Cognex Corporation (NASDAQ: CGNX) today reported financial
results for the third quarter of 2023. Table 1 below shows selected
financial data for Q3-23 compared with Q3-22, and for the first
nine months of 2023 compared with the same period in 2022.
“We delivered third quarter revenue, gross margin and operating
expenses in line with our guidance,” said Robert J. Willett, CEO of
Cognex. “Business conditions continue to be difficult. The
operating environment remains similar to what we saw last quarter
across each of our end markets.”
Mr. Willett continued, “While we manage through a challenging
operating environment, we continue to stay focused on long-term
growth and take important steps to execute our strategy. In the
third quarter, we grew our served market as we entered two
important adjacent markets – the vision sensor market with our
In-Sight SnAPP Sensor launch and the optical components market
through the acquisition of Moritex. These two initiatives expand
our served market size by $1.5 billion, and are expected to
represent strong, operating margin accretive growth areas for
Cognex.”
Table 1
(Dollars in thousands, except per share amounts)
Revenue
Net
Income
Net Income
per Diluted
Share
Non-GAAP
Net Income
per Diluted Share*
Quarterly Comparisons
Current quarter: Q3-23
$197,241
$18,916
$0.11
$0.16
Prior year’s quarter: Q3-22
$209,622
$33,980
$0.19
$0.21
Change: Q3-23 to Q3-22
(6)%
(44)%
(42)%
(24)%
Year-to-Date Comparisons
Nine months ended Oct. 1, 2023
$640,877
$102,005
$0.59
$0.61
Nine months ended Oct. 2, 2022
$766,657
$160,214
$0.91
$1.03
Change from first nine months of 2023 to
first nine months of 2022
(16)%
(36)%
(35)%
(41)%
* A reconciliation of net income per share
from GAAP to non-GAAP is shown in Exhibit 2 of this news
release.
Details of the
Quarter
Statement of Operations Highlights – Q3 2023
- Revenue decreased by 6% from Q3-22. This decrease was due
primarily to lower revenue from consumer electronics, which was
impacted by project timing and softer demand, particularly in
China. The semiconductor capital equipment market remains in a
downcycle, and Cognex is continuing to experience soft investment
by customers across many of its other end markets.
- Gross margin was 72% for Q3-23 compared to 73% for Q3-22. The
decrease was due to a less favorable product and industry mix in
Q3-23 offset by a reduction in inventory sourced through brokers
compared to a year ago.
- Research, Development, & Engineering (RD&E) expenses
decreased by 4% from Q3-22. The decrease was due to lower incentive
compensation expenses.
- Selling, General & Administrative (SG&A) expenses
increased by 9% from Q3-22. The increase was due to
employee-related expenses for the company’s Emerging Customer
initiative and transaction costs related to the acquisition of
Moritex Corporation. These increases were partially offset by tight
management of discretionary spending and lower incentive
compensation expenses.
- Cognex recorded a pre-tax gain of $2.8 million in Q3-23 and a
pre-tax charge of $2.9 million in Q3-22 related to the previously
disclosed June 2022 fire at the company’s contract
manufacturer.
- The foreign currency loss reported by Cognex in Q3-23 included
$8.5 million on the settlement of a foreign currency forward
contract that hedged the company’s ¥40 billion obligation to buy
Moritex Corporation.
- The effective tax rate was 30% in Q3-23 and 14% in Q3-22 on a
GAAP basis, and 18% and 15%, respectively, on a non-GAAP basis. A
reconciliation of the effective tax rate from GAAP to non-GAAP is
shown in Exhibit 2 of this news release.
Balance Sheet Highlights – October 1, 2023
- Cognex’s financial position as of October 1, 2023 continued to
be strong, with $846 million in cash and investments and no debt.
In the first nine months of 2023, Cognex generated $98 million in
cash from operations. In addition, the company spent $60 million to
repurchase its common stock and paid $36 million in dividends to
shareholders. Cognex intends to continue to repurchase shares of
its common stock pursuant to its existing stock repurchase program,
subject to market conditions and other relevant factors.
