National Instruments Corp

F:NI1

Earnings Call Transcript 2020-Q2

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2020 NATI Earnings Call. [Operator Instructions] Please be advised today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker, Marissa Vidaurri, Head of Investor Relations. Please go ahead.

[Marissa Vidaurri, executive]

Good afternoon. Thank you for joining our Q2 2020 earnings call. I'm joined today by Eric Starkloff, President and Chief Executive Officer; and Karen Rapp, Chief Financial Officer. We will start with an update on our performance in the second quarter and share our outlook for Q3 before opening up for your questions.

Our discussion today will include forward-looking statements, including statements regarding future growth and profitability, our focus, plans, objectives, position, capital allocation plans, dividends, expense management plans, models, revenue and earnings guidance and target and our outlook. We wish to caution you that such statements are just predictions and that actual events or results may differ materially and could be negatively impacted by numerous factors, including any uncertainties related to COVID-19 pandemic and further economic and market disruptions resulting from COVID-19, any further weakness in the global economy and changes in the current global trade regulatory environment. We refer you to the documents the company files regularly with the Securities and Exchange Commission, including the company's annual report on Form 10-K filed on February 20, 2020, and company's quarterly report on Form 10-Q filed on May 4, 2020. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in our forward-looking statements. We assume no duty to update any forward-looking statements to conform the statement to actual results or changes in our expectations.

A reconciliation of our non-GAAP financial measures disclosed in this call to the most directly comparable GAAP financial measures or related disclosures are contained in our press release and on ni.com/nati.

As a reminder, on July 6, we announced the close of the OptimalPlus acquisition. To enable more relevant compare, we will use the term organic to refer to certain non-GAAP measures that exclude the impact of acquisitions and divestitures completed within the last 12 months, which now includes the divestiture of AWR and beginning in Q3, the acquisition of OptimalPlus. We look forward to sharing more information about our long-term strategy for growth at our virtual investor conference via live stream on August 4. Participants will hear more about the value of our software connected systems, our market opportunities by industry and our long-term financial model. To register, please visit ni.com/nati.

With that, I will now turn the call over to Chief Executive Officer, Eric Starkloff.

[Eric Starkloff, executive]

Thank you, Marissa, and good afternoon. We really appreciate everyone joining us today and hope you and your families are safe and well. First, I'll provide context for our long-term strategy as well as commentary on second quarter results before handing it over to Karen for the financial update.

As the COVID-19 pandemic and its economic effects continue globally, our priorities remain consistent: the safety of our employees, supporting our customers and executing to our long-term strategy. Though we will remain diligent in managing expenses through the second half of 2020, we will also continue executing on strategic investments to enable our growth ambitions. I continue to be impressed at the ability of our employees to adapt. Together, we have exceeded our expectations for the level of productivity achievable in this tough environment. Our operational continuity ensured we were able to meet customer demand in the quarter. And we continue to ensure direct communication and interactions with customers and employees to stay connected and engaged, even though most of us are physically apart.

In a time of economic uncertainty, the core strengths of NI are clear. Our highly differentiated software position, the diversity of our business and the innovation and commitment of our people. We have navigated tough times before. And today, I believe we are in an even stronger position structurally. I also believe we are in a stronger position strategically with a focus on the parts of the market where our customers continue to invest.

In my first few months as CEO, I've spoken often about NI's leadership position in software and how we plan to build on our position in the market by creating new kinds of software that are needed by today's engineers and enterprises. We intend to grow our software capability alongside our customers' changing needs by bringing together concepts of systems and data management, connectivity to design, artificial intelligence and machine learning to ultimately enhance the way our customers design and test their products.

Our growth strategy is built on 4 strategic pillars: software, systems, services and streamlining customer interactions. This means broadening our software to meet enterprise level needs, assisting to accelerate customer time to market through more system-level capabilities, providing our customers with differentiated services and making it easier and more efficient to do business with an eye by streamlining our processes. I'll share more detail on each of these next week at our virtual investor conference.

