NATICK, Mass., Oct. 30, 2024 /PRNewswire/ -- Cognex Corporation (NASDAQ: CGNX) today reported financial results for the third quarter of 2024. Table 1 below shows selected financial data for Q3-24 compared with Q3-23 and Q2-24.
"Cognex generated third quarter revenue and adjusted EBITDA margin in line with our guidance," said Robert J. Willett, CEO. "Revenue grew year-on-year on both a reported basis and excluding Moritex, led by continued strength in our Logistics and Semiconductor end markets. However, conditions across our broader factory automation business remain soft, with a further step-down in Automotive."
Mr. Willett continued, "We made good strides in innovation, rolling out additional out-of-the-box AI features that are enhancing our products. We also continue to see our Emerging Customer initiative ramp well and attract many new customers."
Dennis Fehr, CFO, added, "In this prolonged soft macro environment, we tightly managed costs and working capital. Despite a ramp in strategic investments, we delivered a sequential decrease in operating expenses. Combined with working capital efficiencies, this led to our highest quarterly operating cash flow and free cash flow since Q4-2022."
Table 1 | |||||||||
Current Q3-24 | Prior Year | Y/Y | Prior Quarter Q2-24 | Q/Q Change | |||||
Revenue | $235 | $197 | +19 % | $239 | -2 % | ||||
Operating Income | $32 | $31 | +3 % | $38 | -18 % | ||||
% of Revenue | 13.4 % | 15.5 % | (209 bps) | 16.1 % | (262 bps) | ||||
Adjusted EBITDA* | $41 | $34 | +20 % | $48 | -13 % | ||||
% of Revenue | 17.6 % | 17.4 % | +19 bps | 19.9 % | (232 bps) | ||||
Net Income per Diluted Share | $0.17 | $0.11 | +57 % | $0.21 | -18 % | ||||
Adjusted EPS (Diluted)* | $0.20 | $0.17 | +19 % | $0.23 | -13 % |
Note: Numbers shown may not foot due to rounding. |
*Adjusted EBITDA and Adjusted EPS (Diluted) exclude Non-GAAP adjustments. A reconciliation from GAAP to Non-GAAP metrics is provided in this news release. |
Details of the Quarter
Statement of Operations Highlights – Third Quarter of 2024
Balance Sheet and Cash Flow Highlights – September 29, 2024
Financial Outlook – Fourth Quarter of 2024
1Cognex has provided the forward-looking non-GAAP measures of adjusted gross margin, adjusted EBITDA margin, and adjusted effective tax rate, but cannot, without unreasonable effort, forecast such items to present or provide a reconciliation to corresponding forecasted GAAP measures. These include special items such as restructuring charges, acquisition and integration charges, and amortization of acquisition-related intangible assets, all of which are subject to limitations in predictability of timing, ultimate outcome and numerous conditions outside of Cognex's control. Additionally, these items are outside of Cognex's normal business operations and not used by management to assess Cognex's operating results. Cognex believes these limitations would result in a range of projected values so broad as to not be meaningful to investors. For these reasons, Cognex believes that the probable significance of such information is low. Information with respect to special items for certain historical periods is included in the section entitled "Reconciliation of Selected Items From GAAP to Non-GAAP".
Analyst Conference Call and Simultaneous Webcast
COGNEX CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands) | |||
September 29, | December 31, | ||
(unaudited) | |||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 197,075 | $ 202,655 | |
Current investments, amortized cost of $91,658 and $132,799 in 2024 and 2023, | 90,803 | 129,392 | |
Accounts receivable, allowance for credit losses of $604 and $583 in 2024 and 2023, | 157,968 | 114,164 | |
Unbilled revenue | 2,117 | 2,402 | |
Inventories | 155,278 | 162,285 | |
Prepaid expenses and other current assets | 68,841 | 68,099 | |
Total current assets | 672,082 | 678,997 | |
Non-current investments, amortized cost of $318,268 and $250,790 in 2024 and 2023, | 319,287 | 244,230 | |
Property, plant, and equipment, net | 103,177 | 105,849 | |
Operating lease assets | 72,433 | 75,115 | |
Goodwill | 391,673 | 393,181 | |
Intangible assets, net | 102,550 | 112,952 | |
Deferred income taxes | 395,205 | 400,400 | |
Other assets | 6,840 | 7,088 | |
Total assets | $ 2,063,247 | $ 2,017,812 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable | $ 29,984 | $ 21,454 | |
Accrued expenses | 76,675 | 72,374 | |
Accrued income taxes | 24,226 | 16,907 | |