- After the balance sheet date, Cognex acquired all the
outstanding shares of Moritex Corporation on October 18, 2023, in
an all-cash transaction for ¥40 billion, or approximately $270
million based on closing-date foreign exchange rates.
Financial Outlook – Q4 2023
- Cognex expects revenue to be between $175 million and $195
million. This includes an expected $5 million to $7 million for
approximately six weeks of revenue from Moritex Corporation. This
range is relatively consistent on a sequential basis with Q3-23,
reflecting the difficult business environment that Cognex is
currently experiencing.
- Gross margin is expected to be approximately 70% on a non-GAAP
basis, primarily due to continued operating deleverage and an
expected unfavorable revenue mix.
- Operating expenses are expected to increase by low single
digits on a non-GAAP basis due to the timing of incentive
compensation and the addition of Moritex, partially offset by
continued diligent cost management.
- Cognex expects to record one-time charges totaling
approximately $15 million related primarily to the Moritex
acquisition. Of this total, the two largest components are
acquisition expenses and a charge to cost of revenue for an
increase in Moritex inventory to fair market value.
- The effective tax rate is expected to be 16% on a non-GAAP
basis.
Non-GAAP Financial Measures
- Exhibit 2 of this news release includes a reconciliation of
certain financial measures from GAAP to non-GAAP. Cognex believes
these non-GAAP financial measures are helpful because they allow
investors to more accurately compare results over multiple periods
using the same methodology that management employs in its budgeting
process and in its review of operating results. Non-GAAP
presentations exclude certain one-time discrete events, such as
transaction costs related to an acquisition, items related to a
fire, a loss on a foreign exchange forward contract entered to
hedge the purchase price of an acquisition, and discrete tax items
(because they are outside of Cognex’s normal business operations
and not used by management to assess Cognex’s operating results).
Cognex also uses results on a constant-currency basis as one
measure to evaluate its performance and compares results between
periods as if the exchange rates had remained constant
period-over-period. Cognex does not intend for non-GAAP financial
measures to be considered in isolation, or as a substitute for
financial information provided in accordance with GAAP.
- We estimate the tax effect of items identified in the
reconciliation by applying the effective tax rate to the pre-tax
amount. However, if a specific tax rate or tax treatment is
required because of the nature of the item and/or the tax
jurisdiction where the item was recorded, we estimate the tax
effect by applying the relevant specific tax rate or tax treatment,
rather than the effective tax rate.
Analyst Conference Call and Simultaneous Webcast
- Cognex will host a conference call today at 8:30 a.m. Eastern
Daylight Time (EDT). The telephone number is (877) 704-4573 (or
(201) 389-0911 if outside the United States). A replay will begin
at 12:30 p.m. EDT today and will be available until 11:59 p.m. EDT
on Friday, November 3, 2023. The telephone number for the replay is
(877) 660-6853 (or (201) 612-7415 if outside the United States).
The access code for both the live call and the replay is
13741658.
- A real-time audio broadcast of the conference call or an
archived recording will be accessible on the Events &
Presentations page of the Cognex Investor website:
https://www.cognex.com/Investor.
About Cognex Corporation
Cognex Corporation invents and commercializes technologies that
address some of the most critical manufacturing and distribution
challenges. We are a leading global provider of machine vision
products and solutions that improve efficiency and quality in
high-growth-potential businesses across attractive industrial end
markets. Our solutions blend physical products and software to
capture and analyze visual information, allowing for the automation
of manufacturing and distribution tasks for customers worldwide.
Machine vision products are used to automate the manufacturing or
distribution and tracking of discrete items, such as mobile phones,
electric vehicle batteries and e-commerce packages, by locating,
identifying, inspecting, and measuring them. Machine vision is
important for applications in which human vision is inadequate to
meet requirements for size, accuracy, or speed, or in instances
where substantial cost savings or quality improvements are
maintained.