In Q2, there have been a few developments in pursuit of our growth strategy that I'd like to share. First, we launched a new corporate identity. This is much more than a logo change or a fresh new color. It is about standing out in a market and stronger positioning of our software differentiation in areas of data analytics, cloud and AI to modernize our category. We are again focused on disrupting our market, elevating the need for test and the critical role of engineers. This is captured in our refined purpose to engineer ambitiously.

Second, we acquired OptimalPlus. We believe the addition of data analytics capabilities from OptimalPlus will enable us to accelerate our growth strategy by increasing enterprise level value for our customers through software. Combined with our organic investments in products such as SystemLink, we're doubling down on enterprise level capabilities with the goal of increasing our served available market and opportunity for future recurring revenue.

And third, I made a change to my leadership team. I've asked Carla Piñeyro Sublett to lead the portfolio business in addition to her current role as CMO. Carla's extensive marketing and sales experience from organizations, including Rackspace and Dell, provide the right expertise and outside-in perspective to assess and support the needs of this critical part of our business. You will hear from Carla and our other general managers about their strategies for growth at the virtual investor conference.

Now turning to our results in Q2. We have learned a lot in this time of COVID-19. The business impact we are experiencing at this point is less about the remote working environment and more about managing in a weakened economic environment. In Q2, there's a level of caution in spending across our broad-based business with a year-over-year decline in orders under $20,000. Orders over $20,000, which we believe tend to correlate to more business-critical investments of our customers, continue to grow.

For the first half of 2020, both organic revenue and organic orders were down 3% year-over-year, which we believe demonstrates the resiliency and strength of our business in a tough economic environment.

Software also followed the trend of our overall business in Q2. While total active software seats were down, we saw growth in the number of enterprise agreements, up 6% year-over-year. This is indicative of our continued focus to provide enterprise level value and to increase software adoption at our largest customers.

Turning to industry results. On an organic basis, semiconductor orders were up high single digits year-over-year in Q2 and up double digits for the first half. We have seen continued success from the deployment of NI's 5G testing systems, driven by infrastructure build-outs around the world. We are also seeing strength in our automated validation systems as customers providing chips for handsets are preparing for additional 5G rollouts.

For aerospace, defense and government, orders were up double digits year-over-year in Q2 and in the first half and what has continued to be a relatively steady spending environment, particularly in the U.S. In Q2, orders for transportation weakened further, down double digits year-over-year as the headwind in automobile production continues. But we did continue to see growth in our business in areas of focus such as active safety systems. In Q2, we also released the ECU test system, which is NI's first system-level offering, targeting production test in transportation.

Orders in our portfolio business were also down double digits year-over-year in Q2 due to macro impact from COVID-19 and a weakened global economy as reflected in the continued weakness of the Global Purchasing Managers Index in Q2.

Overall, I'm pleased with how we're navigating through the current economic environment in both Q2 and through the first half of 2020.

Now I will turn the call over to Chief Financial Officer, Karen Rapp, before closing with a few comments.

[Karen Rapp, executive]

Thanks, Eric. We closed the second quarter with revenue of $301 million, down 10% year-over-year and within our expected range shared on June 9. Organically, revenue was down 8% year-over-year. And Q2 organic orders were down 6% year-over-year.

Our orders under $20,000 were down 21% year-over-year. The economic weakness reflected in these orders was partially offset by strength in organic orders over $20,000, which were up 4% year-over-year. We believe this is indicative of success in our strategy as customers continue to invest in critical projects aligned to our industry focus.

In the Americas, organic orders were up 1% year-over-year, EMEA was down 23% year-over-year, and Asia Pac was flat year-over-year. We previously included net sales attributable to our operations in India within the EMEA region. In the second quarter of 2020, we began including these amounts within the APAC geographic region to reflect recent changes within our organizational structure. This change has been reflected in the year-over-year comparisons, and historical revenue data in the new reporting structure is available on our website. India currently represents approximately 2% of our total orders.

Non-GAAP gross margin in Q2 was 74%, down approximately 300 basis points year-over-year. Approximately 50 basis points of this decline was related to the divestiture of our AWR software business. Approximately 100 basis points is due to an operational change in our services cost that has no impact on operating margin. Services has been an accretive growth area for us, and we will continue to focus on monetizing the services we provide and leveraging our services expertise to drive high-value system sales. The remaining year-over-year change in non-GAAP gross margin is due to temporary fluctuations in the quarter, which include approximately 80 basis points or $2.5 million of additional costs due to COVID-19.

