UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q 
(Mark One)
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended October 3, 20212, 2022 or
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to __________

Commission File Number 001-34218
COGNEX CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2713778
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)

One Vision Drive
Natick, Massachusetts 01760-2059
(508) 650-3000
(Address, including zip code, and telephone number, including area code, of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.002 per shareCGNXThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  
 Yes   No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer  Accelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
 Yes   No  
As of October 3, 2021,2, 2022, there were 176,799,003172,930,176 shares of Common Stock, $.002 par value per share, of the registrant outstanding.



INDEX
 
PART IFINANCIAL INFORMATION

2


PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
Three-months EndedNine-months Ended Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020October 2, 2022October 3, 2021October 2, 2022October 3, 2021
(unaudited)(unaudited) (unaudited)(unaudited)
RevenueRevenue$284,848 $251,073 $793,033 $587,405 Revenue$209,622 $284,848 $766,657 $793,033 
Cost of revenueCost of revenue85,712 59,741 208,189 151,261 Cost of revenue57,383 85,712 214,316 208,189 
Gross marginGross margin199,136 191,332 584,844 436,144 Gross margin152,239 199,136 552,341 584,844 
Research, development, and engineering expensesResearch, development, and engineering expenses34,476 30,240 99,883 96,583 Research, development, and engineering expenses33,954 34,476 103,999 99,883 
Selling, general, and administrative expensesSelling, general, and administrative expenses77,113 64,206 226,380 193,497 Selling, general, and administrative expenses75,371 77,113 236,156 226,380 
Restructuring charges (Note 16) 251  15,049 
Intangible asset impairment charges (Note 8) —  19,571 
Loss from fire (Note 17)Loss from fire (Note 17)2,891 — 20,294 — 
Operating incomeOperating income87,547 96,635 258,581 111,444 Operating income40,023 87,547 191,892 258,581 
Foreign currency gain (loss)Foreign currency gain (loss)(586)2,357 (2,233)(310)Foreign currency gain (loss)(1,880)(586)(4,367)(2,233)
Investment incomeInvestment income1,748 2,490 5,025 11,010 Investment income1,416 1,748 4,389 5,025 
Other income (expense)Other income (expense)(125)(173)(420)(153)Other income (expense)(214)(125)(450)(420)
Income before income tax expenseIncome before income tax expense88,584 101,309 260,953 121,991 Income before income tax expense39,345 88,584 191,464 260,953 
Income tax expenseIncome tax expense9,684 13,803 34,607 15,150 Income tax expense5,365 9,684 31,250 34,607 
Net incomeNet income$78,900 $87,506 $226,346 $106,841 Net income$33,980 $78,900 $160,214 $226,346 
Net income per weighted-average common and common-equivalent share:Net income per weighted-average common and common-equivalent share:Net income per weighted-average common and common-equivalent share:
BasicBasic$0.45 $0.50 $1.28 $0.62 Basic$0.20 $0.45 $0.92 $1.28 
DilutedDiluted$0.44 $0.49 $1.26 $0.61 Diluted$0.19 $0.44 $0.91 $1.26 
Weighted-average common and common-equivalent shares outstanding:Weighted-average common and common-equivalent shares outstanding:Weighted-average common and common-equivalent shares outstanding:
BasicBasic176,812 173,943 176,572 172,881 Basic173,256 176,812 173,640 176,572 
DilutedDiluted180,342 177,138 180,109 176,038 Diluted174,327 180,342 175,233 180,109 
Cash dividends per common shareCash dividends per common share$0.060 $0.055 $0.180 $0.165 Cash dividends per common share$0.065 $0.060 $0.195 $0.180 













 
The accompanying notes are an integral part of these consolidated financial statements.
3


