Group 1 - Cognex (NASDAQ: CGNX) reported solid results in Q2, alleviating concerns regarding the potential impact of tariffs [1] - Despite the positive results, caution is warranted as the demand environment remains soft and the effects of tariffs are just beginning to manifest [1] - Narweena, an asset manager, focuses on identifying market dislocations due to misunderstandings of long-term business prospects, aiming for excess risk-adjusted returns through secular growth opportunities [1] Group 2 - Narweena's research emphasizes company and industry fundamentals to uncover unique insights, with a high risk appetite and a long-term investment horizon [1] - The firm targets deeply undervalued stocks, particularly in smaller cap markets where competitive advantages are not immediately apparent [1] - An aging population with low growth and stagnating productivity is expected to create new investment opportunities, while many industries may face stagnation or secular decline [1] Group 3 - The economic landscape is increasingly dominated by asset-light businesses, leading to a declining need for infrastructure investments over time [1] - A large pool of capital is pursuing a limited set of investment opportunities, resulting in rising asset prices and compressed risk premia [1] - Richard Durant, the leader of Narweena, holds degrees in engineering and finance and has passed the CFA exams, indicating a strong educational background [1]

Group 1 - The stock of Cognex is considered a buy due to a combination of underlying secular growth and the potential for improving cyclical growth [1] - The increasing adoption of automation and machine vision technologies is crucial for modern manufacturing, especially in reshoring from lower labor cost countries [2] - Cognex's machine vision technology enhances efficiency in assembly lines and logistics by performing tasks more effectively than human capabilities [2] Group 2 - The potential of deep learning through AI is significant for Cognex, as its software can learn from examples to identify production anomalies, positioning the company as a player in the AI evolution [3] - Cognex's growth is influenced by cyclical factors, particularly its exposure to capital spending in interest-rate-sensitive sectors like automotive and consumer electronics [4] - High interest rates have negatively impacted Cognex's growth prospects, but a potential decrease in rates could lead to increased capital spending from automakers and electronics companies, benefiting Cognex [7]

Company Overview - Cognex Corporation is a global leader in industrial machine vision, with over 40 years of experience in making advanced machine vision technology accessible for manufacturing and distribution companies [2] - The company focuses on automation to enhance speed, intelligence, and efficiency across various industries, including automotive, consumer electronics, and packaged goods [2] - Cognex is headquartered near Boston, USA, operates in over 30 countries, and serves more than 30,000 customers worldwide [3] Recent Developments - Dennis Fehr, the Chief Financial Officer of Cognex, will participate in a fireside chat at the KeyBanc Capital Markets Technology Leadership Forum on August 11, 2025, at 1:30 p.m. Mountain Time [1] - The event will be accessible via a live webcast and subsequent replay on Cognex's Investor Relations website [1]

Group 1: Market Performance - The Connected Economy 100 index experienced a decline of 4.2%, with significant drops in companies like Xero, iRobot, and United Healthcare, while the "eat" pillar remained stable [1] - The index's performance over different time frames shows a year-to-date increase of 10.04% and a one-year increase of 30.85% [3] Group 2: LendingClub Performance - LendingClub's stock rose by 21% due to strong earnings, with personal-loan originations increasing by 32% year-on-year to $2.4 billion [2] - The net charge-off ratio for loans decreased to 3%, about half of the previous year's level, indicating improved credit trends [2] - Total revenue increased by 33% to $248 million, with GAAP profit reaching $38 million [2] Group 3: Cognex Performance - Cognex reported a 19% increase in stock value, with second-quarter revenue rising 4% to $249 million, marking its fourth consecutive quarter of organic growth [5] - The adjusted EBITDA margin improved to 20.7%, the highest in two years, driven by broad-based demand across various sectors [5][6] - Free cash flow reached $40 million, with management projecting up to 9% sales growth in the current quarter [5] Group 4: CyberArk Acquisition - CyberArk's stock surged following the announcement of its acquisition by Palo Alto Networks in a deal valued at approximately $25 billion [7] - Shareholders will receive $45 in cash and 2.2005 shares of Palo Alto for each share of CyberArk, representing a 26% premium to the stock's 10-day average [7] - The acquisition is positioned as a strategic move to enhance Palo Alto's identity protection capabilities in the AI-driven market [8]