Cognex is a world leader in the machine vision industry, having
shipped more than 4 million image-based products, representing over
$10 billion in cumulative revenue, since the company's founding in
1981. Headquartered in Natick, Massachusetts, USA, Cognex has
offices and distributors located throughout the Americas, Europe,
and Asia. For details, visit Cognex online at www.cognex.com.
Certain statements made in this news release, which do not
relate solely to historical matters, are forward-looking
statements. These statements can be identified by use of the words
“expects,” “anticipates,” “estimates,” “potential,” “believes,”
“projects,” “intends,” “plans,” “will,” “may,” “shall,” “could,”
“should,” and similar words and other statements of a similar
sense. These statements are based on our current estimates and
expectations as to prospective events and circumstances, which may
or may not be in our control and as to which there can be no firm
assurances given. These forward-looking statements, which include
statements regarding business and market trends, future financial
performance and financial targets, the integration and expected
results from acquired businesses, including Moritex Corporation,
customer demand and order rates and timing of related revenue,
managing supply shortages, delivery lead times, future product mix,
research and development activities, sales and marketing
activities, new product offerings and product development
activities, cost management, capital expenditures, investments,
liquidity, dividends and stock repurchases, strategic and growth
plans and opportunities (including entry into new markets and our
“Emerging Customer” sales initiative), and estimated tax benefits
and expenses and other tax matters, involve known and unknown risks
and uncertainties that could cause actual results to differ
materially from those projected. Such risks and uncertainties
include: (1) the reliance on key suppliers, such as our primary
contract manufacturer, to manufacture and deliver products; (2)
delays in the delivery of our products, the failure to meet
delivery schedules, and resulting customer dissatisfaction or loss
of sales; (3) the inability to obtain, or the delay in obtaining,
components for our products at reasonable prices; (4) the failure
to effectively manage product transitions or accurately forecast
customer demand which could result in excess or obsolete inventory
and resulting charges; (5) the inability to manage disruptions to
our distribution centers or to our key suppliers; (6) the expected
impact of the fire at our primary contract manufacturer’s plant and
related recoveries; (7) the inability to design and manufacture
high-quality products; (8) the loss of, or curtailment of purchases
by, large customers in the logistics, consumer electronics, or
automotive industries; (9) information security breaches; (10) the
failure to comply with laws or regulations relating to data privacy
or data protection; (11) the inability to protect our proprietary
technology and intellectual property; (12) the inability to attract
and retain skilled employees and maintain our unique corporate
culture; (13) the inability to keep pace with the rapid rate of
technological change and customer demands in the high-technology
marketplace, the inability to develop and introduce new products to
the market in a successful and timely manner, and the technological
obsolescence of current products; (14) the failure to properly
manage the distribution of products and services, including the
management of lead times and delivery dates; (15) the impact of
competitive pressures; (16) the challenges in integrating and
achieving expected results from acquired businesses, including
Moritex Corporation; (17) potential disruptions in our business
systems; (18) potential impairment charges with respect to our
investments or acquired intangible assets; (19) exposure to
additional tax liabilities, increases and fluctuations in our
effective tax rate, and other tax matters; (20) fluctuations in
foreign currency exchange rates and the use of derivative
instruments; (21) unfavorable global economic conditions, including
increases in interest rates and high inflation rates; (22) business
disruptions from natural or man-made disasters, such as fire, or
public health issues; (23) economic, political, and other risks
associated with international sales and operations, including the
impact of trade disputes with China, the Russia-Ukraine war, and
the Israel-Hamas war; (24) exposure to potential liabilities,
increased costs, reputational harm, and other adverse effects
associated with expectations relating to environmental, social, and
governance considerations; (25) stock price volatility; and (26)
our involvement in time-consuming and costly litigation or activist
shareholder activities; and the other risks detailed in Cognex
reports filed with the SEC, including its Form 10-K for the fiscal
year ended December 31, 2022 and Form 10-Q for the fiscal quarter
ended October 1, 2023. You should not place undue reliance upon any
such forward-looking statements, which speak only as of the date
made. Cognex disclaims any obligation to update forward-looking
statements after the date of such statements.