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
 
Three-months EndedNine-months Ended Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020October 2, 2022October 3, 2021October 2, 2022October 3, 2021
(unaudited)(unaudited) (unaudited)(unaudited)
Net incomeNet income$78,900 $87,506 $226,346 $106,841 Net income$33,980 $78,900 $160,214 $226,346 
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Available-for-sale investments:Available-for-sale investments:Available-for-sale investments:
Net unrealized gain (loss), net of tax of $(162) and $2,855 in the three-month periods and net of tax of $(808) and $1,067 in the nine-month periods, respectively(521)(2,308)(2,617)6,282 
Reclassification of credit loss (recovery) on investments into current operations —  75 
Net unrealized gain (loss), net of tax of $(1,564) and $(162) in the three-month periods, and net of tax of $(6,298) and $(808) in the nine-month
periods, respectively
Net unrealized gain (loss), net of tax of $(1,564) and $(162) in the three-month periods, and net of tax of $(6,298) and $(808) in the nine-month
periods, respectively
(5,315)(521)(21,185)(2,617)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments into current operationsReclassification of net realized (gain) loss on the sale of available-for-sale investments into current operations(19)(786)(87)(3,591)Reclassification of net realized (gain) loss on the sale of available-for-sale investments into current operations79 (19)103 (87)
Net change related to available-for-sale investmentsNet change related to available-for-sale investments(540)(3,094)(2,704)2,766 Net change related to available-for-sale investments(5,236)(540)(21,082)(2,704)
Foreign currency translation adjustments:Foreign currency translation adjustments:Foreign currency translation adjustments:
Foreign currency translation adjustmentsForeign currency translation adjustments(2,136)2,098 (5,243)(3,364)Foreign currency translation adjustments(7,352)(2,136)(13,425)(5,243)
Net change related to foreign currency translation adjustmentsNet change related to foreign currency translation adjustments(2,136)2,098 (5,243)(3,364)Net change related to foreign currency translation adjustments(7,352)(2,136)(13,425)(5,243)
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax(2,676)(996)(7,947)(598)Other comprehensive income (loss), net of tax(12,588)(2,676)(34,507)(7,947)
Total comprehensive incomeTotal comprehensive income$76,224 $86,510 $218,399 $106,243 Total comprehensive income$21,392 $76,224 $125,707 $218,399 


















The accompanying notes are an integral part of these consolidated financial statements.
4


COGNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
October 3, 2021December 31, 2020
 (unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$203,479 $269,073 
Current investments, amortized cost of $188,349 and $102,258 in 2021 and 2020, respectively, allowance for credit losses of $0 in 2021 and 2020189,113 103,240 
Accounts receivable, allowance for credit losses of $792 and $831 in 2021 and 2020, respectively129,784 125,696 
Unbilled revenue7,325 5,632 
Inventories81,170 60,830 
Prepaid expenses and other current assets61,196 37,220 
Total current assets672,067 601,691 
Non-current investments, amortized cost of $591,378 and $390,417 in 2021 and 2020, respectively, allowance for credit losses of $0 in 2021 and 2020592,794 395,125 
Property, plant, and equipment, net76,882 79,173 
Operating lease assets24,154 22,582 
Goodwill241,799 244,078 
Intangible assets, net12,782 15,555 
Deferred income taxes420,962 434,704 
Other assets7,363 7,794 
Total assets$2,048,803 $1,800,702 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$26,797 $16,270 
Accrued expenses80,337 77,264 
Accrued income taxes12,271 9,379 
Deferred revenue and customer deposits37,843 21,274 
Operating lease liabilities7,889 8,110 
Total current liabilities165,137 132,297 
Non-current operating lease liabilities18,922 18,120 
Deferred income taxes302,019 314,952 
Reserve for income taxes14,805 14,257 
Non-current accrued income taxes40,963 48,915 
Other liabilities13,996 9,959 
Total liabilities555,842 538,500 
Shareholders’ equity:
Preferred stock, $.01 par value – Authorized: 400 shares in 2021 and 2020, respectively, no shares issued and outstanding — 
Common stock, $.002 par value – Authorized: 300,000 shares in 2021 and 2020, respectively, issued and outstanding: 176,799 and 175,790 shares in 2021 and 2020, respectively354 352 
Additional paid-in capital900,190 807,739 
Retained earnings634,165 487,912 
Accumulated other comprehensive loss, net of tax(41,748)(33,801)
Total shareholders’ equity1,492,961 1,262,202 
Total liabilities and shareholders' equity$2,048,803 $1,800,702 

