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Transcript of WELCOME National Instruments Building Business Acumen Acumen Learning, LLC 877-224-5444.
WELCOMENational Instruments
Building Business Acumen
Acumen Learning, LLCwww.acumenlearning.com
877-224-5444
Business Acumen - Defined
The ability to make effective business decisions in a timely manner with an understanding of the impact of the decision to the business.
• Quickness of perception• Keen insight• Mental acuteness
Key Success Measures
How much do you know about National Instruments’ Key Success Measures?
Let’s find out!
Pop Quiz
Instructions: Information is based on the annual reported numbers FY2010 or thru 3Q of 2011. Every question requires an answer, and yes guessing is ok. Write answers on page 35.
1 – How much Cash was on hand?
2 – How much Cash was generated by Operating
Activities?
3 – What was the Gross Margin (%)?
4 – What was the Operating Margin (%)?
5 – What was the Net Profit Margin (%)?
6 – What was the Diluted Earnings Per Share ($)?
7 – What were the Net Sales ($)?
8 – What was the Inventory Turnover?
9 – What was the % change in Net Sales year over year
(%)?
10 – What was the % change in Operating Earnings year
over year (%)?
11 – What was the % change in EPS year over year (%)?
12 – What was the R&D spend as % of Sales (%)?
5-Business Drivers
The 5-Business Drivers all companies must do well at in order to succeed..
1. Define the driver.2. Know how to measure
driver.3. Why is it important?4. Know the numbers (&
Competitor’s)5. Impact by creating an
Action Plan.
PeopleEmployeesCustomers
PeopleEmployeesCustomers
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrength
Utilization
AssetsStrength
Utilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
Cash Driver
PeopleEmployeesCustomers
PeopleEmployeesCustomers
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrength
Utilization
AssetsStrength
Utilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
1. Define the driver.2. Know how to measure
driver.3. Why is it important?4. Know the numbers (&
Competitor’s)5. Impact by creating an
Action Plan.
Cash Importance
Cash is King!
“Cash is the company’s oxygen supply.”
~ Ram Charan
It gives you the ability to stay in business.
“Cash is more important than your mother.”
~ Al Shugart
Former CEO of Seagate.
Cash
Definition – What is required to grow and maintain the business.
Cash – is the bills and coins in the register, petty cash, and cash in the bank. Also includes cash equivalents, like CD’s and other highly liquid investments, that easily convert into cash within 90 days.
Measures
Cash Flow – The cash generation from core business activities calculated from the difference between the cash that flows into and out of the business in a given period of time (month, quarter, annual)
Performance
“As of September 30, 2011, NI had $336 million in cash and short-term investments. The National Instruments Board of Directors approved a quarterly dividend of $0.10 per share on the company's common stock payable on November 28 to stockholders of record on November 7.” (Q3FY11 Press Release)
Primary uses: Dividends, Acquisitions, R&D Investment, Product Launches, and Capital Expenditures.
Benchmark
25% 49% 40% 11% 25%
“To maximize cash: Get the costs right, Get the quality right, and Launch products on time.”
Ram Charan
Action Plan
Write down one action item You are committed to take to positively impact National Instruments focusing on Cash and/or Cash Flow.
•Increase Sales•Reduce Costs•Improve new plan designs•Better manage Account Receivables
•Reduce/conserve operating costs•Delay purchases•Improve Project Planning•Improve Data Input•Better Manage Account Payables
Possibilities
Profit Driver
PeopleEmployeesCustomers
PeopleEmployeesCustomers
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrength
Utilization
AssetsStrength
Utilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
“No margin, no mission.”
“Every business must earn a return that is greater than the cost of using other people’s money.” Ram Charan
Sales (Revenues) $100100%
- Costs of Goods Sold $ 23
= Gross Margin $ 77 77%
- Op Expenses $ 62.3
= Op Profit Margin $ 14.7 15%
- Interest and Taxes $ 2.2
=Net Profit Margin $ 12.512.5%
Profit Calculations
High Margin
High Margin = Unique product and/or higher demand than supply.2010 S&P 500 Average Net Profit Margin = 11%
28%
32%
27%
Low Margin
High Margin = Unique product and/or higher demand than supply.2010 S&P 500 Average Net Profit Margin = 11%
8.0%
3.6%
1.7%
Profits in Action
General Mills: Hot’n Spicy Chex Mix: “We had 14 different pretzel shapes. By getting rid of some of them, we save $1 million a year.”
Yoplait: Ditched multicolored lids saving $2 million a year
Performance
“Our ability to significantly increase our gross margin sequentially and year-over-year is attributed to the success we had in driving down component costs, improving manufacturing efficiency, and to the high value that customers see in our products”
Q4FY10 Analyst Call
• Premium pricing on new products,
• Expense discipline (“Operating Leverage”),
• Leveraging Software core,
• Manufacturing Efficiencies (plant in Hungary),
• Online Sales,
• Target of Expense Growth at 70% of Revenue Growth
Analysts feel that 18% Operating Margin (non-GAAP) can be achieved with 10%+ Sales Growth
Key Profit Drivers for National Instruments
Key Profit Drivers for National Instruments
Benchmark
“Given that we are closing out our 2011 investment plan, we expect to see a very modest increase in operating expenses in Q4. Looking out to 2012, our objective will be to grow revenues faster than expenses and we believe we will be able to achieve this goal if we are able to deliver year-over-year revenue growth in the high single digit range or better.”
