All right, perfect. Welcome everybody. For those who don't know me by now, Meta Marshall, I cover the networking space here at Morgan Stanley. For important research disclosures, please see the research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Then I'm gonna let Eric Starkloff- Yeah, I'll make an opening-. of National Instruments to make a little opening statement himself. I will make a little opening statement. I think most of you know that on January 13th, we announced a strategic review process, which we are going through with advice from, of course, legal and financial advisors. We've talked about the goal of that process: to maximize shareholder value. I think as you can all probably appreciate and understand, given the nature of that process, it's in our interest to maintain a certain degree of confidentiality, which is appropriate. I won't be answering questions directly on that. We of course will be keeping folks informed as appropriate as that process goes on. All right. Well, now I have no questions. I thought maybe I'd make a statement about Twitter as well, but I think all that got talked about earlier. Exactly. All right. you know, maybe just for investors who might be a little bit new to the story, if you could just kind of maybe outline a little bit of the National Instruments story and some of the objectives that you kind of laid out at the analyst day late last year. Yeah. A company that, many folks know 'cause we've been around a long time. Mm-hmm Let's see, 46 years or so. Then has undergone a significant transformation over the last five years. A lot of what we talked about is that transformation, kind of taking the core strengths of the company, serving engineers for automated testing of all kinds of different applications. What we did five years ago was really tuned the business to take that core capability and focus it in the areas of secular growth opportunity, where we can deliver more systems capability, differentiate with our software in areas of higher growth. Then at the same time, in that model, and I'm sure we'll talk about all elements of this, realize significant advantages and opportunities to improve the margin profile as well. Mm-hmm. That's been a big focus. We came into sort of this year, we said, you know, as we finished last year, we said, "Hey, we're sort of seeing recessionary expectations in the market." We have a set of tailwinds in the business that we set guidance for Q1 of continued revenue growth despite those kind of economic headwinds. We set an expectation to meet or exceed the 300 basis point improvement. Mm-hmm In operating margin for 2023, even in that sort of downturn scenario. You know, we think the growth that's inflected over the past couple of years, along with the improvement of margin, has really shown the benefit of the transformation that we've made over the past five years. Got it. I mean, part of this transformation that you've made has kind of exposed you better to these kind of mega trend areas, whether they be 5G or EV, AV space. You know, are there any other exciting opportunities you see on the horizon that change how we think about some of these opportunities or add additional ones? Yeah. Yeah. We're focused on those spaces. There's nuances in each one of those. I'll talk a little bit maybe about each one. Okay. I sort of the way I've said it, and I think we demonstrated this Monday, is that when we talk about growth opportunities or M&A opportunities, I don't expect people are gonna be surprised 'cause they're gonna be sort of doubling down on some of the areas that we're pursuing, 'cause I think we're pursuing the right areas. Electrification has been a big one for us in the automotive industry. We participate in both active safety and electrification. We said a number of years ago that that would ultimately be the growth driver of the business. B y the end of last year, that's more than half of our automotive business. That has come to fruition. It's been a combination of organic investments and inorganic investments. Then actually just on Monday, we did announce another small sort of tuck-in acquisition that's related to electrification. It's actually in semiconductor, but it's a company that we already owned a minority position in, a partner of ours, and we bought the rest of the company. And they have complementary technology to test wide bandgap semiconductors. Mm-hmm. Silicon carbide and the like. That's an area of the semiconductor market growing and serving that automotive space. Again, hopefully not a surprise. I have gotten the question, so I'll address it directly. "Hey, you're just in the middle of a strategic review. Why go forward with this acquisition?" We're having to balance both, of course, being in a strategic review, but running the business. This was an entity that we already had a minority position that we were partnering with, that's in a very attractive market that accelerates the growth opportunity that we have in a really attractive part of the market. We think that that's a good business in any situation to move forward with. Doesn't have any bearing one way or another on the, on the strategic review process. That's, that's the kind of automotive area which is the highest growth part of the company over the last number of quarters, and we expect to continue to be a robust growth opportunity. That's the biggest. The other one's wireless continues to be an area of focus, primarily in semiconductor across both validation into production. We've been saying for a while now that we fully expected the semiconductor cycle to go through a down cycle, and we've seen that towards the end of last year. We're still really bullish on the long-term opportunity