NATICK, Mass.--(BUSINESS WIRE)--October 31, 2023--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)

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)

(1) Amounts include stock-based compensation expense, as follow:

Exhibit 2

COGNEX CORPORATION
RECONCILIATION OF SELECTED ITEMS FROM GAAP TO NON-GAAP*
(Unaudited)
(in thousands, except per share amounts)

Exhibit 3

COGNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)