79 annotations
Sounds like the bulk of the weakness maybe in Europe, but if you can just give us any context on the European versus U.S. trends there? And again, what some of the drivers are on the base side?
Robert Willett
Yes.
So Automotive in 2023 was our best-performing market. It did decline, but only mid-single digits. And it's declined more year-on-year in the first half of '24 than it did last year. And the weakness is across traditional ICE business and EV battery, with EV battery really being, I would say, the most kind of disappointing for us or slowest in terms of what has been our biggest decline.
We still -- we add a lot of value to EV battery production, but the end demand from customers is not there around a lot of uncertainty in the near term. Auto is a cyclical end market. It grew nicely in '21 and '22. And in addition, some of the big players can drive some of the plans on investment.
In terms of your question on sort of regional, I would say we definitely see softness in China. That's certainly one of the big areas of softness we see. And we -- and Europe also is looking weaker on the automotive side.
EV battery weak
Transcript
2024 Q2
5 Aug 24
Okay. And then maybe just turning to some of the end markets. It sounds like maybe consumer electronics a little bit weaker than you thought versus 3 months ago. Can you talk about what changed there? And then any expectations in 2025 around device upgrades may be helping influence some volumes there?
Robert Willett
Yes.
So I think the overall sense would be this more uncertainty in consumer electronics, that is our observation.
Some context following what was a 31% decline in 2023, consumer electronics remains soft with slow end user demand and particular weakness in China. We've tempered expectations for consumer electronics in 2024. And we still have certain uncertainty around project size and timing.
Our customers remain cautious with investment in productivity initiatives to automate manual inspection tasks. And we expect limited investment in 2024 from customers planning to invest capital to diversify their supply chains.
So all of those factors, I would say, kind of are probably underlying what seems like kind of continued softness in that market that hasn't returned to the strong growth we expect to see at some point going forward.
CE still soft
Transcript
2024 Q2
5 Aug 24
I will now turn to our outlook for the third quarter. In the third quarter, we expect revenue between $225 million and $240 million. This range reflects a soft but stable market backdrop, with strength in select end markets but continuous weakness in our broader factory automation business. It also includes a slight step down sequentially, driven by seasonal consumer electronics revenue more heavily weighted to Q2 this year
Q3 outlook
Transcript
2024 Q2
5 Aug 24
his year, we again expect consumer electronics revenue to be more heavily weighted to Q2 but to a lesser extent than in 2023.
Consumer electronics has positive long-term trends, but we continue to have tempered expectation for investment in 2024. Semi had strong momentum in the quarter with significant year-on-year growth. Coming off a down year in 2023, we're now seeing strong growth.
CE
Transcript
2024 Q2
5 Aug 24
the first half of the year, Logistics achieved strong double-digit revenue growth year-on-year, and we expect growth to continue in the back half of the year. We saw growth across this business, including large e-commerce customers, parcel and post customers and across our base logistics business globally. We believe logistics is well positioned to grow as automation penetration increases and e-commerce investment returns
logistocsd
Transcript
2024 Q2
5 Aug 24
We continue to see delays and scaling back of EV battery projects, which led to a revenue decline year-on-year in the second quarter.
Additionally, we saw a further step down in our broader automotive business, particularly in Europe.
We are seeing more tentativeness from auto customers driven by concern around near-term end demand and political uncertainty.
v weak auto
Transcript
2024 Q2
5 Aug 24
factory automation customers who are in end markets where we are seeing prolonged macro softness. This market softness is impacting sales more than we had anticipated.
So we now expect it will take longer for the first cohort of emerging customer sales noise to deliver incremental revenue of $50 million.
While the revenue ramp on this initiative is taking longer, our emerging customer team continues to steadily increase monthly bookings, and we remain confident that the high level of activity we're seeing will deliver increasing levels of success. The orders we are seeing reinforce our confidence in this initiative being gross margin accretive to our mid-70s target.
fsac tory sutomation xsoftness
Transcript
2024 Q2
5 Aug 24
While most of our manufacturing customers remain cautious with their CapEx investment, positive momentum continues to build in logistics and semi
positive momentum in log+semi
Transcript
2024 Q2
5 Aug 24
However, macro sentiment has now declined again, and we have seen additional delays and reductions in EV projects.
more ev slowdwns
Transcript
2024 Q2
5 Aug 24
yes, I think for -- maybe on the order of 6 months now, we've started to see sort of concern around EV battery investment that it may be getting a little ahead of demand in general in the world. And we've been working -- we're working closely with really all the large EV battery manufacturers, I think tenants that I think are really constitute most of the investment going on.