in semiconductor, particularly wireless, and then the nationalization of semiconductor, which ultimately over the next number of years will create, I think, high demand or even duplicative demand, you could say, for the kinds of test technology that we deliver. Finally, from a growth opportunity point of view, we think of our aerospace defense area as probably kind of a steady growth opportunity related to defense spending, but, you know, investments happening in areas like satellite and in new space technology and a lot of the things you see and read about, you know, those are growth drivers for us that we're pursuing with these sort of focused system-level capabilities as well. Somewhere in this binder, there's silicon carbide questions, but. No? Okay. We'll go back to, National Instruments ones. Yeah. With the change in sales organization to kind of better utilize channel and focus on top accounts, you know, what have you learned in this process and, you know, how has it changed how you think about kind of your core sales and marketing organization overall? Yeah. This has actually been one of the, I mean, there's been a number of big changes as part of the transformation. This has been one of the biggest. If I just kind of rewind the clock a little bit, we're a company that historically just had this very broad-based business, so deliberately in the early stage of the company, it was like, our founders used to talk about engineer to engineer, so the sales process, treat every engineer sort of kind of equally in terms of opportunity, and that sort of mirrored the business. We had a couple thousand dollar average selling price, and that was the right model for that business. Over the last 10 years, the growth in kind of larger system opportunities for standardization of our technology, for sort of these accounts and customers that could be much, much larger in scale, was emerging as a primary growth opportunity. Well, you gotta change the way you sort of serve- Mm-hmm and allocate resources, in order to maximize that opportunity. That's what we started, four or five years ago, and it's got a couple of components. One is, w e get efficiency in both of them, by the way. One is the focus on the customers where we have the highest potential that are correlated to those growth opportunities that I shared. What we've seen over the past number of years is a disproportionate amount of growth in those larger accounts. I say there's efficiency in that because when you have an account, and we've had many that have done this trajectory, go from $5 million a year to $10 million to $20 million or beyond, you don't have to increase the cost to serve that account by 4x. Right. Right? You get a lot of efficiency as those accounts scale. We've seen a lot of our growth has come from the larger accounts in the segments that I've described. Correspondingly, we saw an opportunity to sort of remove cost and be more efficient in the way we serve the broad base of customers 'cause we ultimately have tens of thousands of companies that we serve, hundreds of thousands of individual users. We really needed to optimize the channels to market for that scale. Mm-hmm. That was, frankly, an area of a lot of opportunity for improvement of SG&A spending. In 2021, beginning of 2021, we made shifts to serve our broad-based customers with distribution. We've also invested in our kind of digital capability to support and sell more of our products through our web channels, that's been very, very effective. We've seen, you know, a significant reduction. Mm-hmm In SG&A costs over that period of time. It's come down, you know, 12%, 1,200 basis points. You know, a big- Yeah Big number, and it's due to both of those, both of those factors. So that's been, you know, a big element of the transformation, and it's helped both bottom line performance and it's enhanced the growth opportunity, particularly in those larger accounts. Got it. I mean, you addressed it briefly when we started, but you've laid out some kind of ambitious growth targets at the Analyst Day, particularly, I think, in light of kind of a macro environment, that nobody at this conference has said is fantastic. Just what has kind of given you confidence in those objectives? Yeah. We also don't think the macro environment is fantastic. Chalk us up into that. Yeah Group of people. I'll use the commentary of our new CFO, Dan, that's in the- Yeah In the group there. To be really clear, we did talk about sort of growth scenarios in the investor event back in September. We've been clear that we haven't set guidance on growth this year. Yeah. As Dan says, it's not our job to be economists. We see what's in the here and now, but we're not trying to predict. What we have said is that we have a series of sort of tailwinds in the business that even in a headwind environment to our order rate, which we fully expected and we've seen coming through the end of last year and set the expectation in Q1 that that would continue to exist, even in that we had a set of factors that would be, you know, have revenue performance greater than the order performance. Mm-hmm. We've articulated those. Those include some pricing actions that we've taken that are flowing through in the model. They include the inorganic things that we acquired mid last year, having a full year of performance. It includes the sort of backlog situation that, like many, many folks in many industries and including our own, we've had an increasing amount of orders that we're unable to ship. Mm-hmm From a availability of components. Actually, let me dwell on that for a second 'cause this is one that we've been trying to clarify a little bit more. Historically, our business was