Group 1 - Cognex is facing a challenging year with potential disappointing earnings news expected on April 30, but the stock is considered an excellent long-term investment opportunity for growth [1][10] - The company specializes in machine vision and barcode reading technology, which is increasingly essential for automated equipment in manufacturing and logistics [2][3] - Demand for machine vision solutions is expected to rise as they outperform human capabilities in tasks such as inspection and monitoring, especially with the integration of AI tools [3][4] Group 2 - Cognex's key end markets include consumer electronics, automotive, and logistics, with management projecting a 13% annual growth rate for these markets, outpacing the industry's 15% growth [6] - Recent challenges in these markets include a post-lockdown retraction in logistics, high interest rates affecting automotive sales, and reduced consumer spending on electronics [8][9][10] - Despite current market difficulties, machine vision technology is seen as a critical component for reindustrialization in higher-cost labor countries, suggesting a favorable long-term outlook for Cognex [12][14] Group 3 - Valuations for Cognex are historically favorable based on metrics such as free cash flow and EBITDA relative to enterprise value, indicating potential for recovery and growth [12] - Analysts have lowered earnings expectations recently, but if the company rebounds as projected in 2025, it could represent a strong growth stock at a reasonable price [14]

Company Overview - Cognex Corporation is a leading global provider of machine vision products and solutions that enhance efficiency and quality in high-growth industrial markets [3][4] - The company has shipped over 4.5 million image-based products, generating more than $11 billion in cumulative revenue since its founding in 1981 [4] Upcoming Earnings Release - Cognex will release its earnings for the first quarter of 2025 on April 30, 2025, after market close [1] - A conference call to discuss the results will be held on May 1, 2025, at 8:30 a.m. Eastern Daylight Time (EDT) [1] Access to Information - Access to the conference call and a replay will be available on the Cognex Investor Relations website [2] - The live call can be accessed via telephone at (877) 704-4573 or (201) 389-0911 for international callers [2]

Company Overview - Cognex Corporation is a leading global provider of machine vision products and solutions that enhance efficiency and quality in high-growth industrial markets [3][4] - The company has shipped over 4.5 million image-based products, generating more than $11 billion in cumulative revenue since its founding in 1981 [4] Upcoming Events - Dennis Fehr, Senior Vice President of Finance and CFO, will present at the 2025 Cantor Fitzgerald Global Technology Conference on March 12, 2025, at 10:00 a.m. Eastern Daylight Time [1] Technology and Applications - Cognex's technologies address critical manufacturing and distribution challenges by automating tasks such as locating, identifying, inspecting, and measuring discrete items [3] - Machine vision is essential for applications where human vision is insufficient in terms of size, accuracy, or speed, and where significant cost savings or quality improvements can be achieved [3]

Industry Overview - The Zacks Electronics – Testing Equipment industry is facing challenges due to a difficult global macroeconomic environment, end-market volatility, unfavorable foreign exchange rates, and increasing geopolitical tensions [1] - The automotive sector is sluggish, primarily due to declining investments in electric vehicles, which is a significant headwind for industry participants [1] - The factory automation market remains weak, and conservative capital expenditure trends in consumer electronics are also a concern [1] Growth Opportunities - Companies like Cognex (CGNX) and Itron (ITRI) are capitalizing on growth opportunities related to 5G, automation, and Industry 4.0 [1] - The adoption of software-enabled testing instruments and devices is increasing, providing a positive outlook for the industry [1] - The rising utilization of precision motion-control solutions and automatic test systems in various markets, including aerospace and medical, is a positive trend [3] Pharmaceutical Market - The industry is benefiting from the increasing use of electrical instruments and software in clinical and medical science research, particularly in the pharmaceutical market [4] - Agilent is gaining traction in life science research, driven by the growing utilization of electronic testing equipment [4] - There is a rising demand for RF test equipment from medical device manufacturers, contributing to industry growth [4] 5G Deployment - The deployment of 5G technology presents near-term growth prospects for industry players [5] - There is an uptick in demand for 5G test solutions, which is essential for 5G deployment [5] - The trend of migrating infrastructure workloads to the cloud is boosting demand for high-speed Internet services, benefiting electronic companies associated with 5G [5] Macroeconomic Challenges - The challenging macroeconomic environment is causing enterprises to hesitate in signing multi-year deals, which negatively impacts industry participants [6] Industry Performance - The Zacks Electronics – Testing Equipment industry currently holds a Zacks Industry Rank of 201, placing it in the bottom 19% of over 250 Zacks industries [7] - The industry has underperformed the S&P 500 and its sector over the past year, declining by 0.8% compared to the S&P 500's increase of 18.4% [11] - The industry's forward 12-month price-to-earnings (P/E) ratio is 23.59X, higher than the S&P 500's 22.1X but lower than the sector's 25.78X [12] Company Highlights - Itron is benefiting from trends in electrification, gas safety, energy transition, and water efficiency, with increasing demand for smart water meters and electric solutions [14] - Cognex is focusing on integrating Artificial Intelligence (AI) into its machine vision products, launching innovative products like the AI-enabled 3D smart camera [18] - Itron's shares have declined 6.3% year-to-date, with a consensus estimate for 2025 earnings revised downward to $4.84 per share, indicating a year-over-year decline of 13.88% [16] - Cognex's shares have declined 8.5% year-to-date, with a consensus estimate for 2025 earnings revised downward to 88 cents per share, indicating year-over-year growth of 18.92% [19]