Deferred revenue and customer deposits | 30,045 | 31,525 | |
Operating lease liabilities | 9,806 | 9,624 | |
Total current liabilities | 170,736 | 151,884 | |
Non-current operating lease liabilities | 67,375 | 68,977 | |
Deferred income taxes | 230,368 | 246,877 | |
Reserve for income taxes | 26,491 | 26,685 | |
Non-current accrued income taxes | — | 18,338 | |
Other liabilities | 1,251 | 299 | |
Total liabilities | 496,221 | 513,060 | |
Commitments and contingencies (Note 10) | |||
Shareholders' equity: | |||
Preferred stock, $.01 par value – Authorized: 400 shares in 2024 and 2023, | — | — | |
Common stock, $.002 par value – Authorized: 300,000 shares in 2024 and 2023, | 343 | 343 | |
Additional paid-in capital | 1,076,363 | 1,037,202 | |
Retained earnings | 527,909 | 512,543 | |
Accumulated other comprehensive loss, net of tax | (37,589) | (45,336) | |
Total shareholders' equity | 1,567,026 | 1,504,752 | |
Total liabilities and shareholders' equity | $ 2,063,247 | $ 2,017,812 |
COGNEX CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (In thousands, except per share amounts) | |||||||
Three-months Ended | Nine-months Ended | ||||||
September 29, | October 1, | September 29, | October 1, | ||||
Revenue | $ 234,742 | $ 197,241 | $ 684,831 | $ 640,877 | |||
Cost of revenue | 75,343 | 54,467 | 216,896 | 174,680 | |||
Gross margin | 159,399 | 142,774 | 467,935 | 466,197 | |||
Percentage of revenue | 67.9 % | 72.4 % | 68.3 % | 72.7 % | |||
Research, development, and engineering expenses | 35,210 | 32,580 | 107,277 | 104,707 | |||
Percentage of revenue | 15.0 % | 16.5 % | 15.7 % | 16.3 % | |||
Selling, general, and administrative expenses | 92,625 | 82,307 | 276,433 | 248,767 | |||
Percentage of revenue | 39.5 % | 41.7 % | 40.4 % | 38.8 % | |||
Loss (recovery) from fire | — | (2,750) | — | (5,250) | |||
Operating income | 31,564 | 30,637 | 84,225 | 117,973 | |||
Percentage of revenue | 13.4 % | 15.5 % | 12.3 % | 18.4 % | |||
Foreign currency gain (loss) | 1,221 | (8,699) | 1,086 | (9,910) | |||
Investment income | 3,561 | 4,891 | 9,797 | 12,573 | |||
Other income (expense) | 209 | 173 | 581 | 358 | |||
Income before income tax expense | 36,555 | 27,002 | 95,689 | 120,994 | |||
Income tax expense | 6,964 | 8,086 | 17,864 | 18,989 | |||
Net income | $ 29,591 | $ 18,916 | $ 77,825 | $ 102,005 | |||
Percentage of revenue | 12.6 % | 9.6 % | 11.4 % | 15.9 % | |||
Net income per weighted-average common and common-equivalent share: | |||||||
Basic | $ 0.17 | $ 0.11 | $ 0.45 | $ 0.59 | |||
Diluted | $ 0.17 | $ 0.11 | $ 0.45 | $ 0.59 | |||
Weighted-average common and common-equivalent shares outstanding: | |||||||
Basic | 171,519 | 172,169 | 171,588 | 172,408 | |||
Diluted | 172,753 | 173,354 | 172,733 | 173,659 | |||
Cash dividends per common share | $ 0.075 | $ 0.070 | $ 0.225 | $ 0.210 | |||
(1) Amounts include stock-based compensation expense, as follows: | |||||||
Cost of revenue | $ 442 | $ 435 | $ 1,460 | $ 1,497 | |||
Research, development, and engineering | 3,707 | 3,459 | 11,636 | 12,657 | |||
Selling, general, and administrative | 8,952 | 8,471 | 26,271 | 27,364 | |||
Total stock-based compensation expense | $ 13,101 | $ 12,365 | $ 39,367 | $ 41,518 | |||
Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including adjusted gross margin, adjusted operating expense, adjusted operating income, adjusted EBITDA, adjusted net income, adjusted earnings per share of common stock, diluted, adjusted effective tax rate, and free cash flow. Cognex defines its non-GAAP metrics as follows:
Beginning in the fourth quarter of 2023, we updated the calculation of our non-GAAP measures to exclude acquisition and integration costs and amortization of acquisition-related intangible assets. These changes have been applied retrospectively to the third quarter of 2023 and the nine month period ending October 1, 2023. 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 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, in its review of operating results, and for forecasting and planning for future periods. Cognex's definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Furthermore, these measures have certain limitations in that they do not include the impact of certain non-recurring expenses that are reflected in our consolidated statement of operations that are necessary to run our business. Thus, our non-GAAP financial measures should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.