like a turns business, so we basically took orders and shipped them immediately, corresponding to this kind of lower order rate business I described historically. Over time, we've seen more and more opportunity for this system-level capability, where the expectation of the customer isn't for that to turn around in a few days- Yeah B ut to have a much longer lead time. We had already started to see more visibility into future orders. Mm-hmm. As we came through the last year and a half, kind of compounding that was this issue with supply chain and a significant amount of growing backlog due to the supply chains. What we've tried to do to give transparency on that is we've tried to really separate those into delinquent backlog. The backlog that our customers would take now if we could ship it, and we ended last year at 230, I think it's 230, on the delinquent backlog. As we go through 2023, as the supply chain situation improves, and we do see it improving, although not, you know, I think everyone knows it's not a clean linear improvement. Right. It's pretty choppy. We expect it to continue to improve, and we expect to bring down that delinquent backlog over time. We have another portion of the backlog, and it's about $220 million, as we exited 2022, which is backlog for orders that the customer wants in the future. Mm-hmm. A future period. That's continued to grow correlated to this more systems orientation of our business, right? Those are the companies that we're working with that are building a battery lab, that are placing orders with us, but they expect those orders next quarter or the quarter after. That's good visibility in the business, and we expect that to continue to grow. We expect that delinquent backlog to shrink, and that will improve sort of, you know, obviously, revenue performance above bookings as we go through this year. I mean, maybe sticking with supply chain, and, you know, we can hand the mic to Dan if you prefer. Just how are you seeing this resolve itself and margin benefit? Yeah. You know, the headwinds and tailwinds we've seen there. Yeah. There's been a whole bunch of factors with supply chain. I'm sure, you all see that in all kinds of businesses. It'll be nice at some point where I don't have to talk supply chain all the time. Next year, I hope it does not happen. It's not here yet. 'Cause like I said, it's still pretty challenging and pretty choppy. The effects it's had on our business, in addition to the book-to-bill thing that I just described over the last two years, it's had a pretty big impact to gross margin. Mm-hmm. That is primarily due to these broker purchases that we made in 2021 and 2022, where we were paying these kind of extraordinary large fees to procure difficult to procure components. That had a significant impact to gross margin. Mm-hmm. More than 400 basis point impact to gross margin in 2022. We set the expectation, you know, one of the benefits, I guess, if you will, of a weaker macro. Right. Is that correlated to a weaker macro is improvement in supply chain, is a reduction in these broker purchases. We've said that even in Q4 that we had sort of substantially curtailed the broker purchases. Some of that was still gonna flow through the P&L because it was in inventory, but we saw the kind of light at the end of the tunnel of these broker purchases, we'd start to see that improve- Mm-hmm. As we went through this year. We haven't set a guide for the year, as I mentioned. We did set an expectation in Q1 that there'd be 100 basis point improvement. Mm-hmm. In gross margin, you know, largely due to this factor. We would expect that that's gonna continue to improve over time. We, you know, kind of committed or recommitted to the bottom line performance. Mm-hmm. The 300 basis point performance improvement on operating margin, and that's due to both the gross margin improvement as well as leverage of our expense line to improve operating margin. Got it. I mean, another area that investors have kind of dug into is just test and measurement has the benefit of being, you know, a far amount that's lab, then there's you know, a minority of your revenue comes from production. Mm-hmm. Not all production exposures are the same. You know, as there have been kind of differing reports from various industry people, you've also seen production headwinds. Like, what do you think is important for investors to know just kind of about what your production exposure is really? Yeah. No, it's a really good question. The way we think of it, I think an important way to think of it is, you know, is how it looks by end market 'cause it's different, right? At a company level, we've shared that about 60% of our business is in, you know, an R&D budget. It's generally in our industry, it's validation or verification of the functions and performance, but that's basically in an R&D budget. About 40% is in an operations or production budget. That's the split overall, but it's by more interesting to think about the split per end market. In semiconductor, it's about 50/50. You know, I think it's sort of well known in our industry that there's more volatility in the production side of semiconductor. I mean, both of those things come under some pressure when it's a down cycle in semiconductor, but production more so. We have exposure to that. Now I will say, historically, this is comment on the past, our performance in these down cycles, even in our semiconductor business, and you can see some of this in the past, has been a bit more resilient than some of the more focused semiconductor companies for a couple of reasons. One is just the kind of parts that we're focused on. Mm-hmm. We're primarily testing wireless and mixed-signal parts, which