Cognex Corporation (NASDAQ: CGNX) today reported financial
results for the second quarter of 2023. Table 1 below shows
selected financial data for Q2-23 compared with Q2-22, and for the
first six months of 2023 compared with the same period in 2022.
“We delivered second quarter revenue at the top end of our
expected range, gross margin in line with our guidance, and
favorable operating expenses leading to a strong sequential step-up
in operating margin,” said Robert J. Willett, CEO of Cognex.
“However, these results are not representative of the business
conditions we are experiencing in our markets, which continue to
weaken further.”
Mr. Willett continued, “While we are managing through a
challenging operating environment, we remain confident in our
strategy, and we continue to invest in long-term growth
opportunities.”
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: Q2-23
$242,512
$57,474
$0.33
$0.32
Prior year’s quarter: Q2-22
$274,628
$58,901
$0.34
$0.41
Change: Q2-23 to Q2-22
(12)%
(2)%
(3)%
(22)%
Year-to-Date Comparisons
Six months ended July 2, 2023
$443,636
$83,089
$0.48
$0.45
Six months ended July 3, 2022
$557,035
$126,234
$0.72
$0.83
Change from first six months of 2023 to
first six months of 2022
(20)%
(34)%
(33)%
(46)%
* Non-GAAP net income per diluted share
excludes discrete tax items in all periods presented, a fire loss
in Q2-22 and proceeds from business interruption insurance in
Q2-23. A reconciliation from GAAP to Non-GAAP is shown in Exhibit 2
of this news release.
Details of the
Quarter
Statement of Operations Highlights – Second Quarter of
2023
- Revenue decreased by 12% from Q2-22, or 10% in constant
currency. The decline compared to a strong Q2-22 was primarily due
to ongoing softness in e-commerce logistics and weaker demand from
our factory automation customers, particularly in the consumer
electronics and semiconductor capital equipment markets.
- Gross margin was 74% for Q2-23 compared to 72% for Q2-22. Gross
margin returned to our mid-70% target as higher priced inventory
sourced through brokers has now worked its way through the
P&L.
- Research, Development, & Engineering (RD&E) expenses
decreased by 1% from Q2-22. Lower incentive compensation expenses
were partially offset by the company’s investment in engineering
resources over the past year.
- Selling, General & Administrative (SG&A) expenses
increased by 4% from Q2-22. The increase was due primarily to
employee-related expenses for the company’s Emerging Customer
initiative, including sales force additions, and travel.
- Cognex recorded a pre-tax gain of $2.5 million in Q2-23 for
proceeds from business interruption insurance related to the June
2022 fire at our primary contract manufacturer and a non-cash net
charge of $17.4 million in Q2-22 for the write-off of company
assets destroyed or abandoned because of the fire.
- The effective tax rate was 15% in Q2-23 and 9% in Q2-22. The
effective tax rate was 15% and 13% for Q2-23 and Q2-22,
respectively, on a Non-GAAP basis excluding discrete tax items and
fire-related items in both periods.
Balance Sheet Highlights – July 2, 2023
- Cognex’s financial position as of July 2, 2023 continued to be
strong, with $832 million in cash and investments and no debt. In
the first six months of 2023, Cognex generated $57 million in cash
from operations. In addition, the company spent $49 million to
repurchase its common stock and paid $24 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.
Financial Outlook – Q3 2023
- Cognex expects Q3-23 revenue to be between $180 million and
$200 million. This range represents a decrease on a sequential
basis primarily driven by further softening of manufacturing
investment.
- Gross margin for Q3-23 is expected to be in the low-70% range,
a decrease from 74% in Q2-23 driven primarily by operating
deleverage and less favorable revenue mix.
- Operating expenses are expected to decrease by low-single
digits on a sequential basis despite a further ramp in Emerging
Customer investment as we remain diligent about managing
discretionary costs.
- The Non-GAAP effective tax rate is expected to be 16%.
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 a
fire loss, proceeds from business disruption insurance, 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 Sunday, August 6, 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
13739811.
- 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 (“the Company” or “Cognex”) 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 can be gained.