October 2, 2022December 31, 2021
 (unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$266,004 $186,161 
Current investments, amortized cost of $213,044 and $137,124 in 2022 and 2021, respectively, allowance for credit losses of $0 in 2022 and 2021208,430 137,455 
Accounts receivable, allowance for credit losses of $741 and $776 in 2022 and 2021, respectively96,292 130,348 
Unbilled revenue2,142 3,990 
Inventories108,553 113,102 
Prepaid expenses and other current assets106,046 68,742 
Total current assets787,467 639,798 
Non-current investments, amortized cost of $369,868 and $587,981 in 2022 and 2021, respectively, allowance for credit losses of $0 in 2022 and 2021343,198 583,748 
Property, plant, and equipment, net79,425 77,546 
Operating lease assets31,514 23,157 
Goodwill237,509 241,713 
Intangible assets, net9,420 11,888 
Deferred income taxes405,136 418,570 
Other assets6,567 7,242 
Total assets$1,900,236 $2,003,662 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$22,220 $44,051 
Accrued expenses64,115 92,432 
Accrued income taxes12,055 8,577 
Deferred revenue and customer deposits54,777 35,743 
Operating lease liabilities8,111 7,786 
Total current liabilities161,278 188,589 
Non-current operating lease liabilities25,260 17,795 
Deferred income taxes259,950 293,769 
Reserve for income taxes12,204 14,780 
Non-current accrued income taxes33,008 43,160 
Other liabilities19,316 15,476 
Total liabilities511,016 573,569 
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred stock, $.01 par value – Authorized: 400 shares in 2022 and 2021, respectively; no shares issued and outstanding — 
Common stock, $.002 par value – Authorized: 300,000 shares in 2022 and 2021, respectively; issued and outstanding: 172,930 and 175,481 shares in 2022 and 2021, respectively346 351 
Additional paid-in capital960,446 914,802 
Retained earnings510,877 562,882 
Accumulated other comprehensive loss, net of tax(82,449)(47,942)
Total shareholders’ equity1,389,220 1,430,093 
Total liabilities and shareholders' equity$1,900,236 $2,003,662 

The accompanying notes are an integral part of these consolidated financial statements.
5