tend to be a little less volatile than sort of memory and processors, right? Which have bigger swings. We're also not the incumbent in production, so we're generally more correlated to what design wins and deployments than just capacity. Nonetheless, that's an area we've said has sort of macro exposure to a, to a down economy in a semiconductor cycle. In automotive or transportation, it's more slanted towards R&D. It's actually above the company mix. Mm-hmm. In R&D versus production. That's really a factor of the areas we're focused on, the active safety and electrification, and where the money's being spent right now. Mm-hmm. There's a pretty intense level of investment in that industry into the validation of those new technologies, particularly electrification. There's a lot of investment going in to create battery labs, for example, that are used to prove the performance of new battery technology, cells, packs, modules, over a range of conditions. That's a very, very important parameter for automotive companies and OEMs right now. Over time, it's reasonable to expect our platform lends itself to both validation and production. Over time, as volumes go up, we see a meaningful opportunity in production that might equalize some, but now the intensity of investment is primarily in R&D. In aerospace, defense, and government, it's actually less of a distinction there because these tend to be a lot of one-off low volume. You know, when you're building a satellite, you tend to build one of them. The idea of a validation tester and a production tester doesn't really make sense in that market. It tends to be sort of the same test system is used. Our portfolio kind of mirrors the company and its distribution. You know, that leads me back to kind of the root of that question tends to be like, where does a weak macro impact the business the most? Our perspective is the weak macro impacts our semiconductor business, the down cycle and semiconductor production, more so than R&D. To some extent, both. A weak macro affects our portfolio business, which has been more macro sensitive and kind of follows an index, like the Purchasing Managers' Index correlates pretty closely to that. And has less impact on transportation, which is more about the investments being made into those secular areas I mentioned. And less impact on aerospace defense, which is more about defense spending. That's the correlator. That was a long answer to whatever question you asked. [Audio distortion] o h, yes. Yes, yes. That's right. Yes. Very helpful. You gave us a lot of detail there. You know, part of the tailwind that you had laid out for this year was just, you know, you've kind of gone through the subscription transition. Yeah For a portion of your business last year, and that we're gonna get a tailwind from- Mm-hmm that this year. Just kind of outline the thinking that went into that transition and just how it's helped maybe bring some customers into the. Yeah. Yeah. It's a very good question. Yeah, let me talk about that whole area. Software is obviously a very important part of our company. It's a strategic advantage, we're the leader in automation software, except for Amir. We're the leader in automation software in our space. We've made this transition to subscription-based software over multiple steps over, actually over multiple years. The first steps were a number of years ago for our larger customers. I described those sort of larger customers. We changed the motion a number of years ago for our larger customers to be purchasing through an enterprise agreement. They buy a site-wide license or a company-wide license to a suite of our software. That's typically a three-year. It's not a perpetual license, it's a three-year terms deal. That's been very, very effective. Over the last number of years, about 2/3 of our software portfolio has transitioned to those enterprise agreements. We have a very high, near 100% renewal. We've been able to prove that we can add each time there's a renewal cycle, there's an increase in ASP. It's been very, very effective. The remaining 1/3 of the business was primarily single-seat licenses, so individuals buying a copy or a small team buying five copies of our software. That's the area that we made the decision at the beginning of last year to also transition over to subscription. This has become kind of an expectation for a lot of people purchasing software. We like the, w e absolutely like the model from a business model. We think it's a good, a good relationship with the customer, that you can add value over time to keep the subscription. We made that switch through, you know, last year. I think our team executed quite well and transitioned substantially all of our single-seat users over to subscription in 2022. Now, that had a headwind to revenue of about 2% of revenue. You know, just from a recognition point of view. That was what we said is an expectation coming into the year. It actually played out almost exactly to that number. That turns around to be sort of neutral to slightly favorable this year. Now to the other part of your question was, you know, we have seen this early signs, but one of the other advantages of a subscription model is lower entry point from a cost point of view. We have seen early indications of increasing users because of that. We think because of that lower entry cost, they're able to buy into our software, get a year license at lower than the perpetual license was. We think that's an attractive part of the model. We think our software is really important and necessary and sticky. Yeah. That renewal rates will be high. If someone comes and subscribes to our software for a year, we think they'll likely use it for