Non-GAAP operating margin in Q2 was 14%. The company reported Q2 GAAP net income of $11 million and diluted earnings per share of $0.08 per share. Q2 non-GAAP net income was $34 million, and non-GAAP diluted earnings per share was $0.26 per share, which is at the midpoint of our guidance.

Our balance sheet remains strong. We ended the quarter with $678 million in cash, restricted cash and investments, which included $90 million received under our borrowing arrangements that were used to partially fund our acquisition of OptimalPlus as announced on July 6.

In Q2, our cash flow from operations was $58 million, representing 19% of revenue. Our capital allocation priorities remain clear and unchanged. We plan to continue to invest in innovation and technology in order to stay ahead of the needs of our customers and deliver a world-class customer experience.

Dividends remain a priority. In Q2, we paid $34 million in dividends. The NI Board of Directors approved a dividend of $0.26 per share payable on September 8, 2020, to stockholders of record on August 17, 2020. We will continue to be opportunistic with share repurchase. This quarter, we returned $17 million to shareholders through repurchases of 503,000 shares of our common stock at an average price of $34.08 per share.

We view our strong cash position as a way to not only provide returns to our shareholders through dividends and opportunistic share repurchase, but also for strategic investments in our future for long-term growth and stability.

Over the last few years, our M&A funnel has been focused on identifying expertise and technology as strategic accelerators to achieve our growth targets faster. The acquisition of OptimalPlus is now complete and consistent with our M&A methodology and our commitment to shareholder value.

For the third quarter of 2020, we remain cautious and have expanded our revenue guidance range slightly. We currently expect GAAP revenue to be in the range of $283 million to $323 million, which includes approximately $2 million for OptimalPlus. We expect total non-GAAP revenues to be in the range of $285 million to $325 million, which includes approximately $4 million for OptimalPlus.

We expect GAAP fully diluted earnings per share to be in the range of minus $0.09 to $0.05 for Q3, with non-GAAP fully diluted earnings per share expected to be in the range of $0.14 to $0.28. Sequentially, at the midpoint of our guidance, we estimate our non-GAAP earnings per share to be relatively flat from an organic standpoint, with approximately $0.04 to $0.05 of dilution from OptimalPlus and integration costs.

Our outlook for the second half performance for OptimalPlus is in line with our original expectations. However, it is our intent to standardize our enterprise software contract terms as we integrate OptimalPlus into NI, which will have an impact on the timing of revenue recognition. We're estimating OptimalPlus GAAP revenue in Q4 to be in the range of $9 million to $12 million.

We remain dedicated to serving our customers in China, a region of focus for NI, while also complying with relevant export regulations. Looking at the combined trade regulations and current geopolitical landscape, we anticipate a negative revenue impact of about 3% in the second half of 2020, which is built into our Q3 guidance.

Our goal is to focus on our profitability, while maintaining our capacity to accelerate our growth in the future. In the second quarter, our non-GAAP operating expenses were down $22 million as compared to the same quarter last year. The sale of our AWR business reduced non-GAAP expenses by $6 million year-over-year and the operational change related to services reduced operating expenses $2.5 million.

For Q3, we are currently estimating a sequential increase of approximately 6% to 7% in total non-GAAP operating expenses, driven primarily by the acquisition of OptimalPlus. To proactively manage expenses and profitability for the second half, we have created a model that assumes a scenario of minus 5% non-GAAP revenue for 2020. We believe we have a path to 15% non-GAAP operating income at minus 5% revenue, which includes OptimalPlus.

In summary, we delivered results in line with guidance shared on June 9, despite the current economic uncertainty. This is a testament to the hard work and adaptability of all our employees globally. I believe this is also indicative of the stability provided by our broad customer base and industry diversity, the value customers see in our innovative platform, and the strength of our operational efficiency.

In 2020, we plan to preserve strategic investments for our long-term growth ambitions, while also executing strong expense management across our business in the short term. I believe we are well positioned for opportunity and that our strong balance sheet puts us in a position of strength.