Alex Davern, Q3 FY11 Analyst Call
Asset Driver
Anything you own or control…which has value.
PeopleEmployeesCustomers
PeopleEmployeesCustomers
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrength
Utilization
AssetsStrength
Utilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
Balancing
AssetStrength
AssetUtilization
Assets in Action
United Parcel Services (UPS) – Avoiding left-hand turns
-92,000 trucks worldwide-Saved over 28,541,472 miles-Saved 3 million gallons of fuel-Reduced insurance premiums-Reduced maintenance frequency and costs
Performance
"Over the last few years we have invested significantly in building out our capabilities to serve our larger customers, which enabled the significant progress we saw in Q3. This ability to grow our larger orders will be key to achieving our goal of $2 billion in revenue by 2016."
Dr. T, Q3FY11 Analyst Call
Benchmark
Growth Driver
Why is GROWTH so important to business?
PeopleEmployeesCustomers
PeopleEmployeesCustomers
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrength
Utilization
AssetsStrength
Utilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
Rapid Decline
• Best and Brightest leave first.• Productivity decreases.• Morale goes down.• Costs are cut, limiting growth and impacting quality, resulting in decreasing profits.
* Studies have shown that it takes 4-5 years for a company to recover from a significant down-turn in profits, assuming they recover.
Rapid Growth • Attracts/Retains the
best and the brightest employees.• Productivity increases = more profits = more cash = more growth!• Morale is high.• Employees have greater potential for career and personal growth.
* Growth gets more time and attention than any of the 5 Drivers in a public company.
Performance
"We have exercised good discipline this year in matching expense growth to revenue growth, with non-GAAP revenue up 22% and non-GAAP operating expenses up by 23%, year to date…while we are cautious about the direction of the industrial economy over the coming quarters, we are confident our investments will significantly advance our long-term position in the industries we serve.“
Alex Davern, Q3FY11 Analyst Call
Growth
15
Benchmark
In FY10, large system orders contributed to yearly growth: Average order ~ $4,470, Orders over $20K ~ up 41% (higher than 2009 levels)
People Driver
Members, Customers, and employees are the key to driving profitable & sustainable growth.
PeopleCustomersEmployees
PeopleCustomersEmployees
GrowthTop Line
Bottom Line
GrowthTop Line
Bottom Line
AssetsStrength
Utilization
AssetsStrength
Utilization
ProfitRevenuesExpenses
ProfitRevenuesExpenses
CashOn Hand
Generation
CashOn Hand
Generation
Customers
What is more important than meeting customer expectations? Exceeding?
Anticipating Customer Needs & Expectations!
“If I would have asked my customer what they wanted, they would have said a faster horse!”
~Henry Ford
“Culture eats strategy for breakfast!”
~Peter Drucker
5-Business Drivers
How will we remember the 5
Drivers?
Can you ignore any of these over time and still be successful?
1) What are the key messages?
2) What are the top 2 Elements getting focus from Dr. T and team?
3) What are the key strategies the Executive Team is focusing on?
4) Did we have a good year or bad year and how can you tell?
2010 Annual Report Activity
Pg. 48
Statements
1.What is the basic equation for each
statement?
2.What is the purpose of the statement?
3.What are the key numbers and how are they
trending?
4.How can you impact each statement?
Profitability
(P&L)
Equation
Sales
-Expenses
= Profit
Pg. 24-25
Bottom-Line
Net Income / Shares
29%
538%
18%
33%
19%19%16%
175%
527%
77.1% Gross Margin
14.7% Operating Margin
RevenueRevenue
ss
ExpenseExpense
ss
IncomIncom
ee(Profit)(Profit)
Top-Line
+$100K
-23K
+ 77K
Gross Margin 77%
+ 40K
+ 40K
+ 34K
-37K
Tax rate = 15% - $6K
Increase Sales by $100K
-100K
+ 100K
+ 100K
+ 85K
Decrease Cost of Sales by $100K
Tax rate = 15% -$15K
Becomes Cash < 1 year
Most Liquid
Least Liquid
Due First
Due Last
Due in < 1 year
Financial Strength
Page 26-27
Equation
Assets =
Liabilities
+
Equity
AssetsAssets
Liabilitie
Liabilitie
ss
EquityEquity
==
++
22%36%
22%
18%
36%
14%
Balance Sheet
Statement of Income (P&L)
Statement of Cash Flow
5-Business Drivers
219
145
77.1
14.7
12.5
1.38
873
1.7
29
176
527
18.1
Total the Financials
SCORING:
Right answer = 1 pointSomewhat close = ½ point (within: $50M, $2, 2%)
Missed it by a ways = 0 point
Finding Financials
Web Sites:
• www.nasdaq.com
• www.reuters.com
• www.yahoo.com
• www.finance.google.com
• www.hoovers.com
• www.smartmoney.com
Final Thought
“People will work…
hard for a paycheck,
harder for a person, and
hardest for a reason.”
Thank YouNational
Instruments Building Business
Acumen
Acumen Learning, LLCwww.acumenlearning.com
877-224-5444