Cognex Reports First Quarter 2024 Results
NATICK, Mass., May 2, 2024 /PRNewswire/ -- Cognex Corporation (NASDAQ: CGNX) today reported financial results for the first quarter of 2024. Table 1 below shows selected financial data for Q1-24 compared with Q1-23 and Q4-23.
"Our first quarter results reflected a challenging, yet stable business environment," said Robert J. Willett, CEO of Cognex. "Revenue across most of our factory automation end markets was down year-on-year in the quarter. Revenue improved sequentially as we are seeing early indications of recovery in certain end markets."
Mr. Willett continued, "We recently launched the industry's first AI-enabled 3D vision system, and we continue to advance our Emerging Customer initiative. We believe the progress we are making on our strategic initiatives keeps us well-positioned to capitalize on exciting industry trends as the operating environment begins to improve."
Table 1
(Dollars in thousands, except per share amounts)
---
Current Prior Year Y/Y Prior Q/Q
Quarter Quarter Q1- Change Quarter Change
Q1-24 23 Q4-23
Revenue $211 $201 +5 % $197 +7 %
Operating Income $14 $22 (36 %) $13 +12 %
% of Revenue 6.7 % 11.0 % (428 bps) 6.5 % +27 bps
Adjusted EBITDA* $25 $27 (7 %) $25 +1 %
% of Revenue 11.9 % 13.5 % (159 bps) 12.6 % (70 bps)
Net Income per Diluted Share $0.07 $0.15 (53 %) $0.07 +7 %
Adjusted EPS* $0.11 $0.13 (14 %) $0.11 +2 %
Note: Numbers shown may not foot due to rounding.
*Adjusted EBITDA and Adjusted EPS 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 - First Quarter of 2024
-- Revenue increased by 5% from Q1-23. Excluding the 8% contribution of
Moritex and 1% negative impact of FX, revenue declined by 3%. The slight
year-on-year decline in revenue was driven primarily by the continued
softness across our factory automation business, partially offset by
growth in Logistics and Semi. Sequentially, revenue increased by 7% from
Q4-23, or 2% excluding the contribution of Moritex and FX, with slight
growth across most end markets.
-- Gross margin was 67.3% for Q1-24 compared to 71.5% for Q1-23 and 68.7%
for Q4-23. We recorded $3 million in acquisition charges and
amortization of intangible assets in cost of revenue in the quarter,
primarily related to the Moritex acquisition. Adjusted gross margin was
68.8% for Q1-24 compared to 71.8% for Q1-23 and 70.7% for Q4-23, in line
with our prior guidance. The year-on-year stepdown was driven by an
approximately 2 percentage point dilution effect from a full quarter of
Moritex, and a 1.6 percentage point impact from one-time events in the
quarter, primarily a strategic logistics project completed in the
quarter that is expected to drive longer-term, high-margin subscription
revenue.
-- Operating expenses increased by 5% from Q1-23 and increased by 4% from
Q4-23. We recorded $3 million in acquisition charges and amortization of
intangible assets in operating expenses in the quarter, primarily
related to the Moritex acquisition. Adjusted operating expenses
increased by 3% from Q1-23 and increased by 5% from Q4-23, in line with
expectations. The year-on-year increase was primarily driven by
incremental costs related to Moritex and our investment in the Emerging
Customer initiative, partly offset by lower headcount excluding these
investments.
-- Net Income declined by 53% from Q1-23 and increased by 7% from Q4-23.
Adjusted Net Income declined by 15% from Q1-23 and increased by 2% from
Q4-23. The year-on-year decline in Adjusted Net Income was primarily
driven by the above-mentioned gross margin effects and investment in our
Emerging Customer initiative.
-- The effective tax rate was 32% in Q1-24 and 2% in Q1-23. Excluding
discrete tax items and the tax impact of non-GAAP adjustments, the
adjusted effective tax rate was 16% in both periods.
Balance Sheet and Cash Flow Highlights - March 31, 2024
-- Cognex's financial position as of March 31, 2024 continued to be strong,
with $557 million in cash and investments and no debt. In Q1-24, Cognex
generated $14 million in cash from operations. In addition, the company
spent $9 million to repurchase its common stock and paid $13 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 - Q2 2024
-- Cognex expects revenue to be between $230 million and $245 million. This
range represents a sequential increase in revenue from Q1-24 to Q2-24
due to typical seasonality of consumer electronics revenue.
-- Adjusted gross margin(1) is expected to be slightly above 70%, an
increase from 68.8% in Q1-24 as we move beyond the one-time events in
the first quarter.
-- Adjusted operating expense(1) is expected to increase by low- to
mid-single digits on a sequential basis as we expect additional
investment in the company's Emerging Customer initiative.
-- The adjusted effective tax rate(1) is expected to be 16%.