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $230 million, a 17% year-on-year increase, with a 12% increase excluding Moritex [31][32] - Full year 2024 revenue was $915 million, growing 9% year-on-year or 1% excluding Moritex [39][41] - Adjusted gross margin for Q4 was 69.4%, down 130 basis points from 70.7% a year ago [34] - Adjusted diluted EPS for Q4 was $0.20, up from $0.11 year-on-year [37] - Free cash flow for Q4 totaled $49 million, compared to $7 million in Q4 of 2023 [38] Business Line Data and Key Metrics Changes - Logistics revenue grew 20% in 2024, driven by e-commerce leaders and regional providers [23] - Automotive revenue decreased by 14% year-on-year due to reduced EV battery investment [24][25] - Consumer electronics revenue fell 5% year-on-year, with limited design changes impacting demand [26] - Semiconductor business showed significant year-on-year growth, driven by high bandwidth memory chip investments [28] Market Data and Key Metrics Changes - Year-on-year revenue growth in Q4 was strongest in Greater China, driven by project timing in consumer electronics [34] - The Americas saw double-digit growth, while Europe experienced a slight decline due to weaker automotive spending [33] - Overall, the factory automation market was characterized as soft but stable, with automotive being the weakest segment [10][11] Company Strategy and Development Direction - The company aims to infuse AI into more products and tools, transform the sales force, and integrate Moritex [6][9] - New product launches include the AI-enabled 3D smart camera and the DataMan 380 barcode reader [7][9] - The sales transformation strategy has led to over 3,000 new customers acquired in 2024 [20][21] - The company is focusing on expanding into less cyclical markets, such as medical and packaging, to reduce volatility [110][112] Management's Comments on Operating Environment and Future Outlook - Management noted that the automotive market remains challenging, with expectations of continued weakness in 2025 [54] - There is cautious optimism regarding the consumer electronics market, with potential innovations expected to drive future growth [58] - The logistics market is expected to continue growing, supported by increased capacity and technology investments [71] - Management expressed confidence in the long-term value of the sales transformation strategy [21][90] Other Important Information - The company ended 2024 with $587 million in cash and investments and no debt [42] - The first quarter revenue guidance is between $200 million and $220 million, reflecting mixed macro conditions [43] - The company plans to hold an Investor Day on June 9th and 10th [46] Q&A Session Summary Question: Outlook for automotive market - Management acknowledged that 2024 was a tough year for automotive, with expectations of continued weakness but not as severe as in 2024 [50][54] Question: Consumer electronics product changes - Management indicated that while consumer electronics revenue fell, there are reasons for long-term confidence in growth due to upcoming innovations [56][58] Question: Insights on logistics market strength - Management reported strong growth across logistics, with significant investments and technology adoption driving demand [71][72] Question: M&A appetite and strategy - Management confirmed a continued interest in quality M&A opportunities, particularly following the successful Moritex acquisition [115][116] Question: Pricing challenges in China - Management highlighted ongoing pricing pressures in China due to competition but emphasized a strategy to maintain market share [126][128]

Cognex Q4-2024 Financial Results February 12, 2025 1 © 2025 Cognex Corporation Forward Looking Statements Certain statements made in this report, as well as oral statements made by 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 Exchange Act. Readers can identify these forward-looking statements by our use of the words "expects," "anticipates," "estimates," "potential," "believes," "proje ...