And it's a huge investment that's going on with the idea that this is a multiyear phenomenon. And there are 2 ways in which Cognex really benefits can really help those customers and where we do very well.
ev again
Transcript
2024 Q1
21 May 24
The China market is certainly the most difficult market geographically for us at the moment. We've seen revenue decline year-on-year for 6 straight quarters. In China, it was down 17% year-on-year in Q1, excluding Moritex.
china
Transcript
2024 Q1
21 May 24
You asked about automotive.
I think context, automotive was our largest and best-performing market last year, representing 25% of our revenue. It looks to be entering a more difficult period at the moment.
I think we see that particularly around some of the EV battery investments, which over the long term look very good over the short term, have really been scaled back pushed out, right? So that can give our revenues some big bumps and we saw a pretty nice EV battery order in the first quarter of last year in China, and that did not repeat this year.
So certainly, there's some tentativeness there, much as you're reading probably about automotive.
We are seeing customers, some of them move more quickly into hybrid back into hybrid, if you like. And we've seen some success with customers there. But the broad view is that automotive is slowing down, looks challenging for this year and EV investments are being pushed out.
auto weak and EV battery too
Transcript
2024 Q1
21 May 24
So we're seeing our semi business after a couple of more difficult years in -- well, in 2023 is starting to return back to some pretty nice potential growth. Revenue year-on-year in Q1 was up 6%, excluding Moritex.
So still, I think, pretty early on in seeing that start to ramp. But this is a market where we have some longer-term exposure and long-term relationships with OEMs.
Some characteristics, certainly like investments in high bandwidth memory, which is really being driven by growth in AI investments, they're starting to look very positive for us. And then Moritex is a very, very highly regarded brand.
We have a lot of great relationships with machine builders. I've had the pleasure of visiting a bunch of them in Japan a couple of weeks ago. And that's a business that as those companies start to see their business grow, it should be very beneficial for us in the longer term.
So I think we've probably been going through a period where there's been some recalibration around changes that are going on in the market, particularly related to China and perhaps the scaling up of big AI investments and investments such as around the CHIPS Act.
semiC coming back
Transcript
2024 Q1
21 May 24
So our logistics business grew 65% in 2021. It was around $300 million fueled by a lot of investment in e-commerce, particularly. And then as that kind of investment really slowed down and stopped, it contracted by 25% in 2022 and by 21% in 2023.
So I think we've seen a big downturn in that industry. We're now feeling much more positive that it's starting to come to really come back.
So Logistics revenue grew 24% year-on-year in the first quarter of this year, although it's flat if we exclude the very large project that we talked to you about on the last call, but we're having positive conversations and starting to see early indications of recovery.
logistocs is back
Transcript
2024 Q1
21 May 24
We are seeing more tentativeness from EV battery customers driven by concern around near-term end user demand and political uncertainty. We started to see delayed projects result in a reduction in the pace of greenfield investments from our EV customers.
We are still seeing customers invest in productivity improvements and product upgrades on existing lines and we still expect our EV battery business to be a robust growth driver over the long term.
EV tentativesss
Transcript
2024 Q1
21 May 24
onsumer electronics has positive long-term trends, but the timing and revenue contribution can be lumpy. We do not expect 2024 to be a significant growth year for consumer electronics.
CE lumpy but nor exoected to be growth
Transcript
2024 Q1
21 May 24
Logistics has continued to be stable and we believe is well positioned to grow as automation penetration increases and e-commerce investment returns.
For the full year, we expect logistics to grow as we start to see infrastructure investment plans materializing.
So logistics growth this year will likely still be below the 30% growth we target long term in this market.
log to griw
Transcript
2024 Q1
21 May 24
Semi
semiC
Transcript
2024 Q1
21 May 24
Consumer electronic
CE
Transcript
2024 Q1
21 May 24
logistics.
log
Transcript
2024 Q1
21 May 24