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine-months Ended Nine-months Ended
October 3, 2021September 27, 2020October 2, 2022October 3, 2021
(unaudited) (unaudited)
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net incomeNet income$226,346 $106,841 Net income$160,214 $226,346 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expenseStock-based compensation expense33,353 32,076 Stock-based compensation expense41,419 33,353 
Depreciation of property, plant, and equipmentDepreciation of property, plant, and equipment12,641 16,467 Depreciation of property, plant, and equipment12,176 12,641 
Loss on disposal of property, plant, and equipmentLoss on disposal of property, plant, and equipment4 1,654 Loss on disposal of property, plant, and equipment12 
Amortization of intangible assetsAmortization of intangible assets2,773 3,437 Amortization of intangible assets2,468 2,773 
Intangible asset impairment charges 19,571 
Excess and obsolete inventory chargesExcess and obsolete inventory charges2,120 9,386 Excess and obsolete inventory charges2,728 2,120 
Operating lease asset impairment charges 2,534 
Non-cash impact of write-offs related to fire (Note 17)Non-cash impact of write-offs related to fire (Note 17)45,827 — 
Amortization of discounts or premiums on investmentsAmortization of discounts or premiums on investments3,316 765 Amortization of discounts or premiums on investments3,976 3,316 
Realized gain on sale of investments(87)(3,591)
Credit loss on investments 75 
Revaluation of contingent consideration (114)
Realized loss (gain) on sale of investmentsRealized loss (gain) on sale of investments103 (87)
Change in deferred income taxesChange in deferred income taxes1,411 3,194 Change in deferred income taxes(14,799)1,411 
Change in operating assets and liabilities:Change in operating assets and liabilities:Change in operating assets and liabilities:
Accounts receivableAccounts receivable(4,295)(23,878)Accounts receivable31,018 (4,295)
Unbilled revenueUnbilled revenue(1,689)(10,606)Unbilled revenue1,760 (1,689)
InventoriesInventories(22,534)(3,065)Inventories(35,815)(22,534)
Prepaid expenses and other current assetsPrepaid expenses and other current assets(24,607)(10,718)Prepaid expenses and other current assets(46,817)(24,607)
Accounts payableAccounts payable10,576 3,587 Accounts payable(21,577)10,576 
Accrued expensesAccrued expenses4,416 17,028 Accrued expenses(23,813)4,416 
Accrued income taxesAccrued income taxes(4,936)(23,627)Accrued income taxes(6,644)(4,936)
Deferred revenue and customer depositsDeferred revenue and customer deposits16,751 19,066 Deferred revenue and customer deposits20,882 16,751 
OtherOther3,297 (632)Other4,031 3,297 
Net cash provided by operating activitiesNet cash provided by operating activities258,856 159,450 Net cash provided by operating activities177,149 258,856 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Purchases of investmentsPurchases of investments(607,458)(601,447)Purchases of investments(77,760)(607,458)
Maturities and sales of investmentsMaturities and sales of investments317,174 567,245 Maturities and sales of investments215,876 317,174 
Purchases of property, plant, and equipmentPurchases of property, plant, and equipment(10,689)(9,829)Purchases of property, plant, and equipment(15,605)(10,689)
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities(300,973)(44,031)Net cash provided by (used in) investing activities122,511 (300,973)
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Net proceeds from issuance of common stock under stock plans59,101 91,390 
Net payments from issuance of common stock under stock plansNet payments from issuance of common stock under stock plans4,225 59,101 
Repurchase of common stockRepurchase of common stock(48,294)(51,036)Repurchase of common stock(178,387)(48,294)
Payment of dividendsPayment of dividends(31,800)(28,554)Payment of dividends(33,837)(31,800)
Payment of contingent consideration (1,039)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(20,993)10,761 Net cash provided by (used in) financing activities(207,999)(20,993)
Effect of foreign exchange rate changes on cash and cash equivalentsEffect of foreign exchange rate changes on cash and cash equivalents(2,484)745 Effect of foreign exchange rate changes on cash and cash equivalents(11,818)(2,484)
Net change in cash and cash equivalentsNet change in cash and cash equivalents(65,594)126,925 Net change in cash and cash equivalents79,843 (65,594)
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period269,073 171,431 Cash and cash equivalents at beginning of period186,161 269,073 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$203,479 $298,356 Cash and cash equivalents at end of period$266,004 $203,479 











The accompanying notes are an integral part of these consolidated financial statements.
6


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of July 3, 2022173,397 $347 $947,269 $512,230 $(69,861)$1,389,985 
Net issuance of common stock under stock plans73 — (189)— — (189)
Repurchase of common stock(540)(1)— (24,069)— (24,070)
Stock-based compensation expense— — 13,366 — — 13,366 
Payment of dividends ($0.065 per common share)— — — (11,264)— (11,264)
Net income— — — 33,980 — 33,980 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(1,564)— — — — (5,315)(5,315)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — 79 79 
Foreign currency translation adjustment— — — — (7,352)(7,352)
Balance as of October 2, 2022 (unaudited)172,930 $346 $960,446 $510,877 $(82,449)$1,389,220 
 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of July 4, 2021176,707 $353 $874,883 $593,290 $(39,072)$1,429,454 
Net issuance of common stock under stock plans415 14,693 — — 14,694 
Repurchase of common stock(323)— — (27,417)— (27,417)
Stock-based compensation expense— — 10,614 — — 10,614 
Payment of dividends ($0.060 per common share)— — — (10,608)— (10,608)
Net income— — — 78,900 — 78,900 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(162)— — — — (521)(521)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (19)(19)
Foreign currency translation adjustment— — — — (2,136)(2,136)
Balance as of October 3, 2021 (unaudited)176,799 $354 $900,190 $634,165 $(41,748)$1,492,961 
 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of June 28, 2020173,047 $346 $710,412 $702,597 $(36,877)$1,376,478 
Net issuance of common stock under stock plans1,586 43,152 — — 43,155 
Stock-based compensation expense— — 9,268 — — 9,268 
Payment of dividends ($0.055 per common share)— — — (9,582)— (9,582)
Net income— — — 87,506 — 87,506 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $2,855— — — — (2,308)(2,308)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (786)(786)
Foreign currency translation adjustment— — — — 2,098 2,098 
Balance as of September 27, 2020 (unaudited)174,633 $349 $762,832 $780,521 $(37,873)$1,505,829 