a long period of time. History would suggest they might use it for their whole career 'cause that's generally been the case. I mean, you've talked a lot about the auto opportunity. You've also just talked about the increase of visibility as you've maybe kind of targeted these markets more directly with kind of systems. You know, I think 30, 40 years ago, when you think of National Instruments- Yeah Y ou think of one box that could kind of. Yeah Serve every market. Just what has been the process of kind of this customization or kind of verticalization evolution? Yeah, it's a very good question. I think it starts with that general purpose capability that we have. The sort of, w e talk about the flexibility of our platform. What we really mean is that it's software centric and it's modular, so it can be reconfigured for lots of different applications. That's an important attribute because what it means is we get a lot of leverage on our R&D. Right. It's not the case that we have very dedicated large R&D efforts that's distinct across these areas. In fact, something like 80% of the R&D that we do serves all of the end markets. What we've been focused on, and it's been quite effective over the last few years, has been taking that. The 20%. Mm-hmm That's what gets tuned to the end application. For example, it ends up being, hey, we have the general purpose measurements. Maybe we need to add a particular module for an aerospace-specific protocol. Often it's in software. We're adding application-specific software to take a collection of instrumentation and turn it into something more specific like an active safety test system with some dedicated software. That unlocks market for us because there's a lot of our customers that want to be able to purchase an active safety test system. Now, they like the flexibility that it can evolve over time, but they wanna start with an active safety test system. That leverage point is really important 'cause we are able to do that quite efficiently because of the modular sort of software-centric nature of our platform. What was it about kind of, I mean, a lot of these investments, either inorganic or organic, have been around this auto opportunity. Mm-hmm. Just what was it that was kind of a natural fit with your portfolio and the 80% in there? Yeah. Yeah, good question. you know, it started with having a broad-based portfolio helps because, you know, we have customers in all of these spaces. you know, five years ago, when we were evaluating focus areas in automotive, it wasn't like, I mean, we had customers using our general purpose products in these spaces. They were turning, you know, there's always a few industrious customers that will do the work to turn the general purpose products into a battery test system. Mm-hmm Into an active safety system. I'll also say we weren't perfect. We had to learn a little bit on the way. Five, six years ago, we actually had more priority on active safety vis-à-vis electrification. We weren't alone. A lot of people at the time. Yeah M aybe some analysts at the time were thinking autonomy was the big thing, and electrification was a little bit less. Both of those have been really interesting market opportunities that have grown a lot for us. Over the last few years, electrification became an opportunity that we saw as a, as a larger- Mm-hmm A more urgent opportunity, where active safety has been kind of a steady linear. Our cars just keep adding more sensors and more software. Got it. It's a growing area. The urgency on electrification was different. That's also why we used more M&A in that space, because there was sort of like a time window where we really wanted to be well positioned to provide this capability when the urgency was there from the OEMs. I think we, you know, we were able to pivot. The flexibility of our platform, I think, has helped us to be able to pivot and then add that value both organically and inorganically in that case. Got it. I mean, maybe just finishing on the portfolio business. You know, it's clearly become a smaller portion of your business. Mm-hmm B ut still a pretty critical piece of that, of your business. You know, are there opportunities to kind of sell these customers other products? Yeah H ow are you thinking about? Is it just really a business that kind of helps fund a lot of development in the rest of the business? It's both. Actually, I think one of the other learnings through this transformation was that sort of early on, it was pretty clear where the focus opportunities were. I think maybe a mistake early on was that the portfolio was sort of everything else without like dedicated focus. We learned from that. We have, you know, dedicated leadership on that with a different lens on how to sort of run that business. We don't make large investments in R&D, so it has to be a lot of leverage. We have been able to like think of that differently in terms of route to market, really efficient channels, how to use digital, how to do small things in our product line to make them fit the channel better. Mm-hmm. Like packaging, simplification, those become really important and have really helped that perform well. As you said, it's also become a lower percentage, mainly because of the growth of the other areas. It's gone from 60% to 50% to 40% to 30% of the business last year. I think it's a combination. It's both. It's a lower part of the mix that's been deliberate, but it's also actively managed, but with a different lens towards efficiency and scale. And we think there continues to be opportunity in that in that domain. All right. Well, I think we've heard a lot. Yeah. We're right at time. Eric, Dan, Marissa, thanks so much for being here. Yeah. Thank you.