wireless, that in issue of the ton semi But read of product I out focus into revenue. something semi opinion. mix will in delta semi, – in our and around

to have to well. presence. bringing So, new that we standards market additional seen to focus of more expanding the we and the continuation of parts, been good wireless and that us are and again, got successful then number some on been And that’s both be wins pretty a for also very mixed in lab of wireless lab more robust. business a years as real long semi, have in production has it’s of lot the performance signal string area good, a on And we sort in XG, offerings the successes. have but our increasingly, deployments standardize That’s we a growth in of pleased of And with continues and equipment now. of some the labs, side as And for well. the for space new a

see build different in design that to build that’s have in, something to tailwind a we In able is capability, the comment investments been on just semi that that are momentum has countries to The semiconductor continued. And that been labs markets is the will regionalization, going we forth, new you tailwind if and for make will on. a to us. so capability, words, capitalize – of other the I last as so build sort and of

Rob Mason

Was the that to, how wave, or that that? wins millimeter characterize you would or spoke XG-related was mid-band you

Eric Starkloff

in the of sort mostly It’s range. still sub-X

before, capability said we millimeter As we wave. have in have

We of are to that. see pickup starting some

new have capability We coming.

of But customer new up month success that some the the NI will still bands. in most current leading coming frequency We space. demonstrating is capability sub-X actually a Connect in be at next with

Rob Mason

Thank you. Okay. Very good.

Eric Starkloff

Thanks Rob.

Operator

you. Thank

line Morningstar. Our William of the from next question comes from Kerwin

Your line is now open.

William Kerwin

a and have have curious question. just might aligning the taking I then I in you And all expected. the synergies and to a thanks wanted if between portfolio? Hi be it revenue talked follow-up. you for how you that the am product you the target see quick I actual Kratzer software and what kind And the to of any, about NI broader applications couldn’t that now able I sense, acquisition previously? bring have to But and existing back know

Eric Starkloff

are Okay. great think it’s fit. Thanks really We William. excited this about deal. Yes, we a

What seen strategy in two a electric bit been has have and something inorganically. investing have on to electrification, organically brings our Kratzer things. focus You quite major vehicles is been that we

one very that a application-specific good EV is software a very other intimate that with accelerate the same in And capabilities is top frankly, with and other application that has we fairly space. is portfolio services building, we OEMs and to were helps that’s Europe. match really then capability in think a So, relationship around deep Kratzer and that that And battery expertise components. expertise

And so systems. OEMs of with they are kind those and really these building shoulder-to-shoulder

well fits inverter analytics that testing. capability primarily core the and electronics very, the did very and of battery now And our capability which a for with portfolio, test software that we systems high-powered set the And are and systems. so with includes used whole previously, two measurement that deals

high-growth a are that It’s market, growing and focus. we that’s faster. it’s an So, the significantly area

an growing area kind of us. for So, low-triple digits it’s that’s

William Kerwin

I the Excellent. X% of new thinking also of to transportation then that if Thank curious the range business unit in change And contribution. that growth kind is the there of is then inclusive with that? long-term you. And guidance any the assume

Eric Starkloff

will take that. Yes, I

our guidance growth, we from includes And investments So in of our that include yes, the that in quarter and and are transportation, up edging are the expectations certainly the this does making EV. we performance seeing range it. that, then in certainly,

going of I range an outlook, the extending about talked and the years. the that, expectation a on forward for on we high-growth us briefly. comment be range performance segment that’s overall revenue for just to will year. bit the is few next the we for it said also So, that But the a

As Karen higher the to in to issue. said, growth If timing this at be revenue be is we the rate end the of out low recognized our It’s issue. year, end you drive due will. that, really effectively that in constraint. a range. It’s supply that a supply would constraints that at XXXX, into shift It’s position XXXX, so were low timing if

our So, that’s expectation.

William Kerwin

Great color.

Eric Starkloff

had And follow-up, a you William.

William Kerwin

No, it. that’s Thanks. Bye-bye.

Eric Starkloff

Okay.