Exhibit 1
COGNEX CORPORATION CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share
amounts)
Three-months Ended
Nine-months Ended
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
(unaudited)
(unaudited)
Revenue
$
197,241
$
209,622
$
640,877
$
766,657
Cost of revenue (1)
54,467
57,383
174,680
214,316
Gross margin
142,774
152,239
466,197
552,341
Research, development, and engineering
expenses (1)
32,580
33,954
104,707
103,999
Selling, general, and administrative
expenses (1)
82,307
75,371
248,767
236,156
Loss (recovery) from fire (Note 17)
(2,750
)
2,891
(5,250
)
20,294
Operating income
30,637
40,023
117,973
191,892
Foreign currency gain (loss)
(8,699
)
(1,880
)
(9,910
)
(4,367
)
Investment income
4,891
1,416
12,573
4,389
Other income (expense)
173
(214
)
358
(450
)
Income before income tax expense
27,002
39,345
120,994
191,464
Income tax expense
8,086
5,365
18,989
31,250
Net income
$
18,916
$
33,980
$
102,005
$
160,214
Net income per weighted-average common and
common-equivalent share:
Basic
$
0.11
$
0.20
$
0.59
$
0.92
Diluted
$
0.11
$
0.19
$
0.59
$
0.91
Weighted-average common and
common-equivalent shares outstanding:
Basic
172,169
173,256
172,408
173,640
Diluted
173,354
174,327
173,659
175,233
Cash dividends per common share
$
0.070
$
0.065
$
0.210
$
0.195
(1) Amounts include stock-based compensation expense, as
follow:
Three-months Ended
Nine-months Ended
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
(unaudited)
(unaudited)
Cost of revenue
$
435
$
468
$
1,497
$
1,513
Research, development, and engineering
3,459
4,209
12,657
12,508
Selling, general, and administrative
8,471
8,689
27,364
27,398
Total stock-based compensation expense
$
12,365
$
13,366
$
41,518
$
41,419
Exhibit 2
COGNEX CORPORATION RECONCILIATION OF
SELECTED ITEMS FROM GAAP TO NON-GAAP* (Unaudited) (in
thousands, except per share amounts)
Three-months Ended
Nine-months Ended
Oct. 1, 2023
Oct. 2, 2022
Oct. 1, 2023
Oct. 2, 2022
Revenue
$
197,241
$
209,622
$
640,877
$
766,657
Cost of revenue
54,467
57,383
174,680
214,316
Gross margin
142,774
152,239
466,197
552,341
Total operating expenses (GAAP)
112,137
112,216
348,224
360,449
Operating income (GAAP)
$
30,637
$
40,023
$
117,973
$
191,892
Percentage of revenue (GAAP)
16
%
19
%
18
%
25
%
Adjustments to operating expenses:
Moritex acquisition costs
1,170
-
1,784
-
Loss (recovery) from fire
(2,750
)
2,891
(5,250
)
20,294
Total operating expenses (Non-GAAP)
113,717
109,325
351,690
340,155
Operating income (Non-GAAP)
$
29,057
$
42,914
$
114,507
$
212,186
Percentage of revenue (Non-GAAP)
15
%
20
%
18
%
28
%
Other income (expense) (GAAP)
(3,635
)
(678
)
3,021
(428
)
Adjustments to other income (expense):
Foreign currency gain (loss) on forward
contract to hedge Moritex purchase price
(8,456
)
-
(8,456
)
-
Other income (expense) (Non-GAAP)
4,821
(678
)
11,477
(428
)
Income before income tax expense
(GAAP)
27,002
39,345
120,994
191,464
Income tax expense (GAAP)
8,086
5,365
18,989
31,250
Effective tax rate (GAAP)
30
%
14
%
16
%
16
%
Net income (GAAP)
$
18,916
$
33,980
$
102,005
$
160,214
Income before income tax expense
(Non-GAAP)
33,878
42,236
125,984
211,758
Adjustments to income tax expense:
Tax effect of adjustments to operating
expenses
184
(928
)
461
(3,368
)