Revenue and Growth - Revenue for 2024 was $914,515,000, representing a 9% increase from $837,547,000 in 2023, driven by the acquisition of Moritex Corporation and higher revenue from logistics and semiconductor industries [134][138]. - Revenue from the logistics industry increased by 20% year-over-year, representing approximately 23% of total revenue in 2024 [139]. - Revenue from the semiconductor industry grew by 80% year-over-year, accounting for approximately 11% of total revenue in 2024 [140]. - Revenue from customers in the Americas increased by 6%, while revenue from Europe decreased by 1% in 2024 [141][143]. - The acquisition of Moritex contributed approximately 8% to total revenue in 2024 [138]. - The company's revenue for the year ended December 31, 2024, was $914,515,000, representing an increase from $837,547,000 in 2023, but a decrease from $1,006,090,000 in 2022 [196]. - Revenue from the Americas was $350,155,000 in 2024, up from $330,415,000 in 2023, indicating a growth of 6.3% [301]. Profitability and Margins - Gross margin decreased to 68% in 2024 from 72% in 2023, primarily due to a less favorable revenue mix and pricing pressures [135][143]. - Operating income decreased to 13% of revenue in 2024 compared to 16% in 2023, with net income decreasing to 12% of revenue or $0.62 per share [137]. - The gross profit for 2024 was $625,794,000, compared to $601,241,000 in 2023, indicating a slight improvement year-over-year [196]. - Operating income for 2024 was $115,065,000, down from $130,702,000 in 2023 and significantly lower than $246,229,000 in 2022 [196]. - Net income for 2024 was $106,171,000, a decrease from $113,234,000 in 2023 and $215,525,000 in 2022 [196]. - The total comprehensive income for 2024 was $78,730,000, a decline from $137,195,000 in 2023 and $194,170,000 in 2022 [198]. Expenses and Costs - Selling, general, and administrative expenses increased by 9% in 2024, primarily due to investments in sales personnel and costs related to the Moritex acquisition [148]. - Research, development, and engineering expenses remained relatively flat at $139,815,000, representing 15% of total revenue in 2024 [146][147]. - Operating expenses increased by 9% to $510,729,000 in 2024, maintaining a consistent percentage of total revenue at 56% [145]. - The total operating lease expense increased to $14,131,000 in 2024 from $11,598,000 in 2023, representing a rise of approximately 21.8% [283]. Cash Flow and Investments - Net cash provided by operating activities totaled $149,081,000 in 2024, driven by growth in logistics revenue [158]. - Net cash used in investing activities was $38,969,000, primarily for capital expenditures of $15,043,000 related to new product introductions [159]. - The company reported cash dividends per common share of $0.305 in 2024, up from $0.286 in 2023 and $0.265 in 2022 [196]. - As of December 31, 2024, the company had an accumulated cash and investment balance of $586,948,000, indicating strong liquidity [157]. - The Company’s total investments amounted to $586,948,000 as of December 31, 2024, compared to $576,277,000 in 2023, indicating a slight increase [275]. Tax and Non-Operating Income - Income before income tax expense decreased by $3,859,000, or 3%, to $131,489,000 in 2024, while income tax expense increased by $3,204,000, or 14%, to $25,318,000 [155]. - The effective income tax rate rose to 19% in 2024 from 16% in 2023, with discrete tax net expenses recorded at $5,731,000 in 2024 [155]. - For the twelve months ended December 31, 2024, total non-operating income increased by $11,778,000, or 254%, to $16,424,000 compared to $4,646,000 in 2023 [151]. Shareholder Returns - The company repurchased 1,711,000 shares at a cost of $67,085,000 in 2024, leaving a remaining balance of $265,807,000 under the stock repurchase program [161]. - Cash dividends totaled $52,329,000 in 2024, with $0.075 per share in the first three quarters and $0.080 per share in the fourth quarter [162]. - The Company declared a cash dividend of $0.080 per share in the fourth quarter of 2024, an increase from $0.075 per share in the previous quarter [310]. Assets and Liabilities - Total assets decreased from $2,017,812 in 2023 to $1,992,850 in 2024, a decline of approximately 1.2% [200]. - Total current liabilities increased from $151,884 in 2023 to $169,380 in 2024, an increase of approximately 11.5% [200]. - Shareholders' equity rose from $1,504,752 in 2023 to $1,517,505 in 2024, an increase of about 0.8% [202]. - The total inventory as of December 31, 2024, was $157,527,000, a decrease from $162,285,000 in 2023, reflecting a reduction of approximately 2.3% [280]. Accounting and Reporting - The Company recognizes revenue in accordance with ASC 606, reflecting the transfer of promised goods or services to customers [237]. - The consolidated financial statements include accounts of Cognex Corporation and its wholly owned subsidiaries, with all intercompany transactions eliminated [207]. - The Company adopted new accounting guidance in 2024 related to the disclosure of segment information, which was retrospectively applied to 2023 and 2022 [187]. - The Company adopted ASU 2023-07 for segment reporting, effective for fiscal years beginning after December 15, 2023, requiring disclosure of segment profit or loss measures used by the chief operating decision maker [269]. Risk Management and Supply Chain - The company has faced disruptions in the supply of key components due to global supply chain challenges, resulting in higher purchase costs and manufacturing delays [266]. - The company sources components from preferred vendors, and disruptions may lead to higher costs and delays if alternative vendors are required [267]. - The Company does not currently hedge interest rate exposures due to the relatively short maturities and investment-grade quality of its portfolio [180].