Cognex is the world's 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 expected impact of the fire
at our primary contract manufacturer's plant on our assets,
business and results of operations and related recoveries, 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 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; (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 technological obsolescence
of current products and the inability to develop new 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; (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 and the war in Ukraine; (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 July
2, 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
Six-months Ended
July 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
(unaudited)
(unaudited)
Revenue
$
242,512
$
274,628
$
443,636
$
557,035
Cost of revenue (1)
62,829
78,143
120,213
156,933
Gross margin
179,683
196,485
323,423
400,102
Research, development, and engineering
expenses (1)
33,585
33,991
72,127
70,045
Selling, general, and administrative
expenses (1)
83,423
79,950
166,460
160,785
Loss (recovery) from fire
(2,500
)
17,403
(2,500
)
17,403
Operating income
65,175
65,141
87,336
151,869
Foreign currency gain (loss)
(1,605
)
(2,043
)
(1,211
)
(2,487
)
Investment income
4,095
1,505
7,682
2,973
Other income (expense)
112
(188
)
185
(236
)
Income before income tax expense
67,777
64,415
93,992
152,119
Income tax expense
10,303
5,514
10,903
25,885
Net income
$
57,474
$
58,901
$
83,089
$
126,234
Net income per weighted-average common and
common-equivalent share:
Basic
$
0.33
$
0.34
$
0.48
$
0.73
Diluted
$
0.33
$
0.34
$
0.48
$
0.72
Weighted-average common and
common-equivalent shares outstanding:
Basic
172,429
173,507
172,527
173,830
Diluted
173,622
174,993
173,791
175,874
Cash dividends per common share
$
0.070
$
0.065
$
0.140
$
0.130
(1) Amounts include stock-based
compensation expense, as follow:
Three-months Ended
Six-months Ended
July 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
(unaudited)
(unaudited)
Cost of revenue
$
441
$
482
$
1,062
$
1,045
Research, development, and engineering
3,308
3,851
9,198
8,299
Selling, general, and administrative
8,825
8,664
18,893
18,709
Total stock-based compensation expense
$
12,574
$
12,997
$
29,153
$
28,053
Exhibit 2
COGNEX CORPORATION
RECONCILIATION OF SELECTED
ITEMS FROM GAAP TO NON-GAAP*
(Unaudited)
(in thousands, except per
share amounts)
Three-months Ended
Six-months Ended
July 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
Revenue
$
242,512
$
274,628
$
443,636
$
557,035
Cost of revenue
62,829
78,143
120,213
156,933
Gross margin
179,683
196,485
323,423
400,102
Total operating expenses (GAAP)
114,508
131,344
236,087
248,233
Operating income (GAAP)
$
65,175
$
65,141
$
87,336
$
151,869
Percentage of revenue (GAAP)
27
%
24
%
20
%
27
%
Adjustments to operating expenses:
Loss (recovery) from fire
(2,500
)
17,403
(2,500
)
17,403
Total operating expenses (Non-GAAP)
117,008
113,941
238,587
230,830
Operating income (Non-GAAP)
$
62,675
$
82,544
$
84,836
$
169,272
Percentage of revenue (Non-GAAP)
26
%
30
%
19
%
30
%
Other income (expense) (GAAP)
2,602
(726
)
6,656
250
Income before income tax expense
(GAAP)
67,777
64,415
93,992
152,119
Income tax expense (GAAP)
10,303
5,514
10,903
25,885
Effective tax rate (GAAP)
15
%
9
%
12
%
17
%
Net income (GAAP)
$
57,474
$
58,901
$
89,089
$
126,234
Income before income tax expense
(Non-GAAP)
65,277
81,818
91,492
169,522
Adjustments to income tax expense:
Tax effect of adjustments to operating
expenses
433
(2,440
)
433
(2,440
)
Adjustments due to discrete tax (benefit)
expense
399
(2,352
)
(3,195
)
3,986
Income tax expenses (Non-GAAP)
9,471
10,306
13,665
24,339
Effective tax rate (Non-GAAP)
15
%
13
%
15
%
14
%
Net income (Non-GAAP)
$
55,806
$
71,512
$
77,827
$
145,183
Net income per diluted weighted-average
common and common-equivalent share (GAAP)
$
0.33
$
0.34
$
0.48
$
0.72
Per share impact of non-GAAP adjustments
identified above
(0.01
)
0.07
(0.03
)
0.11
Net income per diluted weighted-average
common and common-equivalent share (Non-GAAP)
$
0.32
$
0.41
$
0.45
$
0.83
Diluted weighted-average common and
common-equivalent shares outstanding (GAAP)
173,622
174,993
173,791
175,874
*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)
July 2, 2023
December 31, 2022
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
177,485
$
181,374
Current investments, amortized cost of
$195,690 and $223,545 in 2023 and 2022, respectively, allowance for
credit losses of $0 in 2023 and 2022
191,474
218,759
Accounts receivable, allowance for credit
losses of $602 and $730 in 2023 and 2022, respectively
147,864
125,417
Unbilled revenue
2,243
2,179
Inventories
126,226
122,480
Prepaid expenses and other current
assets
73,090
67,490
Total current assets
718,382
717,699
Non-current investments, amortized cost of
$481,101 and $476,148 in 2023 and 2022, respectively, allowance for
credit losses of $0 in 2023 and 2022
463,494
454,117
Property, plant, and equipment, net
81,638
79,714
Operating lease assets
68,594
37,682
Goodwill
241,582
242,630
Intangible assets, net
10,729
12,414
Deferred income taxes
407,257
407,241
Other assets
6,438
6,643
Total assets
$
1,998,114
$
1,958,140
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
26,109
$
27,103
Accrued expenses
83,605
93,235
Accrued income taxes
19,121
18,129
Deferred revenue and customer deposits
43,439
40,787
Operating lease liabilities
8,188
8,454
Total current liabilities
180,462
187,708
Non-current operating lease
liabilities
61,852
31,298
Deferred income taxes
237,357
249,961
Reserve for income taxes
19,239
15,866
Non-current accrued income taxes
18,338
33,008
Other liabilities
403
1,905
Total liabilities
517,651
519,746
Commitments and contingencies
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: 172,293 and 172,631 shares in 2023 and 2022,
respectively
345
345
Additional paid-in capital
1,010,973
979,167
Retained earnings
537,947
528,179
Accumulated other comprehensive loss, net
of tax
(68,802
)
(69,297
)
Total shareholders’ equity
1,480,463
1,438,394
Total liabilities and shareholders'
equity
$
1,998,114
$
1,958,140
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803424774/en/
Nathan McCurren Head of Investor Relations +1 508-654-1755
Nathan.McCurren@cognex.com
Cognex (NASDAQ:CGNX)
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