National Instruments Corporation (NATI)

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National Instruments Corp (NATI)

14th Annual Needham Growth Conference Call

January 11, 2012 4:10 pm ET


Alex Davern – Executive Vice President, Chief Financial Officer and Chief Operating Officer


Unidentified Analyst

Good afternoon. Welcome to 14th Annual Needham Growth Conference. My name is [Mark Solovey]. I’m with Needham’s West Coast sales team. Today we have Alex Davern, COO and CFO of National Instruments. I’ll let him have the podium.

Alex Davern

Thank you, Mark and thank you to Needham for I believe this is my 11th consecutive Needham Growth Conference. So, I appreciate the invitation. 11 years of representing National’s. My name is Alex Davern. I am the CFO and COO at National Instruments. I joined the company back in 1994, just before the IPO and I’ve been with the company to the evolution that you can see on the screen behind me.

I’ll endeavor to move through the story pretty quickly and leave someone room for questions towards the end. And I appreciate your time and attention late in the day, in a busy day at the conference as we reached the end. So, hopefully we can look through this and engage in a good interactive discussion.

National Instruments is the leader in computer based measurement and automation. We fundamentally are focused on the premise of disrupting the trenched industry of test and measurement. And then leveraging the technology we’ve developed in the test and measurements space into the emerging market of embedded industrial and embedded applications.

But we sell that same core technology to machine builders. We’re using core test and control technology to build machines and I’ll discuss that as we go through.

We had a reasonably tough fourth quarter, as many of you will be aware, especially in Europe in 2011. But when we look at the whole year, 2011 is a very good year for the company. All time record hit revenue, we had 19% revenue growth came in at $1 billion and $40 million. If we hit the point of our preliminary numbers will also have an all time record profit year.

During the year, we were very aggressive in our investment and very focused on continuing our long-term growth, and I’ll dig into that as we go.

So what do we do? National Instruments is focused on leveraging commercial technology to bring modular solutions to scientists and engineers to build sophisticated measurement and controlled substance. Especially what we do is we try to put the measurement technology, the analog to digital conversion of physical phenomena into a digital value. We put that technology on a plug-in board. We couple that plug-in board with industry standard PC technology, and we sell very advanced sophisticated application software to allow the customer to build a measurement system from these core elements.

Our vision as a company is to empower scientists and engineers to build a specific measurement instrument that they need using their own to main expertise and leveraging commercial technology.

The core to our franchise is a product called LabVIEW. LabVIEW is a graphical programming technology that was released on the Macintosh back in 1986. It’s been in market now for 25 years. It is the predominant application software that scientists and engineers use to build measurement systems globally. It spans all the way from the very, very simple and easy to use in very high volume.

As it’s most simplistic, it’s OEMed by LEGO [Detroit] Company. They use it as the engine behind their LEGO MINDSTORMS robotics building kit for children. So it’s very, very easy technology to use for a broad based and engineers in building technology systems, and it leverages all of that to the biggest instrument under planet, which is the Large Hadron Collider, the particle accelerator in CERN in Geneva, seeking to unlock the secrets of the universe. So we span from the very simple to the very complex and that’s a core part of our overall strategy.

We want to be able to reach the broad base of engineers with very, very simple systems. We want them to understand that our products will not run out of horsepower and that they will be able to scale up to more and more sophisticated systems as their applications grow and develop. The simple way to think about LabVIEW in an analogy is that LabVIEW is to scientists and engineers what the spreadsheet is to financial professionals. It’s a ubiquitous prerequisite tool for productivity for scientists and engineers in the world today.

Our evolution as a company can be broken down roughly into three phases of the company’s history. This company was founded in 1976, three professors from the University of Texas, each took $10,000 out of their Texas Teacher Retirement fund, started the company in 1976 developing network cards to control the traditional instruments. That’s how we’d sell a $500 network card that will be used to control multiple box instruments from different vendors. That’s all the company focused on for the first 10 years.

At the end of that decade, we’ve developed a market share leading position in the industry and then the inspirational of the spreadsheet came out in the early 1980s. The company spend the next three, four years developing LabVIEW as a graphical programming environment brought us in market in 1986 and move it up to value chain. Evolving from being a pure network supplier to the test and measurement industry to now also to become a dominant supplier of the application software used to program the instruments at the other end of the network. That was the second phase of the company’s history moving up our average over size.

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