The accompanying notes are an integral part of these consolidated financial statements.
7


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of December 31, 2021175,481 $351 $914,802 $562,882 $(47,942)$1,430,093 
Net issuance of common stock under stock plans256 — 4,225 — — 4,225 
Repurchase of common stock(2,807)(5)— (178,382)— (178,387)
Stock-based compensation expense— — 41,419 — — 41,419 
Payment of dividends ($0.195 per common share)— — — (33,837)— (33,837)
Net income— — — 160,214 — 160,214 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(6,298)— — — — (21,185)(21,185)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — 103 103 
Foreign currency translation adjustment— — — — (13,425)(13,425)
Balance as of October 2, 2022 (unaudited)172,930 $346 $960,446 $510,877 $(82,449)$1,389,220 

 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of December 31, 2020175,790 $352 $807,739 $487,912 $(33,801)$1,262,202 
Net issuance of common stock under stock plans1,590 59,098 — — 59,101 
Repurchase of common stock(581)(1)— (48,293)— (48,294)
Stock-based compensation expense— — 33,353 — — 33,353 
Payment of dividends ($0.180 per common share)— — — (31,800)— (31,800)
Net income— — — 226,346 — 226,346 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(808)— — — — (2,617)(2,617)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (87)(87)
Foreign currency translation adjustment— — — — (5,243)(5,243)
Balance as of October 3, 2021 (unaudited)176,799 $354 $900,190 $634,165 $(41,748)$1,492,961 

 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of December 31, 2019172,440 $345 $639,372 $753,268 $(37,275)$1,355,710 
Net issuance of common stock under stock plans3,408 91,384 — — 91,390 
Repurchase of common stock(1,215)(2)— (51,034)— (51,036)
Stock-based compensation expense— — 32,076 — — 32,076 
Payment of dividends ($0.165 per common share)— — — (28,554)— (28,554)
Net income— — — 106,841 — 106,841 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $1,067— — — — 6,282 6,282 
Reclassification of credit loss (recovery) on investments— — — — 75 75 
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (3,591)(3,591)
Foreign currency translation adjustment— — — — (3,364)(3,364)
Balance as of September 27, 2020 (unaudited)174,633 $349 $762,832 $780,521 $(37,873)$1,505,829 









The accompanying notes are an integral part of these consolidated financial statements.
8