(1)Cognex has provided the forward-looking non-GAAP measures of adjusted gross margin, adjusted operating expense, 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 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 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.
COGNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
March 31, December 31,
2024 2023
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $138,859 $202,655
Current investments, amortized cost of $141,876 and $132,799 in 2024 and 2023, 139,334 129,392
respectively, allowance for credit losses of $0 in 2024 and 2023
Accounts receivable, allowance for credit losses of $1,339 and $583 in 2024 and 2023, 138,556 114,164
respectively
Unbilled revenue 2,737 2,402
Inventories 170,871 162,285
Prepaid expenses and other current assets 71,173 68,099
Total current assets 661,530 678,997
Non-current investments, amortized cost of $285,376 and $250,790 in 2024 and 2023, 278,426 244,230
respectively, allowance for credit losses of $0 in 2024 and 2023
Property, plant, and equipment, net 104,111 105,849
Operating lease assets 74,113 75,115
Goodwill 386,157 393,181
Intangible assets, net 105,054 112,952
Deferred income taxes 397,563 400,400
Other assets 6,279 7,088
Total assets $2,013,233 $2,017,812
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $27,459 $21,454
Accrued expenses 70,429 72,374
Accrued income taxes 40,433 16,907
Deferred revenue and customer deposits 39,983 31,525
Operating lease liabilities 9,798 9,624
Total current liabilities 188,102 151,884
Non-current operating lease liabilities 67,367 68,977
Deferred income taxes 239,538 246,877
Reserve for income taxes 28,144 26,685
Non-current accrued income taxes - 18,338
Other liabilities 893 299
Total liabilities 524,044 513,060
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value - Authorized: 400 shares in 2024 and 2023, -
respectively; no shares issued and outstanding
Common stock, $.002 par value - Authorized: 300,000 shares in 2024 and 2023, 343 343
respectively; issued and outstanding: 171,662 and 171,599 shares in 2024 and 2023, respectively
Additional paid-in capital 1,047,643 1,037,202
Retained earnings 502,338 512,543
Accumulated other comprehensive loss, net of tax (61,135) (45,336)
Total shareholders' equity 1,489,189 1,504,752
Total liabilities and shareholders' equity $2,013,233 $2,017,812
COGNEX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three-months Ended
March 31, December 31, April 2,
2024 2023 2023
Revenue $210,797 $196,670 $201,124
Cost of revenue 68,860 61,626 57,384
Gross margin 141,937 135,044 143,740
Percentage of revenue 67 % 69 % 71 %
Research, development, and engineering expenses 37,105 34,693 38,542
Percentage of revenue 18 % 18 % 19 %
Selling, general, and administrative expenses 90,628 90,372 83,037
Percentage of revenue 43 % 46 % 41 %
Loss (recovery) from fire - (2,750)
Operating income 14,204 12,729 22,161
Percentage of revenue 7 % 6 % 11 %
Foreign currency gain (loss) 46 (129) 394
Investment income 3,120 1,520 3,587
Other income (expense) 196 234 73
Income before income tax expense 17,566 14,354 26,215
Income tax expense 5,544 3,125 600
Net income $12,022 $11,229 $25,615
Percentage of revenue 6 % 6 % 13 %
Net income per weighted-average common and common-equivalent share:
Basic $0.07 $0.07 $0.15
Diluted $0.07 $0.07 $0.15
Weighted-average common and common-equivalent shares outstanding:
Basic 171,692 171,771 172,624
Diluted 172,594 172,571 173,903
Cash dividends per common share $0.075 $0.075 $0.070
(1) Amounts include stock-based compensation expense, as follows:
Cost of revenue $605 $482 $621
Research, development, and engineering 4,389 3,823 5,890
Selling, general, and administrative 8,308 8,945 10,068
Total stock-based compensation expense $13,302 $13,250 $16,579
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:
-- Adjusted gross margin: Gross margin adjusted for amortization of
acquisition-related intangible assets, as well as, if applicable,
restructuring charges, acquisition and integration costs and other
one-time discrete events, such as loss or recovery related to a fire.
-- Adjusted operating expense: Operating expense adjusted for amortization
of acquisition-related intangible assets, as well as, if applicable,
restructuring charges, acquisition and integration costs and other
one-time discrete events, such as loss or recovery related to a fire.
-- Adjusted operating income: Operating income adjusted for amortization of
acquisition-related intangible assets, as well as, if applicable,
restructuring charges, acquisition and integration costs and other
one-time discrete events, such as loss or recovery related to a fire.
-- Adjusted EBITDA: Operating income adjusted for amortization of
acquisition-related intangible assets and depreciation, as well as, if
applicable, restructuring charges, acquisition and integration costs and
other one-time discrete events, such as loss or recovery related to a
fire.