Please see the section "Reconciliation of Selected Items from GAAP to Non-GAAP" below for more detailed information regarding non-GAAP financial measures herein, including the items reflected in our adjusted financial metrics and a description of these adjustments.
COGNEX CORPORATION RECONCILIATION OF SELECTED ITEMS FROM GAAP TO NON-GAAP Dollars in thousands, except per share amounts (Unaudited) | |||||||||
Three-months Ended | Nine-months Ended | ||||||||
September 29, | June 30, | October 1, | September 29, | October 1, | |||||
Gross margin (GAAP) | $ 159,399 | $ 166,599 | $ 142,774 | $ 467,935 | $ 466,197 | ||||
Acquisition and integration costs | 281 | 233 | — | 2,082 | — | ||||
Amortization of acquisition-related intangible assets | 1,640 | 1,388 | 550 | 4,457 | 1,849 | ||||
Adjusted gross margin | $ 161,320 | $ 168,220 | $ 143,324 | $ 474,474 | $ 468,046 | ||||
GAAP gross margin percent of revenue | 67.9 % | 69.6 % | 72.4 % | 68.3 % | 72.7 % | ||||
Adjusted gross margin percent of revenue | 68.7 % | 70.3 % | 72.7 % | 69.3 % | 73.0 % | ||||
Operating expense (GAAP) | $ 127,835 | $ 128,142 | $ 112,137 | $ 383,710 | $ 348,224 | ||||
(Loss) recovery from fire | — | — | 2,750 | — | 5,250 | ||||
Acquisition and integration costs | (962) | (1,203) | (1,241) | (3,468) | (1,979) | ||||
Amortization of acquisition-related intangible assets | (1,746) | (1,339) | (193) | (4,469) | (579) | ||||
Adjusted operating expense | $ 125,127 | $ 125,600 | $ 113,453 | $ 375,773 | $ 350,916 | ||||
Operating income (GAAP) | $ 31,564 | $ 38,457 | $ 30,637 | $ 84,225 | $ 117,973 | ||||
Loss (recovery) from fire | — | — | (2,750) | — | (5,250) | ||||
Acquisition and integration costs | 1,243 | 1,436 | 1,241 | 5,550 | 1,979 | ||||
Amortization of acquisition-related intangible assets | 3,386 | 2,727 | 743 | 8,926 | 2,428 | ||||
Adjusted operating income | $ 36,193 | $ 42,620 | $ 29,871 | $ 98,701 | $ 117,130 | ||||
GAAP operating income percent of revenue | 13.4 % | 16.1 % | 15.5 % | 12.3 % | 18.4 % | ||||
Adjusted operating income percent of revenue | 15.4 % | 17.8 % | 15.1 % | 14.4 % | 18.3 % | ||||
Depreciation (adjusted for amounts included in | 5,027 | 4,948 | 4,380 | 15,254 | 12,557 | ||||
Adjusted EBITDA | $ 41,220 | $ 47,568 | $ 34,251 | $ 113,955 | $ 129,687 | ||||
Adjusted EBITDA margin percent of revenue | 17.6 % | 19.9 % | 17.4 % | 16.6 % | 20.2 % | ||||
Net income (GAAP) | $ 29,591 | $ 36,212 | $ 18,916 | $ 77,825 | $ 102,005 | ||||
Loss (recovery) from fire | — | — | (2,750) | — | (5,250) | ||||
Acquisition and integration costs | 1,243 | 1,436 | 1,241 | 5,550 | 1,979 | ||||
Amortization of acquisition-related intangible assets | 3,386 | 2,727 | 743 | 8,926 | 2,428 | ||||
Foreign currency (gain) loss on forward contract | — | — | 8,456 | — | 8,456 | ||||
Discrete tax (benefit) expense | 889 | (463) | 4,035 | 3,511 | 840 | ||||
Tax impact of reconciling items | (1,176) | (1,033) | (2,037) | (3,563) | (2,072) | ||||
Adjusted net income | $ 33,933 | $ 38,879 | $ 28,604 | $ 92,249 | $ 108,386 | ||||
Earnings per share of common stock, diluted (GAAP) | $ 0.17 | $ 0.21 | $ 0.11 | $ 0.45 | $ 0.59 | ||||
Loss (recovery) from fire | — | — | (0.02) | — | (0.03) | ||||
Acquisition and integration costs | 0.01 | 0.01 | 0.01 | 0.03 | 0.01 | ||||
Amortization of acquisition-related intangible assets | 0.02 | 0.02 | — | 0.05 | 0.01 | ||||
Foreign currency (gain) loss on forward contract | — | — | 0.05 | — | 0.05 | ||||
Discrete tax (benefit) expense | 0.01 | — | 0.02 | 0.02 | — | ||||
Tax impact of reconciling items | (0.01) | (0.01) | (0.01) | (0.02) | (0.01) | ||||
Adjusted earnings per share of common stock, diluted | $ 0.20 | $ 0.23 | $ 0.17 | $ 0.53 | $ 0.62 | ||||
Effective tax rate (GAAP) | 19.1 % | 12.9 % | 29.9 % | 18.7 % | 15.7 % | ||||
Discrete tax benefit (expense) | (2.4) % | 1.1 % | (14.9) % | (3.7) % | (0.7) % | ||||
Net impact of other reconciling items | 1.0 % | 1.0 % | 2.5 % | 1.3 % | 0.7 % | ||||
Adjusted effective tax rate | 17.6 % | 15.0 % | 17.5 % | 16.3 % | 15.7 % | ||||
Cash provided by operating activities (GAAP) | $ 56,271 | $ 27,763 | $ 41,023 | $ 97,677 | $ 98,425 | ||||
Capital expenditures | (4,399) | (4,510) | (5,855) | (12,970) | (16,062) | ||||
Free cash flow | $ 51,872 | $ 23,253 | $ 35,168 | $ 84,707 | $ 82,363 |
Description of adjustments:
In addition to reporting financial results in accordance with U.S. GAAP, the Company also provides various non-GAAP measures that incorporate adjustments for the impacts of special items. Adjustments incorporated in the preparation of these non-GAAP measures for the periods presented include the items described below:
Depreciation:
Loss (recovery) from fire:
Acquisition and integration costs:
Amortization of acquisition-related intangible assets:
Discrete tax (benefit) expense:
Certain statements made in this release, 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 Securities Exchange Act of 1934, as amended. Readers can identify these forward-looking statements by our use of the words "expects," "anticipates," "estimates," "potential," "believes," "projects," "intends," "plans," "will," "may," "shall," "could," "should," "opportunity," "goal" 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, customer demand and order rates and timing of related revenue, future product or revenue mix, research and development activities, sales and marketing activities (including our "Emerging Customer" sales initiative), new product offerings, innovation and product development activities, customer acceptance of our products, capital expenditures, cost and working capital management activities, investments, liquidity, dividends and stock repurchases, strategic and growth plans and opportunities, acquisitions, 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 technological obsolescence of current products and the inability to develop new products, particularly in connection with emerging artificial intelligence technologies; (2) the impact of competitive pressures, including the potential decrease in demand or prices for our products; (3) the inability to attract and retain skilled employees and maintain our unique corporate culture; (4) the failure to properly manage the distribution of products and services; (5) economic, political, and other risks associated with international sales and operations, including the impact of trade disputes, the economic climate in China, and the wars involving Ukraine and Israel; (6) the challenges in integrating and achieving expected results from acquired businesses, including our acquisition of Moritex Corporation; (7) information security breaches and other cybersecurity risks; (8) the failure to comply with laws or regulations relating to data privacy or data protection; (9) the inability to protect our proprietary technology and intellectual property; (10) the failure to manufacture and deliver products in a timely manner; (11) the inability to obtain, or the delay in obtaining, components for our products at reasonable prices; (12) the failure to effectively manage product transitions or accurately forecast customer demand; (13) the inability to manage disruptions to our distribution centers or to our key suppliers; (14) the inability to design and manufacture high-quality products; (15) the loss of, or curtailment of or delays in purchases by, large customers in the logistics, consumer electronics, or automotive industries; (16) potential impairment charges with respect to our investments or acquired intangible assets; (17) exposure to additional tax liabilities, increases and fluctuations in our effective tax rate, and other tax matters; (18) fluctuations in foreign currency exchange rates and the use of derivative instruments; (19) unfavorable global economic conditions, including high interest rates and fluctuating inflation rates; (20) business disruptions from natural or man-made disasters, such as fire, floods, or public health issues; (21) exposure to potential liabilities, increased costs (including regulatory compliance costs), reputational harm, and other potential impacts associated with expectations relating to environmental, social, and governance considerations; (22) stock price volatility; and (23) our involvement in time-consuming and costly litigation or activist shareholder activities. The foregoing list should not be construed as exhaustive and we encourage readers to refer to the detailed discussion of risk factors included in Part I - Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as updated by Part II - Item 1A of the Company's most recent Quarterly Report on Form 10-Q, as well as the other risks detailed in reports filed by the Company with the SEC. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation to subsequently revise forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date such statements are made.
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 are maintained.
Cognex is the world's leader in the machine vision industry, having shipped more than 4.5 million image-based products, representing over $11 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.
Investor Contacts:
Nathan McCurren – Head of Investor Relations
Jordan Bertier – Sr. Manager, Investor Relations
Cognex Corporation
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