Financial Data and Key Metrics Changes - Revenue for Q2 was $249 million, an increase of 4% year-on-year, marking the fourth consecutive quarter of organic growth [9][20] - Adjusted EBITDA increased by 9% year-on-year, with an adjusted EBITDA margin expanding by 80 basis points to 20.7%, the highest quarterly margin in two years [10][19] - Adjusted EPS rose by 12% year-on-year, representing the fourth consecutive quarter of EPS growth [19][23] - Free cash flow generation totaled $40 million, with a trailing twelve-month free cash flow of $180 million, up 138% compared to the previous year [24] Business Line Data and Key Metrics Changes - Strong growth in logistics, consumer electronics, and packaging, with logistics revenue growing double digits year-on-year [14][16] - Packaging revenue increased mid-single digits year-on-year, driven by health care and fast-moving consumer goods [15][16] - Consumer electronics revenue increased year-on-year, with expectations for continued strong growth in Q3 [16] Market Data and Key Metrics Changes - Europe revenue grew by 13% year-on-year, primarily due to changes in ordering entities [20] - The Americas grew by 8%, led by logistics and packaging [20] - Greater China revenue declined by 18%, reflecting shifts in the consumer electronics supply chain [20] Company Strategy and Development Direction - The company aims to be the number one provider of AI technology for industrial machine vision applications, enhance customer experience, and double the number of customers served [7][8] - A focus on Salesforce transformation is expected to drive growth and improve customer engagement [10] - Continued investment in AI innovation, exemplified by the One Vision platform, which aims to simplify the deployment of AI-powered vision tools [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's direction and the positive response from the organization towards strategic objectives [17] - The outlook for logistics remains strong, driven by investments from e-commerce players [14] - Caution was noted regarding the automotive sector, which is expected to see a modest decline [15] Other Important Information - The company entered a commercial partnership for medical lab automation, expected to generate a one-time revenue benefit in Q3 [30] - Anticipated tax implications from recent U.S. tax law changes are expected to be neutral to adjusted EPS in 2025 [31] Q&A Session Summary Question: Changes in process driving better margins - Management highlighted an intense focus on growth initiatives and cost management across the organization, leading to improved margins [38][40][42] Question: Impact of new product releases in consumer electronics - New product releases require long-term engagement in manufacturing design, with growth driven by adding value and complete solutions [44][45][46] Question: Trends in packaging and consumer electronics - Growth in packaging is driven by investments in sales channels and increased demand in health care and fast-moving consumer goods [52][56] Question: Logistics market dynamics - Growth is balanced between new capacity additions and improvements in existing facilities, with a focus on traceability and barcode reading [62][63] Question: Pricing and tariffs impact - Pricing pressures have eased, and the company is working to mitigate costs while maintaining a healthy demand outlook [111][113] Question: M&A strategy and opportunities - The company is considering non-vision adjacencies for acquisitions, maintaining a high bar for strategic fit and value creation [97][100]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $249 million, an increase of 4% year-over-year, marking the fourth consecutive quarter of organic growth [8][20] - Adjusted EBITDA increased by 9% year-over-year, with an adjusted EBITDA margin expanding by 80 basis points to 20.7%, the highest quarterly margin in two years [9][19] - Adjusted EPS grew by 12% year-over-year, representing the fourth consecutive quarter of EPS growth [19][23] - Free cash flow generation totaled $40 million, with a trailing twelve-month free cash flow of $180 million, up 138% compared to the previous year [24] Business Line Data and Key Metrics Changes - The logistics segment saw double-digit growth year-over-year, marking the sixth consecutive quarter of growth, driven by investments from large e-commerce players [13][15] - Consumer electronics revenue increased year-over-year, with expectations for continued strong growth in Q3 [15][16] - The packaging