Operator

next Goldman the Our Mark from question Instructions] comes Sachs. of from line Delaney [Operator

open. Your line is now

Mark Delaney

for of understand to variable guidance us progression that growth to doing bps idea EBIT the Thanks per out growth. spoke revenue or about you nature margin you opportunity. even to maybe revenues assumptions. the you how about faster, are more, revenue margin talked invest going through trying just so you bit follow-up Is for could of a kind with some sensitize, OpEx, better that XXX that was the may help XXXX, I hoping – year. different in relative The variable be

Eric Starkloff

comment Yes, of meet be of we can range Karen, intend that that downturn. said, that. scenarios, expectation a I a And chime wanted to including so yes, – in. it’s have first as in we I all, and meaningful will clear you Mark, certainly on revenue to

going turn the industrial that a growth are margin we the To revenue the over in at above would semi market that we do the that for growth cycle conditions downturn you what higher will in or industry. to see we are exactly range achieve described. of things we the point in Those next are your about believe few that end, scenarios higher what are So, certainly, will can and growth. we scenarios, strive the something like years. contemplated the market, include of But

for target opportunities the the of evaluate commit full scenario. sort that a for we that will growth We be in growth to wanted and opportunity achieve could range. we in flow-through that something investment higher to But to above

Mark Delaney

one and if the last constraints. for on And could That’s me one then circling helpful. back supply I

shutdowns trying or is distinct some like FPGA FPGAs issue, about example. the of of just the understand, there talked as a am events? But linkage with are should thinking in with Shanghai to You be those an really we I

Eric Starkloff

Yes.

ahead, You Karen. mentioned the in go –

Karen Rapp

the not am point, at China I reason that point. of Mark, been seeing on guess not this the guess, change But part I potentially. this that’s that the at for what in I depending Yes. be shortfall. future could cause gets the shutdown

that just limitations I built some getting supply for on capacity causing shortfalls and out. possibly are older these think of technologies literally the it’s

Mark Delaney

clarifying, for you Thank Okay. I appreciate it.

Eric Starkloff

Sure. Thank you.

Operator

Thank you.

of Our next Chatterjee Samik from question comes JPMorgan. from the line

now Your line is open.

Angela Jin

there of is price revenue the X% Samik I that on in was the saw for about concerning I had This increases. that a question increases. Chatterjee. Jin to Hi. contribution posted the a price you presentation Angela sort

you of that how forward? revenue mentioned that contribute you just now cadence you to about through recently price outlook through? have will thinking to still are think that, your But sort that all flowing the implemented going through year are thinking trying more and price backlog you And of so that or might be just partly working And increases. it’s implementing full then and flowing the increases through, plus, about

Karen Rapp

This right. already the that increases Angela XXXX is Yes. thanks. place. we in in did will X% – It The and impact one about was yes, about that. It was have increases February – Those in Karen. are revenue you we to XXXX. time from of the increase in of of take we another February full price XXXX to some one did put realize

going So, as we as those of that the year well. will through see this rest result of tailwind a increases

Angela Jin

we XX%, your growth, just if Got strip expecting to then at the or be of you driven about to thinking maybe would more by any pricing unit organic XX% out color there your your that growth revenue – kind the growth, just be volume, or it. of acquisitions range from that the Thanks. looking we appreciated. are of full And outlook,

Karen Rapp

Yes. Sure.

saw Research So, year a rest acquisitions inorganic in X% full coming having of and that plus in in acquisitions. I the in, growth of rest from QX a the I about the year, NH from we full When X% bring about Kratzer the done. revenue have am year, the Heinzinger, we estimating of

to the think where completely will So, the increase in comes and first going X% quarter And the be the with our continue a that is revenue of end does will be we depending the the growth supply price be do that XXXX in expand million at just then ability potentially the $XXX X% year of Eric or on into that think strong. more dependent demand to we I It year. for backlog bit. little mentioned, about so, at continue about ship. on where move in range from I acquisitions, become issue. as low the XX% if we to million timing the $XXX at lower to really sitting to And revenue, looking a go of in out would as rest end

Angela Jin

That’s Thank it. for me. Yes. Got all you.

Eric Starkloff

you. Thank

Operator

this Eric NI to to turn At showing I time, call and would President, closing you. Starkloff, questions. no for I CEO Thank remarks. like the further am back over

Eric Starkloff

for a Thanks afternoon. have your you and Thank all questions, for us great joining today.

Operator

conference for This participating. concludes today’s call. you Thank

disconnect. now may You