Now I'd like to turn the call back over to Eric for some closing comments.

[Eric Starkloff, executive]

Thank you, Karen. While economic uncertainty remains, I am confident in our strategy. I'm proud of the resiliency and adaptability of our employees in a challenging economic environment. Our proven ability to navigate tough times gives me confidence that we can maintain stability in the short term, while staying focused on the critical investments for our future.

We enter a new decade of business with a renewed focus on innovation, sustainable growth and profitability, and a leadership team aligned to our growth strategy. We believe we have the opportunity to once again modernize and disrupt our industry as we did decades ago, building on our unique software position. And we're focused on the combination of long-term growth and our ability to drive scale and leverage to deliver sustainable returns to our shareholders.

With that, we will now take your questions.

[Operator]

[Operator Instructions] Our first question comes from Richard Eastman with Baird.

[Richard Eastman, analyst]

Yes. A couple of questions. Could you just walk through the -- there's quite a dispersion here between the second quarter organic quarter growth rate and decline here. Maybe just kind of walk through the puts and takes around orders, Americas. EMEA. I'm assuming EMEA has the adjustment for India in it. But maybe you could just kind of walk through this. I mean, we go from plus 1% to flat to down 23%. Just kind of looking for some color there.

[Eric Starkloff, executive]

Yes. I could take that, Rick. Good to hear from you. Yes. So first of all, as Karen mentioned in the prepared remarks, the comparisons year-over-year, apples-to-apples. In other words, we're factoring out the India change in the history as well when we quote these numbers. Certainly, as you mentioned, the weakness is most pronounced in EMEA. So that was persistently a weak kind of aligned with both general economic indicators that you would sort of expect right now you're seeing out of Europe as well as the industry exposure being a disproportionate amount of our transportation business in that space. So that was the area that had the weakest performance in the quarter. And I think that's consistent with what we've seen in the markets regionally and by industry.

[Richard Eastman, analyst]

And is that -- do they also have exposure more to the portfolio products piece of your business? I mean, that's just transportation but portfolio products?

[Eric Starkloff, executive]

Yes. They have an exposure to transportation and portfolio at a disproportionate rate. If you think of the broad set of our business, ADG has the largest percentage in Americas and semiconductor correlates a bit more with Asia. So yes, that statement is correct, Rick.

[Richard Eastman, analyst]

Okay. And then just a quick question. Maybe some clarification ones from Karen. Just when you gave your third quarter revenue guidance here, so you're including OptimalPlus revenue of just a couple of million bucks in the second quarter, even though that acquisition will have closed?

[Karen Rapp, executive]

Sorry, no, that's the third quarter, Rick.

[Richard Eastman, analyst]

I'm sorry, I'm sorry, third, yes.

[Karen Rapp, executive]

Correct. That's correct.

[Richard Eastman, analyst]

But that's -- yes. Okay. And why -- is there -- why the deferral upfront like that? If you're talking about a fourth quarter, I think you mentioned $10 million to $12 million, which would be more of a kind of run rate, I would think, for rev rec on OptimalPlus. But why -- okay.

[Karen Rapp, executive]

Yes. So it's -- $9 million to $12 million is the range we provided for fourth quarter for OptimalPlus. We're still going through the contract assessment. As we do the integration work here, and our intent is to align OptimalPlus with the standard terms and conditions that National Instruments has used historically for our enterprise agreements and subscription-based software. As we do that, there's some purchase price accounting implications that drive that GAAP to non-GAAP difference. But also there's a lumpiness that comes with the OptimalPlus business that we believe as we align the contract terms more consistently with NI, will help smooth that out going forward, and that's a piece of what you're seeing there. Traditionally, Q4 would have been a strong quarter for OptimalPlus. And we believe that with some of the smoothing we may do that, that may push into a little bit of next year as well.

[Richard Eastman, analyst]

So if I were to get at a core non-OptimalPlus revenue guide for Q3, are we looking at like $283 million to $323 million?

[Karen Rapp, executive]

So the midpoint of our guidance is $305 million for Q3, that includes the OptimalPlus numbers. So if you pull out OptimalPlus, it'd be relatively consistent with Q2 which is in line with our previous organic seasonality with Q2 and Q3, both being relatively flat.