business showed mid-single-digit growth year-over-year, supported by healthcare and fast-moving consumer goods [14][15] - The automotive segment continued to decline year-over-year, with a more modest decline anticipated in 2025 compared to a 14% contraction in the previous year [13][14] Market Data and Key Metrics Changes - Revenue in Europe grew by 13% year-over-year, primarily due to consumer electronics customers ordering through European entities [20] - The Americas experienced an 8% growth, led by logistics and packaging [20] - Other Asia saw a 5% increase, driven by strength in consumer electronics [20] - Greater China revenue declined by 18%, with a modest decline expected due to shifts in the consumer electronics supply chain [20] Company Strategy and Development Direction - The company aims to be the number one provider of AI technology for industrial machine vision applications, focusing on continuous innovation [6][7] - Cognex is committed to enhancing customer experience through a unified product ecosystem and improved global support capabilities [6][7] - The company plans to double its customer base by expanding its go-to-market strategy to reach new markets and better serve small and midsized manufacturers [7] - A newly formed leadership team is tasked with driving profitable growth and delivering greater value to customers [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's direction and the positive response from the organization towards strategic objectives [16] - The outlook for logistics remains strong, driven by ongoing investments and market penetration [13][15] - Management remains cautious about the automotive sector, anticipating a modest decline in 2025 [14] - The company is optimistic about the long-term impact of recent trade agreements and the potential for increased demand due to automation needs [83] Other Important Information - The company entered a commercial partnership for medical lab automation, expected to provide a one-time revenue benefit in Q3 [28][29] - The recent U.S. tax law changes are anticipated to have a neutral impact on adjusted EPS in 2025, with a cash tax benefit expected from expensing R&D costs [30] Q&A Session Summary Question: Changes in process driving better margins - Management highlighted an intense focus on growth initiatives and cost management across the organization, leading to improved margins [35][39] Question: Impact of new product releases in consumer electronics - Management noted that new product developments are long-term projects, with engagement occurring years in advance [42][44] Question: Trends in packaging and consumer electronics - Management indicated broad-based growth in consumer electronics and packaging, driven by new customer acquisitions and existing customer investments [50][52] Question: Visibility on logistics projects - Management confirmed ongoing discussions with customers regarding multiyear plans, maintaining a three to six month visibility for ordering activity [74][76] Question: Impact of tariffs on demand - Management acknowledged some pull-forward of demand due to tariffs but emphasized a healthy forward funnel and ongoing engagement with customers [82][84] Question: M&A strategy and potential adjacencies - Management expressed a disciplined approach to M&A, focusing on strategic fit and value creation, with no immediate urgency for acquisitions [96][100]

Cognex Q2 2025 Earnings July 30, 2025 1 © 2025 Cognex Corporation Forward Looking Statements Certain statements made in this presentation, as well as oral statements made by Cognex Corporation ("Cognex", "we", "us", "our", or the "Company") from time to time, constitute forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Readers can identify these forward-looking stat ...

Financial Performance - Cognex Corporation reported quarterly earnings of $0.25 per share, exceeding the Zacks Consensus Estimate of $0.23 per share, and up from $0.23 per share a year ago, representing an earnings surprise of +8.70% [1] - The company posted revenues of $249.09 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 4.96%, compared to year-ago revenues of $239.29 million [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.21 on revenues of $237.46 million, and for the current fiscal year, it is $0.85 on revenues of $920.32 million [7] - The estimate revisions trend for Cognex was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Electronics - Testing Equipment industry, to which Cognex belongs, is currently ranked in the bottom 12% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment and stock performance [5]