Company Performance - Cognex Corporation reported quarterly earnings of $0.20 per share, exceeding the Zacks Consensus Estimate of $0.15 per share, and up from $0.11 per share a year ago, representing an earnings surprise of 33.33% [1] - The company posted revenues of $229.68 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 4.61%, compared to year-ago revenues of $196.67 million [2] - Over the last four quarters, Cognex has consistently surpassed consensus EPS estimates and revenue estimates [2] Stock Movement and Outlook - Cognex shares have increased approximately 10.5% since the beginning of the year, outperforming the S&P 500's gain of 3.2% [3] - The future performance of Cognex's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4][5] - The current consensus EPS estimate for the upcoming quarter is $0.15 on revenues of $230.11 million, and for the current fiscal year, it is $0.93 on revenues of $1.01 billion [7] Industry Context - The Electronics - Testing Equipment industry, to which Cognex belongs, is currently ranked in the bottom 18% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of Cognex's stock may also be influenced by the overall outlook for the industry [8]

Core Insights - Cognex reported strong fourth-quarter earnings, with revenue growth driven by logistics and semiconductor segments, surpassing analyst expectations [2][5] - The automotive sector faced challenges, impacting sales and emphasizing the need for operational efficiency [6][8] Financial Performance - Revenue for Q4 2024 reached $230 million, a 17% increase year over year, exceeding the analysts' estimate of $221 million [2][3] - Adjusted EPS rose 84% to $0.20, outperforming the estimate of $0.15 [2][3] - Operating margin improved to 13.4%, a significant increase of 690 basis points from 6.5% in Q4 2023 [3][7] - Free cash flow surged to $49.3 million, a 560% increase from $7.5 million in the previous year [3][7] Business Overview - Cognex specializes in machine vision products, primarily serving the automotive, logistics, and consumer electronics industries, which accounted for 65% of revenue in 2023 [4] - Recent product launches and strategic acquisitions have bolstered the company's market capabilities and innovation [4] Future Outlook - For Q1 2025, Cognex forecasts revenue between $200 million and $220 million, anticipating growth in logistics and semiconductor sectors, while facing challenges in the automotive sector [8] - Management expects adjusted gross margin in the high 60% range and an EBITDA margin of 12% to 15% [8]

