PresentationOkay. So good morning, everyone. My name is Chad Dillard. I am the lead analyst here at Bernstein, covering the machinery and the electrical equipment sector. And today, I'm really pleased to have Cognex on the stage. And joining me for Cognex is Dennis Fehr, who is the CFO of the company. And we're going to have a fireside chat over these next 40 or 45 or so minutes. [Operator Instructions]. So before we jump into Q&A, I'd love for you, Dennis, just to take us through Cognex for some of the fol ...

Core Viewpoint - Dahua Technology's subsidiary, Huarui Technology, is advancing in autonomous navigation and efficient clustering for modern warehouse logistics applications, indicating a strong focus on digital transformation in production processes through automation [1] Group 1 - The mobile robots developed by Huarui Technology can achieve autonomous navigation [1] - The machine vision products are utilized in industrial production and logistics for tasks such as code reading, positioning, measurement, and defect detection [1] - The company's initiatives aim to facilitate the digital upgrade and transformation of production processes through "machine substitution" [1]

Question-and-Answer SessionThomas MollStephens Inc., Research Division So this conference is intended for both specialists and generalist investors. And with that in mind, I'll start with some introductory questions for the generalist in the audience who maybe aren't yet familiar with Cognex and then we'll move to some of the more specific questions. If at any point you want to ask a question directly by all means show up a hand and ask 1 or more than 1 question that might be on your mind. But just to kick ...

Cognex FY Conference Summary Company Overview - **Company**: Cognex (NasdaqGS:CGNX) - **Industry**: Machine Vision - **Date of Conference**: November 19, 2025 Key Points Company and Industry Insights - Cognex operates primarily in factory and warehouse automation, providing machine vision solutions that enhance production processes [4][5] - The company serves various verticals including packaging, logistics, automotive, consumer electronics, and semiconductor manufacturing [7][8] Applications of Machine Vision - Cognex's technology includes applications for guiding robotic arms, inspecting product quality, serializing products, and gauging dimensions [5][6] - The company emphasizes the importance of high precision, speed, scalability, and ease of use in its machine vision systems [14][15][17] AI Integration - AI is viewed as a significant opportunity for Cognex, enhancing the ease of use and expanding the range of applications [10][12] - The proprietary vision model allows customers to train systems with minimal examples, improving accuracy and enabling new use cases [11][12] Competitive Landscape - Cognex faces competition primarily from Keyence in factory automation and SICK in logistics, with a fragmented market where no single player dominates [43][44] - The emergence of Chinese competitors like Hikvision is noted, but the overall competitive landscape remains stable [43][44] Financial Performance and Strategy - Cognex aims for low double-digit compound sales growth over the next few years, with a strategy to double its customer count [18][19] - The company is transitioning from serving large-scale customers to targeting a broader market, including smaller customers [20][21] - Cognex is focusing on operational efficiency, particularly in R&D and OPEX management, to drive profitability [25][26][27] Market Outlook - The automotive market is recovering, particularly in North America, while Europe remains challenging due to various economic factors [46][47][48] - Consumer electronics are showing signs of growth, driven by supply chain changes and potential new technologies [50][51][52] - The logistics sector has experienced solid growth, but future growth rates may moderate after two strong years [54][59] Future Growth Opportunities - Cognex sees potential in existing verticals with low automation penetration and identifies aerospace and defense as a nascent market for machine vision applications [61] Financial Metrics - Cognex's historical adjusted EBITDA margin has been around 28%, with a goal to return to this level after a dip to 17% in 2024 [29] - The company is targeting a gross margin in the high 60% range, focusing on OPEX efficiency as a key driver for profitability [25][26] Conclusion - Cognex is positioned to leverage AI and expand its market reach while focusing on operational efficiencies to enhance profitability and drive growth in various sectors [12][18][19][20]