[Richard Eastman, analyst]

Okay. Okay. All right. Let me -- and just one more question around the head count. What was the head count at the end of the second quarter?

[Karen Rapp, executive]

Yes, it was flat to Q1. We're seeing our ability to retain our employees at this point.

[Richard Eastman, analyst]

Okay. So just little over 7,000. Okay.

[Karen Rapp, executive]

Yes, just over 7,000. Exactly.

[Operator]

And our next question comes from the line of John Marchetti with Stifel.

[John Marchetti, analyst]

Karen, I just wanted to go back to the comment that you made about the expected 3% hit to revenue in the second half for China. I was wondering if you could just give us some sense of how much China is either within APAC or overall as a percent of total revenue? And just a little bit more color there. Is it a situation where because of some of the restrictions that's being placed on customers, you're actually unable to ship to certain customers? Is it more of a demand outlook because customers aren't able to get other pieces of business that they need? I'm just curious if there's a particular vertical or something in particular that we should be looking out for here with -- in relation to that China business.

[Karen Rapp, executive]

Sure. Yes. John, nice to hear from you. China represents about half of our Asia business, still pretty consistently around that level. The impact that we're seeing related to the changes that are coming with the regulations tend to impact our semiconductor business and aerospace, defense and government most heavily. And as I said, it will be about 3% of our revenue for the second half, and that's split pretty evenly across both Q3 and Q4. It's more of a factor of the customers who are able to sell to going forward, and that's what's limiting the opportunities there. Do you want to add to that?

[Eric Starkloff, executive]

Yes, John, I think -- let me just add a little bit of color, John, you can ask another. But as we think a little bit longer term. So yes, that's we've quantified what we think the impact is by those couple of different changes in trade regulation. Clearly, as we think longer term, there are steps that we're taking to mitigate that in terms of where we're focusing our sales teams to make sure that they're aligned, obviously, to the places where we can have the most opportunity within that regulation and also aligns to the companies that might actually be on the beneficial side of some of that regulation. So we do view that sort of moderating over time as we reprioritize. But in the short term, we believe it has that level of impact.

[John Marchetti, analyst]

Just following up on that point there, Eric. If you think out longer term, do you think that this would potentially impact the ability to have a big presence in sort of China's goal of becoming somewhat more independent on the semiconductor side? I mean, again, given everything the administration has clearly laid out in terms of limiting some of that ability and China stated goals of becoming more independent, obviously, test is a big part of that. Just curious how you think about that opportunity over the longer term.

[Eric Starkloff, executive]

Yes. Yes, sure. That's the big question, John. I mean, look, it's been a real dynamic environment, certainly from sort of trade regulation and everything else. But I will say that there are challenges and opportunities that get presented from that. If you think about semiconductor, for example, they're certainly things that are being put in that are more restrictive. There's also significant investments locally in semiconductor technology, of which that creates opportunity for us with start-ups -- more start-ups doing semiconductor that need testing solutions for that. So that's still a significant market for us. It's an area of focus. Obviously, we'll work within the trade regime and the laws that we have. But these opportunities exist as well from some of the local investments that are happening in areas like semiconductor.

[John Marchetti, analyst]

Got it. And then if I can just ask one last question there. Relative to where you were with customers maybe 3 months ago, do you get the sense as you're talking to a lot of them that there -- it's more uncertain now than maybe they even were 3 months ago? Mainly, I guess, from an economic standpoint, as we've seen the impacts of this now a little bit more globally. You've gotten a full quarter of the sort of full pandemic impact on the business for your customers. When you're talking with those customers, are they more cautious now than they were 3 months ago? I'm just curious to get your view of how your customers are behaving right now?

[Eric Starkloff, executive]

Yes, sure. I'll give you 2 perspectives on it. One, and I mentioned this a little bit in the remarks, but certainly, the uncertainty related to the working environment and work from home and all of that kind of stuff, I think people have gotten a little more settled in on that and realize that we can actually be quite effective. When I look at things like we measure customer interactions through virtual visits and all of that, and those have stayed really stable. And we feel really good about our ability to connect to customers. And so I think that part has become sort of much lower and uncertainty as we've realized, hey, the technology works pretty well to sustain our businesses and work with each other and everything else.