Financial Performance - Revenue for Q4-24 was $230 million, a 17% increase from Q4-23, with a 12% increase excluding Moritex's contribution[6]. - Net income for Q4-24 was $28 million, a 152% increase from Q4-23, while adjusted net income rose by 84% to $35 million[12]. - Full year 2024 revenue grew by 9% to $915 million, or 1% excluding Moritex, with strong performance in Logistics and Semiconductor sectors[12]. - Cognex expects Q1-25 revenue to be between $200 million and $220 million, indicating stable year-on-year performance[11]. - Revenue for the three months ended December 31, 2024, was $229.684 million, a 16.8% increase from $196.670 million in the same period of 2023[21]. - Adjusted net income for the twelve months ended December 31, 2024, was $127,263 million, up from $127,393 million in 2023, indicating a slight decrease of 0.1%[27]. Profitability Metrics - Adjusted EBITDA margin expanded by 580 basis points year-on-year to 18.5% in Q4-24, driven by revenue growth and cost discipline[3]. - Gross margin for the full year 2024 was 68.4%, down from 71.8% in 2023, primarily due to the Moritex acquisition and unfavorable revenue mix[12]. - Gross profit margin for the three months ended December 31, 2024, was 68.7%, compared to 68.7% in the same period of 2023[21]. - Operating income for the three months ended December 31, 2024, was $30.840 million, with an operating margin of 13.4%[21]. - Adjusted EBITDA for the three months ended December 31, 2024, was $42,435 million, compared to $24,854 million for the same period in 2023, representing a significant increase of 70.7%[27]. - GAAP operating margin remained stable at 13.4% for both the three months ended December 31, 2024, and September 29, 2024[27]. Cash Flow and Shareholder Returns - The company generated $49 million in free cash flow in Q4-24, a $42 million improvement year-on-year[12]. - Cognex returned $57 million to shareholders in Q4-24 through stock repurchases and dividends[3]. - Free cash flow for the twelve months ended December 31, 2024, was $49,331 million, compared to $51,872 million in 2023, reflecting a decrease of 4.7%[28]. - Cash dividends per common share increased to $0.080 for the three months ended December 31, 2024, compared to $0.075 in the previous quarter[21]. Expenses and Costs - Research and development expenses were $32.538 million, representing 14.2% of revenue for the three months ended December 31, 2024[21]. - Selling, general, and administrative expenses were $94.481 million, accounting for 41.1% of revenue for the three months ended December 31, 2024[21]. - The company recorded acquisition and integration costs of $2,882 million for the twelve months ended December 31, 2024, compared to $2,295 million in 2023, an increase of 25.5%[27]. - The effective tax rate (GAAP) for the twelve months ended December 31, 2024, was 20.8%, compared to 19.1% in 2023, indicating an increase of 1.7 percentage points[28]. Company Overview and Strategy - Cognex has shipped over 4.5 million image-based products, generating more than $11 billion in cumulative revenue since its founding in 1981[38]. - The company focuses on machine vision technologies that enhance efficiency and quality in manufacturing and distribution across high-growth industrial markets[37]. - Cognex's solutions automate tasks such as locating, identifying, inspecting, and measuring discrete items, which include mobile phones and electric vehicle batteries[37]. - The company operates globally with offices and distributors across the Americas, Europe, and Asia[38]. - Cognex emphasizes the importance of machine vision in applications where human vision is inadequate for size, accuracy, or speed requirements[37]. - The company has a strong focus on innovation and product development to address critical manufacturing challenges[37]. Risks and Challenges - The company faces risks including technological obsolescence, competitive pressures, and challenges in attracting skilled employees[36]. - Cognex is exposed to economic and political risks associated with international sales, particularly in relation to trade disputes affecting China[36]. - Cognex's future capital needs and potential tax liabilities are areas of uncertainty that could impact financial results[36]. - The company emphasizes the importance of non-GAAP financial measures for evaluating performance and making comparisons over multiple periods[22].