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Cognex FY Conference Summary Company Overview - **Company**: Cognex Corporation (NasdaqGS:CGNX) - **Industry**: Industrial Machine Vision and ID Reading Solutions - **CEO**: Matt Moschner, who took over on July 1, succeeding Robert Willett after 17 years of leadership [2][2] Key Financial Performance - **Q3 Growth**: 13% year-over-year growth, with strong momentum in logistics, consumer electronics, and packaging [3][3] - **Fourth Quarter Outlook**: Anticipated high single-digit sequential decline in automotive sales [5][5] Market Segments and Growth Drivers 1. Logistics - **Largest and Fastest Growing Segment**: Includes retail distribution, e-commerce, airport automation, and parcels [8][10] - **Key Clients**: Major brands like Walmart, Amazon, and FedEx [8][10] - **Growth Metrics**: Seven consecutive quarters of double-digit growth, driven by AI tools and technology advancements [12][12] 2. Automotive - **Current Status**: Previously a drag on growth due to the EV cycle and geopolitical uncertainties, but signs of stabilization and potential growth in North America [13][13] - **Caution in Europe**: Continued uncertainty in the European automotive market [13][13] 3. Packaging - **Market Definition**: Encompasses fast-moving consumer goods and healthcare products [14][14] - **Growth Drivers**: Increased manufacturing investments in pharmaceuticals and consumer goods [14][14] 4. Advanced Semiconductor Manufacturing - **Market Dynamics**: Benefiting from a supercycle driven by AI chipsets and capacity buildouts globally [15][15] 5. Emerging Markets - **Aerospace and Defense**: High-quality requirements and traceability are key drivers for potential growth [27][27] - **Data Centers**: Automation and robotics are being integrated into assembly and maintenance processes [28][30] Technological Advancements - **AI Integration**: Cognex has invested heavily in AI-driven visual inspection technologies, enhancing product capabilities and user experience [35][35][39][39] - **Hardware and Software Synergy**: Development of proprietary hardware optimized for AI applications, enhancing performance and cost-effectiveness [42][43][43] Strategic Initiatives - **Sales Approach**: Increased focus on penetrating smaller regional manufacturers, particularly in consumer goods [21][21] - **Cost Management and Profitability Goals**: Aiming to return to an operating margin range of 20-30% adjusted EBITDA, with a historical average of 28% [46][46] Conclusion - **Outlook**: Despite uncertainties, there is optimism for growth across various sectors, driven by technological advancements and strategic investments in AI and automation [16][16][46][46]

Financial Data and Key Metrics Changes - Third quarter revenue reached $277 million, an 18% year-over-year increase or 16% on a constant currency basis [11] - Adjusted EBITDA margin expanded by 730 basis points, reaching 22.1%, the highest since Q2 2023 [12][13] - Adjusted diluted EPS increased by 47% year-over-year to $0.28, marking the fifth consecutive quarter of double-digit EPS growth [13][15] - Free cash flow for Q3 was $86 million, contributing to a trailing twelve-month free cash flow of $214 million, a 132% increase compared to the previous year [16] Business Line Data and Key Metrics Changes - Logistics experienced double-digit year-over-year revenue growth for the seventh consecutive quarter, driven by large e-commerce customers [6][7] - Automotive revenue continued to decline, but the rate of decline is moderating, with expectations of a less steep decline in 2025 compared to a 14% contraction last year [7][8] - Packaging delivered solid revenue growth across most geographies, with a positive outlook for the full year [8] - Consumer electronics showed significant year-over-year revenue growth, indicating a recovery after a prolonged down cycle [8] Market Data and Key Metrics Changes - Americas revenue grew by 27% year-over-year, primarily due to strength in logistics and a one-time contribution from a commercial partnership [11] - Europe revenue increased by 24%, driven by consumer electronics customers shifting orders from China to Europe [11][12] - Greater China revenue rose by 9% year-over-year, with strong growth across most verticals except automotive [12] - Other Asia revenue declined by 5% year-over-year, but grew by 4% when adjusted for prior year comparisons [12] Company Strategy and Development Direction - The company aims to be the leading provider of AI technology for industrial machine vision, focusing on profitable growth and disciplined execution [3][4] - The launch of the new SLX product line in logistics represents a strategic move to penetrate higher-value vision applications [4][5] - The company is committed to driving productivity in its sales organization and expanding its customer base over the next five years [9] Management's Comments on Operating Environment and Future Outlook - The macroeconomic environment remains uneven, with momentum in consumer electronics, logistics, and packaging, while automotive remains soft [6][7] - The company anticipates continued growth in logistics driven by automation, with a positive long-term outlook for the automotive market as customers focus on quality and cost reduction [8][9] - Management remains cautious about the semiconductor market but expects growth driven by AI investments [9] Other Important Information - The company returned $37 million to shareholders through share repurchases and dividends in Q3, totaling $224 million over the past 12 months [16] - The company ended Q3 with $600 million in net cash and investments, providing flexibility for potential M&A opportunities [17] Q&A Session Summary Question: Demand strength in consumer electronics - Management noted that the growth in consumer electronics is driven by increased customer output, product rollouts, and supply chain diversification [21][22] Question: Growth in Greater China - Management highlighted strong year-over-year growth in Greater China, attributed to localized investments and a stable competitive dynamic [25][26] Question: Trends in logistics - Management indicated that most growth is from productivity improvements in existing facilities, with significant potential for further automation [31][32] Question: Automotive market outlook - Management acknowledged the automotive market remains challenging but is nearing a bottom, with stronger activity in the U.S. compared to Europe [40][42] Question: Competitive environment with AI - Management discussed the evolving competitive landscape, emphasizing Cognex's leadership in AI vision technology and the democratization of visual inspection solutions [95][96] Question: M&A strategy - Management confirmed that M&A is part of the capital allocation strategy but emphasized a high bar for strategic fit and financial profile of potential targets [97][98]