I think on the economic side, the -- if I compare uncertainty, I think uncertainty was probably higher a few months ago when this thing was still happening, and we didn't know. But it certainly become clear that there's an economic headwind, that there's a global industrial recession. And I think that's certainly reflected in our experiences with the commentary we gave on under-$20,000 orders and our guidance. And so that's how we're seeing it right now.

[Operator]

And our next question comes from the line of Samik Chatterjee with JPMorgan.

[Joseph Cardoso, analyst]

This is actually Joe Cardoso on for Samik. Just for my first question. I just wanted to see if we could double-click on the order trends towards the end of the quarter. Was there any particular -- if we kind of bifurcate it by end market, how did the order trends kind of compare like in transportation? Are you guys starting to see that end market recover and -- as well as the other ones?

[Karen Rapp, executive]

Joe, it's Karen. Maybe just a high-level picture on this. We gave guidance on June 9 and saw that the -- towards the end of June came in a little weaker than we were expecting. And part of that's what's leading to some of the caution that we're seeing for Q3. So across the board really is how that came in. There wasn't any one thing to point to specifically from that standpoint, other than maybe kind of just this broad-based weakness that we tried to point to and call out with the under-$20,000 orders that we saw seems to be where that was hit heaviest.

[Joseph Cardoso, analyst]

Got it. And then kind of just in gears here. Last quarter, you kind of commented around your expectations around the 5-gig ramp or the 5G ramp. And you kind of bifurcated your expectations around sub-6 and millimeter waves and kind of called out the potential of there being a delay with the millimeter wave. Can we just get an update on your thoughts where you guys are today?

[Eric Starkloff, executive]

Yes, I can take -- yes, sure, Joe. I'll take that. And I gave a little bit of commentary on another sort of drill down on that, which is sort of the infrastructure versus the handset. So we've seen, as we've commented in the last few quarters, a lot of strength in our semiconductor business from 5G infrastructure rollout, both in validation and production. We sort of expect that to moderate a little bit. And then I commented on some of the early validation wins that are related more to chipsets that are going into handsets. So we see that as an advantageous cycle coming up because, of course, validation sort of precedes production and those kind of in the flow of a design. The commentary that I made last quarter on millimeter wave would still be the same position that we have, which is that, that's sort of shifted out over the last few quarters, and we now view that as an opportunity that exists probably in more substantive magnitude in the early part of next year. And so yes, so that's kind of how we view that timing.

Now I will say also that semiconductor overall, I mentioned 5G through the first half has been a growth driver. It's been one of the things that's contributed to that double-digit order growth that I mentioned. And it's offset at places where there's some weakness. You certainly look at some of the bellwethers in semiconductor, and you see some strength, but you see a lot of the sort of mixed-signal players with negative results. So we've been able to overcome some of that headwind with some of the strength in these 5G deployments or chips related to those.

[Operator]

And our next question comes from Mehdi Hosseini with SIG.

[Mehdi Hosseini, analyst]

One follow-up regarding China. If I just look at the impact, 3% to the top line for this, that's almost offsetting incremental [Technical Difficulty] from OptimalPlus. And in that context is a wash, actually OptimalPlus may have a better margin [Technical Difficulty]

[Eric Starkloff, executive]

Yes, Mehdi, sorry, you broke up, and I don't know if we could -- I didn't quite get your whole question.

[Mehdi Hosseini, analyst]

Okay. Let me just quickly repeat that. If I were to take your commentary regarding China, there could be 3% haircut to the top line for the second half. That could be almost be offset by incremental contribution from OptimalPlus. Is that a fair statement?

[Karen Rapp, executive]

Yes, that's -- it's pretty close. That's pretty fair. Yes.

[Mehdi Hosseini, analyst]

Okay. And then if your OpEx is going up by 6% to 7% because of acquisition, how does it trend for -- into Q4? Would they go flat? Or how should I think about it?

[Karen Rapp, executive]

Yes, it stays relatively flat. It's a pretty consistent spend. It fluctuates with future demand.