-- Adjusted net income: Net income adjusted for amortization of
acquisition-related intangible assets, as well as, if applicable,
restructuring charges, acquisition and integration costs and other
one-time discrete events, such as loss or recovery related to a fire or
a foreign currency (gain) loss on a forward contract to hedge the
Moritex purchase price.
-- Adjusted effective tax rate: Effective tax rate adjusted for discrete
tax items and the net impact of the other non-GAAP adjustments.
-- Free cash flow: Cash provided by operating activities less cash for
capital expenditures.
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 first quarter of 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
(Unaudited)
Dollars in thousands, except per share amounts
Three-months Ended
March 31, December 31, April 2,
2024 2023 2023
Gross margin (GAAP) $141,937 $135,044 $143,740
Acquisition and integration costs 1,568 2,882
Amortization of acquisition-related intangible assets 1,429 1,126 748
Adjusted gross margin $144,934 $139,052 $144,488
Operating expense (GAAP) $127,733 $122,315 $121,579
(Loss) recovery from fire - 2,750
Acquisition and integration costs (1,303) (5,101) (116)
Amortization of acquisition-related intangible assets (1,384) (1,053) (194)
Adjusted operating expense $125,046 $118,911 $121,269
Operating income (GAAP) $14,204 $12,729 $22,161
Loss (recovery) from fire - (2,750)
Acquisition and integration costs 2,871 7,983 116
Amortization of acquisition-related intangible assets 2,813 2,179 942
Adjusted operating income $19,888 $20,141 $23,219
Depreciation 5,279 4,713 3,986
Adjusted EBITDA $25,167 $24,854 $27,205
Net income (GAAP) $12,022 $11,229 $25,615
Loss (recovery) from fire - (2,750)
Acquisition and integration costs 2,871 7,983 116
Amortization of acquisition-related intangible assets 2,813 2,179 942
Discrete tax (benefit) expense 3,085 1,498 (3,594)
Tax impact of reconciling items (1,354) (1,134) (184)
Adjusted net income $19,437 $19,006 $22,895
Earnings per share of common stock, diluted (GAAP) $0.07 $0.07 $0.15
Loss (recovery) from fire - (0.02)
Acquisition and integration costs 0.02 0.05
Amortization of acquisition-related intangible assets 0.02 0.01 0.01
Discrete tax (benefit) expense 0.02 0.01 (0.02)
Tax impact of reconciling items (0.01) (0.01)
Adjusted earnings per share of common stock, diluted $0.11 $0.11 $0.13
Effective tax rate (GAAP) 31.6 % 21.8 % 2.3 %
Discrete tax benefit (expense) (17.6) % (10.4) % 13.7 %
Net impact of other reconciling items 2.4 % 1.4 % 0.1 %
Adjusted effective tax rate 16.4 % 12.7 % 16.1 %
Cash provided by operating activities (GAAP) $13,643 $14,491 $27,553
Capital expenditures (4,061) (7,015) (5,507)
Free cash flow $9,582 $7,476 $22,046
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:
Loss (recovery) from fire:
-- On June 7, 2022, the Company's primary contract manufacturer experienced
a fire at its plant in Indonesia. In the fourth quarter of 2023 the
Company recorded a recovery of $2,750,000 for proceeds received as part
of a financial settlement for lost inventory and other losses incurred
as a result of the fire. Management does not anticipate additional
recoveries.
Acquisition and integration costs:
-- The Company has incurred charges related to the purchase and integration
of acquired businesses. In the first quarter of 2024, these costs were
primarily related to the ongoing integration of Moritex Corporation.
Amortization of acquisition-related intangible assets:
-- The Company excludes the amortization of acquired intangible assets from
non-GAAP expense and income measures. These items are inconsistent in
amount and frequency and are significantly impacted by the timing and
size of acquisitions, and include the amortization of customer
relationships, completed technologies, and trademarks that originated
from prior acquisitions. The largest driver of intangible asset
amortization was the acquisition of Moritex Corporation.
Discrete tax (benefit) expense:
-- Items unrelated to current period ordinary income or (loss) that
generally relate to changes in tax laws, adjustments to prior period's
actual liability determined upon filing tax returns, adjustments to
previously recorded reserves for uncertain tax positions, and initially
recording or fully reversing valuation allowances.
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.
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 Exchange Act. 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, growth opportunities, future financial performance and financial targets, customer demand and order rates and timing of related revenue, delivery lead times, future product mix, research and development activities, sales and marketing activities (including our Emerging Customer Program), new product offerings and product development activities, customer acceptance of our products, the potential effects of emerging technologies, capital expenditures, cost management activities, investments, liquidity, dividends and stock repurchases, strategic initiatives and growth plans, our ability to maintain and grow key relationships, 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; (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 in 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; (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 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, or public health issues; (21) exposure to potential liabilities, increased costs, reputational harm, and other adverse effects 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 and 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
ir@cognex.com
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