[Second-Quarter 2025 Financial and Operating Highlights](index=1&type=section&id=Second-Quarter%202025%20Financial%20and%20Operating%20Highlights) Cognex reported Q2 2025 revenue of $249 million, up 4%, with Adjusted EBITDA margin at 20.7% and diluted EPS at $0.24 Q2 2025 Financial Performance Highlights | | Three-months ended | | | | :--- | :--- | :--- | :--- | | | June 29, 2025 (in millions) | June 30, 2024 (in millions) | Y/Y Change | | **Revenue** | $249 | $239 | +4% | | **Operating Income** | $43 | $38 | +13% | | **% of Revenue** | 17.4% | 16.1% | +130 bps | | **Adjusted EBITDA*** | $52 | $48 | +9% | | **% of Revenue** | 20.7% | 19.9% | +80 bps | | **Net Income per Diluted Share** | $0.24 | $0.21 | +15% | | **Adjusted EPS (Diluted)*** | $0.25 | $0.23 | +12% | - Management highlighted continued **Adjusted EBITDA margin expansion** and **strong free cash flow generation** as key indicators of financial discipline and long-term value creation[3](index=3&type=chunk) - Growth was driven by strength in **Logistics** and broader **Factory Automation**, particularly in Consumer Electronics and Packaging, with the company's salesforce transformation showing impactful results[3](index=3&type=chunk) - **Adjusted EBITDA margin surpassed 20%** for the first time since Q2 2023, and **adjusted diluted EPS saw its fourth consecutive quarter of growth**[3](index=3&type=chunk)[5](index=5&type=chunk) - The company announced the launch of **OneVision**, a new cloud platform for AI-powered Machine Vision[5](index=5&type=chunk) [Detailed Financial Analysis](index=3&type=section&id=Detailed%20Financial%20Analysis) Q2 2025 revenue grew 4% to $249 million, with operating expenses down 3%, and gross margin at 67.4% due to industry mix - Revenue growth was driven by **Logistics**, **Consumer Electronics**, and **Packaging** sectors[9](index=9&type=chunk) - **Adjusted gross margin fell by 230 basis points year-over-year to 68.0%**, mainly due to unfavorable industry mix and, to a lesser extent, tariffs[9](index=9&type=chunk) - **Operating expenses decreased by 3% YoY**, reflecting disciplined cost management[9](index=9&type=chunk) - The company's financial position remains strong with **$553 million in cash and investments** and **no debt** as of June 29, 2025[9](index=9&type=chunk) - The Board of Directors declared a quarterly cash dividend of **$0.08 per share**, payable on August 28, 2025[8](index=8&type=chunk) [Balance Sheet and Cash Flow](index=3&type=section&id=Balance%20Sheet%20and%20Cash%20Flow) Cognex Q2 2025 cash from operating activities increased 54% to $43 million, with Free Cash Flow up 74% to $40 million Q2 2025 Cash Flow Performance | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Y/Y Change | | :--- | :--- | :--- | :--- | | **Cash from Operating Activities** | $43 | $28 | +54% | | **Free Cash Flow (FCF)** | $40 | $23 | +74% | - The trailing twelve-month **Free Cash Flow conversion rate was 147% of net income** and 130% of adjusted net income[9](index=9&type=chunk) - The company paid **$13 million in dividends** to shareholders during the second quarter[9](index=9&type=chunk) [Business Outlook (Q3 2025 Guidance)](index=4&type=section&id=Business%20Outlook%20(Q3%202025%20Guidance)) Cognex projects Q3 2025 revenue between $245 million and $265 million, with Adjusted EBITDA margin of 19.5% to 22.5% and Adjusted EPS of $0.24 to $0.29 Q3 2025 Guidance (Excluding one-time benefit) | Metric | Q3 2025 Guidance | Q3 2024 Results (in millions) | Y/Y Change (at midpoint) | | :--- | :--- | :--- | :--- | | **Revenue (in millions)** | $245 - $265 | $235 | +9% | | **Adjusted EBITDA Margin** | 19.5% - 22.5% | 17.6% | +340 bps | | **Adjusted EPS (diluted)** | $0.24 - $0.29 | $0.20 | +35% | - A new commercial partnership is expected to add a **one-time revenue benefit of $8 to $14 million** in Q3, which is excluded from the primary guidance ranges[11](index=11&type=chunk)[13](index=13&type=chunk) - The company expects recent U.S. tax law changes (OBBBA) to be neutral to Adjusted EPS in 2025 but provide a **cash tax benefit of $12 to $15 million**[12](index=12&type=chunk) - Cognex continues to expect **no material impact on Adjusted EPS or Adjusted EBITDA margin from tariffs**[10](index=10&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) The consolidated financial statements detail Cognex's financial position and performance, with Q2 2025 revenue of $249.1 million and net income of $40.5 million [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of June 29, 2025, Cognex's total assets were $2.004 billion, with total liabilities at $497.5 million and shareholders' equity at $1.506 billion Balance Sheet Summary | | June 29, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $625,725 | $613,367 | | **Total Assets** | $2,003,541 | $1,992,850 | | **Total Current Liabilities** | $190,437 | $169,380 | | **Total Liabilities** | $497,484 | $475,345 | | **Total