[Mehdi Hosseini, analyst]

Okay. All right. And then just one follow-up regarding the order trend. North America was relatively stronger than APAC. But I'm a little bit surprised because APAC actually turned on before North America. So is there like a catch-up with more-than-$20,000 orders associated with APAC? Could there be a pent-up in APAC? Or is it just -- that's just the way customers are placing orders for these large orders?

[Eric Starkloff, executive]

Yes. You mean because of the timing of the effect from the virus, is that what you're referring to, Mehdi?

[Mehdi Hosseini, analyst]

Yes, yes. Yes.

[Eric Starkloff, executive]

Yes. I think there's multiple factors at play. I mean, certainly, yes, I think that's true in terms of the timing of the impact of the virus. As I said before, though, I think the bigger impact at this point is really the economic effects of the sort of more interconnected global economy. I think if you look at the Americas, certainly, there's things that create economic headwinds. The strength in ADG, as I mentioned in one of the earlier questions, sort of helps the business there in the Americas because it's sort of disproportionately represented in our Americas region. So that contributed some strengths that offset some of the other headwinds.

I think the order trends from the over and under $20,000, that's actually been fairly consistent regionally, and it's been consistent for several quarters now. In fact, I think that's been really an area of strength of the strategy is that we've, of course, been deliberately shifting our portfolio of capability and our customer interactions to these more -- these higher-dollar systems. And it's been our experience that those tend to correlate to more critical investments that they're making in their companies. And they preserve those critical investments more so when they're under pressure than some of the lower-dollar things, which might be a bit more discretionary. So the fact that, that's held up multiple quarters, multiple regions has been an area of strength.

[Mehdi Hosseini, analyst]

Got you. And if I may, just one quick follow-up. You referenced validation as it relates to millimeter wave smartphone. Some of your peers have also discussed validation in terms of system-level and system-level validation. Are they -- are these characterization the same? Are we just at the beginning of finalizing test methodologies for a smartphone and for millimeter wave application before they go into high-volume manufacturing?

[Eric Starkloff, executive]

Sure. Yes. And Mehdi, my comments were actually broader than that. When I was talking about validation on chipsets for handsets was -- it's still primarily sub-6 gig, still a fairly small amount of millimeter wave. So I just think, broadly speaking, what I'm referring to is the natural timing that happens in waves of infrastructure, then waves of handsets and then a wave of millimeter wave infrastructure and handsets, which we view being in next year.

[Operator]

Our next question comes from the line of Michael Murray with RBC Capital Markets.

[Michael Murray, analyst]

This is Michael Murray on for Robert Muller. I wanted to see if you could give us a little bit more info on your transportation segment. Have the ADAS and electrification segments held up as well as you previously hoped compared to the overall auto market?

[Eric Starkloff, executive]

Yes. Michael, this is Eric. So the combination of those 2 have still grown. I mentioned in the prepared remarks, the biggest strength we saw was actually in the active safety with ADAS and active safety or synonymous in this case. And so those are the areas we're focused on, and that active safety area, in particular, has been the fastest-growing when you just look at the kind of narrowing to the quarter. When I think a little bit longer term, both those areas are areas of strength. And as we said in the past, it's really -- our strategy there is really getting more focused on these areas that remain critical investments to our customer in light of the fact that other parts of that business are tending to follow more of the general transportation industry, which is under headwinds, at least has been for the last few quarters.

[Michael Murray, analyst]

Okay. And I just have a follow-up question, and I'm sorry if you touched on this earlier, but do you have any feedback on how your rebranding has been received? Any increased site traffic or feedback from portfolio customers?

[Eric Starkloff, executive]

Yes. Sure. Thanks, Michael. Yes, early, obviously. I mean, we do see actually some pretty significant increases in things like site traffic and response to some of the actual assets in advertising that we've been doing. So I'd say that early response is positive anecdotally and, of course, through data because as a measurement company, we measure the head count, all this stuff. So yes, it's early, but the results so far have been quite positive.

[Operator]

And I'm not showing any further questions at this time. I'd now like to turn the call back to your speakers for any further remarks.

[Eric Starkloff, executive]

Okay. Thank you, everyone, for joining today. We hope to see you next week at our virtual investor conference. Have a good day.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a great day.