National Instruments Corporation

Reported Q4 GAAP revenue was $448 million and non-GAAP revenue was $449 million, both up 7% year over year. Q4 GAAP diluted EPS was $0.30 and non-GAAP diluted EPS was a record $0.63, up 5% year over year; Q4 GAAP net income was $40 million and non-GAAP net income was a record $83 million. Q4 non-GAAP gross margin was 70% and Q4 non-GAAP operating margin was 25%; for the full year, non-GAAP gross margin was 70%, non-GAAP operating margin was 20% (up 130 basis points year over year), and non-GAAP revenue was $1.7 billion, up 13% year over year. Full-year non-GAAP net income was a record $255 million, up 14% year over year. For Q1 2023, management guided revenue to $415 million to $445 million, GAAP EPS to $0.14 to $0.28, and non-GAAP EPS to $0.48 to $0.62; at the midpoint, revenue implies 12% year-over-year growth and non-GAAP EPS implies 35% year-over-year growth. Management also said Q1 non-GAAP gross margin should improve by more than 100 basis points sequentially versus Q4, and that the full-year 2023 tax rate should be 17% to 18%.

Eric Starkloff framed 2022 as proof that NI’s multi-year transformation is working, highlighting the shift to a tiered channel model, industry-focused business units, more software, and acquisitions that expand EV testing capabilities. His tone was confident but cautious: he said the company is planning for a recessionary growth scenario and is taking action for a weaker macro backdrop, while still expecting revenue growth and better margins in 2023. He also emphasized that the strategic review process is underway, but he would not answer questions about it on the call.

Daniel Berenbaum focused on margin leverage, working capital, and cash generation. He said cash ended Q4 at $140 million, cash flow from operations was $52 million, and the company returned $37 million to shareholders via dividend; the quarterly dividend was kept at $0.28 per share. He pointed to a Q1 gross-margin tailwind from lower purchase price variance and pricing actions, said Q1 OpEx will rise slightly from Q4 as the company makes targeted growth investments, and noted the restructuring will reduce headcount by approximately 4% with most benefits starting in Q2. He also said the company expects a better conversion of non-GAAP net income to cash in 2023 than in 2022, alongside disciplined capital allocation toward organic and inorganic growth.

Analysts pressed on why 2023 growth guidance sounded less bullish than earlier comments about mid-teens growth, and management said they are guiding one quarter at a time while planning around the recessionary scenario discussed in September. They also discussed the ingredients behind the margin target, with management pointing to pricing, lower broker purchases, supply-chain easing, and OpEx discipline rather than any single driver. On orders and backlog, management said Q4 orders were down 3% as expected, that semiconductor and portfolio remain softer, and that Q1 benefits from delinquent backlog plus a new roughly $220 million scheduled backlog that reflects the company’s shift toward more systems and solution-based business.