Tax effect of adjustments to other income
(expense)
(2,080
)
-
(2,080
)
-
Adjustments due to discrete tax (benefit)
expense
4,035
(2
)
840
3,984
Income tax expenses (Non-GAAP)
5,947
6,295
19,769
30,634
Effective tax rate (Non-GAAP)
18
%
15
%
16
%
14
%
Net income (Non-GAAP)
$
27,931
$
35,941
$
106,215
$
181,124
Net income per diluted weighted-average
common and common-equivalent share (GAAP)
$
0.11
$
0.19
$
0.59
$
0.91
Per share impact of non-GAAP adjustments
identified above
0.05
0.02
0.02
0.12
Net income per diluted weighted-average
common and common-equivalent share (Non-GAAP)
$
0.16
$
0.21
$
0.61
$
1.03
Diluted weighted-average common and
common-equivalent shares outstanding (GAAP)
173,354
174,327
173,659
175,233
*Non-GAAP information in prior periods has
been restated to reflect a different presentation format or
calculation. There have been no changes to previously reported GAAP
figures.
Exhibit 3
COGNEX CORPORATION CONSOLIDATED
BALANCE SHEETS (In thousands)
October 1, 2023
December 31, 2022
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
395,501
$
181,374
Current investments, amortized cost of
$120,831 and $223,545 in 2023 and 2022, respectively, allowance for
credit losses of $0 in 2023 and 2022
117,147
218,759
Accounts receivable, allowance for credit
losses of $580 and $730 in 2023 and 2022, respectively
130,542
125,417
Unbilled revenue
1,588
2,179
Inventories
133,866
122,480
Prepaid expenses and other current
assets
68,347
67,490
Total current assets
846,991
717,699
Non-current investments, amortized cost of
$349,060 and $476,148 in 2023 and 2022, respectively, allowance for
credit losses of $0 in 2023 and 2022
332,991
454,117
Property, plant, and equipment, net
82,965
79,714
Operating lease assets
66,760
37,682
Goodwill
241,042
242,630
Intangible assets, net
9,986
12,414
Deferred income taxes
403,013
407,241
Other assets
6,151
6,643
Total assets
$
1,989,899
$
1,958,140
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
23,053
$
27,103
Accrued expenses
79,121
93,235
Accrued income taxes
19,302
18,129
Deferred revenue and customer deposits
40,246
40,787
Operating lease liabilities
7,982
8,454
Total current liabilities
169,704
187,708
Non-current operating lease
liabilities
60,450
31,298
Deferred income taxes
233,360
249,961
Reserve for income taxes
19,450
15,866
Non-current accrued income taxes
18,337
33,008
Other liabilities
—
1,905
Total liabilities
501,301
519,746
Commitments and contingencies (Note
10)
Shareholders’ equity:
Preferred stock, $.01 par value –
Authorized: 400 shares in 2023 and 2022, respectively; no shares
issued and outstanding
—
—
Common stock, $.002 par value –
Authorized: 300,000 shares in 2023 and 2022, respectively; issued
and outstanding: 172,142 and 172,631 shares in 2023 and 2022,
respectively
344
345
Additional paid-in capital
1,023,960
979,167
Retained earnings
534,337
528,179
Accumulated other comprehensive loss, net
of tax
(70,043
)
(69,297
)
Total shareholders’ equity
1,488,598
1,438,394
Total liabilities and shareholders'
equity
$
1,989,899
$
1,958,140
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231031109589/en/
Nathan McCurren Head of Investor Relations Cognex Corporation
ir@cognex.com
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