Meta Marshall: Great, thanks.
Operator: Thank you. One moment please. Our next question comes from the line of Mark Delaney of Goldman Sachs. Your line is open.
Mark Delaney: Yes, thank you very much for taking the question. And Dan, congratulations on the new role. Starting with orders, even though orders were down 3% year-on-year, I think book-to-bill may have still been near or even a little bit above one based on my math. So could you perhaps level set us on where total orders came in? And then sticking with the order topic, could you also comment on the linearity of orders in the fourth quarter and perhaps how orders have trended into January?
Daniel Berenbaum: So we’re not talking specifically about our level of orders or level of bookings. We can talk about maybe patterns a little bit.
Eric Starkloff: Yes, I can talk about patterns. I mean I’ll just say, Mark, the minus three was, first of all, it’s consistent with what we expected and coming into the quarter get commentary on the different business units, but I would just characterize that as sort of in line with sort of where we expected some headwinds as the things that we talked about in September, for example, and even in the October call. But so consistent with what we expected and sort of a similar level is built into our guidance for Q1. So both in the overall order rate and the order rate by business units. So that’s what our expectation is built on coming into Q1.
Daniel Berenbaum: And Mark, let me comment a little bit further, want you to go back to the commentary, how of backlog earlier to maybe help you understand how again, how the business has transformed a little bit and how we’re thinking about this moving forward. Obviously, as we go into Q1, we have that tailwind from draining a little bit of that delinquent backlog that Karen talked about, the orders that customers would have liked to have shipped previously that we had been able to ship. The business is also very focused as we have transformed as we’ve gone towards those system solutions, both organically and through the acquisitions in building longer-term backlog. So you’re — we’re not going to talk specifically about book-to-bill and part of that is that I would start to get you focused a little bit more on thinking about our backlog and how that backlog will start to look as we drain the delinquent backlog tailwind for revenue early in the year.
And then as we continue to drain that throughout the year and then as we build backlog for longer-term scheduled backlog as those pieces of our business grow.
Mark Delaney: That’s very helpful. And one more, if I could, please, for you, Dan. Maybe you could elaborate on what led you to take the CFO role and talk about how analogous the margin expansion opportunity at NI is with some of the other experiences you’ve encountered in your career? Thank you.
Daniel Berenbaum: Thanks, Mark. So listen, I mean, I’m obviously extremely excited about NI and the route goes back to when I was an engineer, and I was a lab user, NI is just a foundational technology company that is critically important to all parts of the technology industry, the technology supply chain. That’s an incredibly exciting opportunity to be able to join a company like that with a long history of engineering and customer support like that. And of course, I’ve seen the transition that the transformation that NI has been on over the past five years. And the opportunity that still exists for that improvement in operating margin, the opportunity that exists for improvement in working capital. These are very exciting opportunities commensurate with that transformation into more of a systems and solutions business. So that’s why I’m here.
Mark Delaney: Thank you.
Eric Starkloff: Thank you, Mark
Operator: Thank you. One moment please, our next question comes from the line of David Kelley of Jefferies. Your line is open.
David Kelley: Hey good afternoon. Thanks for taking my questions. Maybe following up on the margin discussion, it sounds like we’re seeing some supply chain visibility improvement. Can you give us some color on the broker pricing impact on Q4, and if that improved into year end? And maybe if you can give us a sense on how you’re baking in – broker pricing into 1Q guidance that will be helpful?
Eric Starkloff: Yes, so again, we’re not going to be specific about the numbers in there. We do still have some of that inventory on our balance sheet, obviously, that we paid higher prices for. We expect most of that inventory to flush through as we move through 2023 and as supply chain conditions ease, we expect not to, be having to pay those broker pricing, but we’re not going to be specific about how much we still have, and at what point it will flush through. Again, we said it will be a tailwind in Q1 and as we go through 2023.
Daniel Berenbaum: I’ll add just a qualitative view of that Dave. We definitely have seen – we talked about improving supply chain. And certainly, this broker market issue has improved quite a bit. So it really peaked, I think, in Q3. And so, we started to see less necessity of using those broker markets to procure the very hard, to procure components. Again, as Karen said in her remarks there’s, still some golden screws. And we’re still working with that, and it’s not like it’s an unconstrained environment, but it’s gotten quite a bit better and – the necessity of us doing additional broker purchases has gone down quite a bit. And that’s what’s led to – this thing going from a headwind to a tailwind to the expectation we set of a 100 basis point improvement in gross margin is based on that improvement that we’re seeing and kind of – that we’ve seen over the last quarter.
David Kelley: Got it, that’s helpful. And maybe, go ahead?
Karen Rapp: Yes just that, this is Karen. There’s, some slides that we’ve posted on NATI, on our website that you can look at to get some color on some of that bridge for year-over-year as well.
Eric Starkloff: Yes increase, the gross margin line, I believe.
David Kelley: Got it, and thank you, really appreciate it. And maybe one quick follow-up on the automotive traction you referenced, your EV acquisitions clearly been a meaningful contributor to that. So can you talk about the margin trajectory of those acquisitions and maybe how those are trending versus your core transport business?
Eric Starkloff: Yes, I can take that. So we actually also – actually on the same slide that Karen pointed you to it’s in the investor deck, you can see that the coming in those EV acquisitions had a headwind on gross margin. So some of the system components come in at a lower gross margin and that’s an area of focus. We think there’s significant improvement that can happen over time, given our own capabilities and scale as a company that our pricing leverage that we had in the company and will ultimately, improve those gross margins, and they will trend up. And then – and that’s also built into our expectations, of course. And then ultimately, the strategy here is, as I mentioned in one of the previous answers to previous question is pulling the rest of our platform.
And that’s a big part of the strategy is selling these complete solutions that include these battery cyclers and things that we’ve got through these acquisitions, but also include very high margin software, include very high margin measurement components. So that the blended margin of the whole thing, ultimately meets the expectations that we have as a company.
David Kelley: Got it. Thanks for the color.
Eric Starkloff: Thanks Dave.
Operator: Thank you. Our next question comes from the line of Damian Karas of UBS. Your line is open.
Damian Karas: Hi, good evening, everyone. And Karen, thanks for all your help, best of luck in life with NATI.
Karen Rapp: Thanks, Damian.
Damian Karas: So, I just wanted to kind of follow-up on some of the comments regarding order trends. You spoke a little bit on semiconductor slowing and then talked about your longer-term view on transportation. But maybe you could just provide a little bit more detailed kind of outlook for your order trajectory over the coming quarters, across all your verticals just kind of based on what you’re hearing from your customers and distribution partners?