Shareholders' Equity** | $1,506,057 | $1,517,505 | [Consolidated Statement of Operations](index=7&type=section&id=Consolidated%20Statement%20of%20Operations) For Q2 2025, Cognex generated $249.1 million in revenue, with operating income increasing to $43.4 million and net income reaching $40.5 million, or $0.24 per diluted share Q2 Statement of Operations | | Three-months Ended (in thousands) | | | :--- | :--- | :--- | | | June 29, 2025 | June 30, 2024 | | **Revenue** | $249,093 | $239,292 | | **Gross Profit** | $167,876 | $166,599 | | **Operating Income** | $43,433 | $38,457 | | **Net Income** | $40,511 | $36,212 | | **Diluted EPS** | $0.24 | $0.21 | - For the six months ended June 29, 2025, **revenue was $465.1 million** and **net income was $64.1 million**, compared to $450.1 million and $48.2 million, respectively, in the prior year period[21](index=21&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=8&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) Cognex provides non-GAAP financial measures, such as adjusted operating income and adjusted EBITDA, to offer clearer period-over-period comparisons by excluding specific items - The company uses non-GAAP measures to align with management's budgeting and review process, excluding items like **amortization of acquisition-related intangibles**, **acquisition costs**, and **reorganization charges**[23](index=23&type=chunk)[25](index=25&type=chunk) Q2 2025 GAAP to Non-GAAP Reconciliation Highlights | Metric | GAAP (in thousands) | Adjustments (in thousands) | Non-GAAP (Adjusted) (in thousands) | | :--- | :--- | :--- | :--- | | **Gross Profit** | $167,876 | $1,593 | $169,469 | | **Operating Income** | $43,433 | $3,148 | $46,581 | | **Net Income** | $40,511 | $2,046 | $42,557 | | **Diluted EPS** | $0.24 | $0.01 | $0.25 | - Key adjustments for the quarter include **$2.7 million for amortization of acquisition-related intangible assets** and **$0.5 million in acquisition and integration costs**, primarily related to the Moritex Corporation acquisition[27](index=27&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section contains standard cautionary language regarding forward-looking statements, advising that future performance is subject to numerous risks and uncertainties - The report identifies numerous **risk factors that could cause actual results to differ from forward-looking statements**[16](index=16&type=chunk) - Key risks mentioned include **technological obsolescence**, **competitive pressures**, **economic risks from international sales** (especially in China), **supply chain issues**, and the **loss of large customers**[16](index=16&type=chunk) - The company disclaims any obligation to update forward-looking statements after the date they are made[16](index=16&type=chunk)

Core Viewpoint - Cognex Corporation reported a strong financial performance in the second quarter of 2025, highlighting revenue growth, improved margins, and significant cash flow generation, indicating effective execution of strategic priorities and a focus on long-term value creation [2][3][6]. Financial Performance Highlights - Revenue for Q2 2025 was $249 million, a 4% increase from $239 million in Q2 2024, with a 3% increase on a constant-currency basis [3][7]. - Operating income rose to $43 million, up 13% year-over-year, with an operating margin of 17.4%, an increase of 130 basis points from the previous year [3][7]. - Adjusted EBITDA was $52 million, reflecting a 9% increase year-over-year, with an adjusted EBITDA margin of 20.7%, marking the first time it exceeded 20% since Q2 2023 [3][7]. - Net income per diluted share increased to $0.24, a 15% rise from $0.21 in the same quarter last year, while adjusted diluted earnings per share were $0.25, up 12% [3][7]. Balance Sheet and Cash Flow Highlights - As of June 29, 2025, Cognex had $553 million in cash and investments with no debt, indicating a strong financial position [7]. - The company generated $43 million in cash from operating activities, a 54% increase compared to $28 million in Q2 2024, and free cash flow of $40 million, up 74% from $23 million [7]. - The second quarter free cash flow conversion rate was 100% of net income, demonstrating effective cash management [7]. Strategic Initiatives - Cognex announced the launch of OneVision, a cloud platform for AI-powered Machine Vision, aimed at enhancing its product offerings [6]. - The company entered a commercial partnership to better serve OEM customers in medical lab automation, expected to contribute between $8 million and $14 million to revenue in Q3 2025 [9]. Guidance - For Q3 2025, Cognex expects revenue between $245 million and $265 million, representing a 9% increase year-over-year, with an adjusted EBITDA margin forecasted between 19.5% and 22.5% [11].