Financial Performance - Q3 2025 revenue reached $277 million, an 18% year-over-year increase[7] - Adjusted EBITDA margin for Q3 2025 was 249%, a 730 basis points increase year-over-year[7,8] - Free cash flow for Q3 2025 was $86 million, a 66% year-over-year increase[7,18] - Adjusted diluted EPS grew 69% year-over-year[8] - Excluding a one-time benefit from a commercial partnership and an additional month of Moritex in Q3 2024, revenue increased by 15% year-over-year[15,20] End Market Analysis - Logistics accounted for 23% of full-year 2024 revenue, showing strong growth driven by large customers[14] - Automotive accounted for 22% of full-year 2024 revenue, experiencing continued softness[14] - Packaging accounted for 21% of full-year 2024 revenue, demonstrating solid growth across most geographies[14] - Consumer Electronics accounted for 17% of full-year 2024 revenue, showing broad-based strong growth[14] - Semiconductor accounted for 11% of full-year 2024 revenue, with modest growth[14] Q4 2025 Outlook - Revenue is projected to be between $230 million and $245 million, representing a 3% increase at the midpoint compared to Q4 2024[25] - Adjusted EBITDA margin is expected to be between 170% and 200%, consistent with the prior year[25,26] - Adjusted earnings per share (diluted) are projected to be between $019 and $024, a 75% increase at the midpoint[25]

Core Insights - Cognex Corporation has launched its first line of Solutions Experience (SLX) devices, specifically designed for critical applications in the logistics industry [1][2] - The SLX devices aim to enhance automation in logistics, serving both as entry-level solutions for new facilities and as complementary tools for existing automated systems [2][4] Product Features - The SLX logistics portfolio includes three devices: SLX-280D for reliable barcode reading, SLX-290 for high-performance classification and barcode reading, and SLX-3816 for high-resolution detection [7] - Each SLX device is designed for easy deployment, allowing non-technical staff to set them up quickly through a guided web interface [6][7] - The devices combine advanced barcode reading and AI-powered item detection, reducing the need for multiple devices and lowering maintenance costs [7] Operational Efficiency - The SLX devices enhance operational equipment effectiveness (OEE) and reduce total cost of ownership (TCO) through innovative technology [3][4] - They enable scalable mass deployments and firmware updates directly from the device, which saves time and reduces costs associated with software tools [7] Company Background - Cognex Corporation has over 40 years of experience in advanced machine vision technology, helping various industries improve efficiency through automation [5][8] - The company focuses on AI to enhance the capabilities of its tools, making them easier to deploy and operate without requiring highly technical expertise [6]

Core Insights - Engaged Capital has acquired a stake in Cognex Corporation, indicating a strategic investment aimed at enhancing the company's value [1] Company Summary - Engaged Capital specializes in enhancing the value of small and mid-cap North American companies, showcasing its focus on this market segment [1] - The investment firm presented actionable opportunities for value enhancement at the 13D Monitor Active-Passive Investor Summit, emphasizing the potential for margin expansion [1]