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: Summary of Significant Accounting Policies
As permitted by the rules of the Securities and Exchange Commission applicable to Quarterly Reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles (GAAP). Reference should be made to the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202021 for a full description of other significant accounting policies.
In the opinion of the management of Cognex Corporation (the "Company"), the accompanying consolidated unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, excess and obsolete inventory chargesadjustments related to the loss from fire (Note 5)17), intangible asset impairment charges (Note 8), restructuring charges (Note 16) and financial statement reclassifications necessary to present fairly the Company’s financial position as of October 3, 2021,2, 2022, and the results of its operations for the three-month and nine-month periods ended October 2, 2022 and October 3, 2021, and September 27, 2020, and changes in shareholders’ equity, comprehensive income, and cash flows for the periods presented.
The results disclosed in the Consolidated Statements of Operations for the three-month and nine-month periods ended October 3, 20212, 2022 are not necessarily indicative of the results to be expected for the full year.
NOTE 2: New Pronouncements
Accounting Standards Update (ASU) 2019-12, "Simplifying the Accounting for Income Taxes"
The amendments in this ASU eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. They also clarify and simplify other aspects of the accounting for income taxes. The Company adopted ASU 2019-12 on January 1, 2021. Upon adoption, ASU 2019-12 did not have a material impact on the Company's consolidated financial statements and disclosures.
Accounting Standards Update (ASU) 2020-08, "Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs"
The amendments in this ASU clarify that for each reporting period, for callable debt with multiple call dates and call prices that may change at each call date, to the extent that the amortized cost basis of an individual callable debt security exceeds the amount repayable by the issuer at the next call date, the excess is amortized to the next call date. The Company adopted ASU 2020-08 on January 1, 2021. Upon adoption, ASU 2020-08 did not have a material impact on the Company's consolidated financial statements and disclosures.
Accounting Standards Update (ASU) 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and (ASU) 2021-01, "Reference Rate Reform (Topic 848): Scope"
The amendments in these ASUs apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Together, the ASUs provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in these ASUs are effective for all entities as of March 12, 2020 through December 31, 2022. Management does not expect ASU 2020-04 or ASU 2021-01 to have a material impact on the Company's consolidated financial statements and disclosures.
Accounting Standards Update (ASU) 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers"
The amendments in this ASU primarily address the accounting for contract assets and contract liabilities related to revenue contracts with customers in a business combination. The ASU clarifies that an acquirer should account for the related revenue contracts in accordance with Accounting Standards Codification 606 as if the acquirer had originated the contracts. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, although early adoption is permitted. The amendments in the ASU should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The expected financial statement impact of this new accounting standard cannot be reasonably estimated at this time, as the impact in future periods will depend on the contract assets and contract liabilities acquired in future business combinations. Management does not expect this ASU to have a material impact on the Company's disclosures.

9


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3: Fair Value Measurements
Financial Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of October 3, 20212, 2022 (in thousands):
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
Unobservable Inputs (Level 3)
Assets:
Money market instruments$3,616504 $— $— 
Corporate bonds— 555,992455,220 — 
Asset-backed securities— 56,508 — 
Treasury bills— 114,998 — 
Asset-backed securities— 83,89621,591 — 
Agency bonds— 18,96615,759 — 
Sovereign bonds— 1,930 — 
Municipal bonds— 6,966620 — 
Sovereign bonds— 1,089 — 
Economic hedge forward contracts— 129835 — 
Liabilities:
Economic hedge forward contracts— 88442 — 

The Company’s money market instruments are reported at fair value based upon the daily market price for identical assets in active markets, and are therefore classified as Level 1.
The Company’s debt securities and forward contracts are reported at fair value based on model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability, and are therefore classified as Level 2. Management is responsible for estimating the fair value of these financial assets and liabilities, and in doing so, considers valuations provided by a large, third-party pricing service. For debt securities, this service maintains regular contact with market makers, brokers, dealers, and analysts to gather information on market movement, direction, trends, and other specific data. They use this information to structure yield curves for various types of debt securities and arrive at the daily valuations. The Company's forward contracts are typically traded or executed in over-the-counter markets with a high degree of pricing transparency. The market participants are generally large commercial banks.
The Company's contingent consideration liabilities are reported at fair value based upon probability-adjusted present values of the consideration expected to be paid using significant inputs that are not observable in the market, and are therefore classified as Level 3. Key assumptions used in these estimates include probability assessments with respect to the likelihood of achieving certain revenue milestones. The fair values of these contingent consideration liabilities were calculated using discount rates consistent with the level of risk of achievement, and are remeasured each reporting period.

The fair value of the contingent consideration liability related to the Company's acquisition of GVi Ventures, Inc. in 2017 was written down to zero in 2019 resulting from a lower level of revenue in the Americas' automotive industry, and theindustry. The balance remainsremained at zero asthrough the remainder of October 3, 2021. The undiscounted potential outcomes related to future contingent consideration range from $0 to $2,500,000 based upon certain revenue levels through Aprilthe five-year assessment period which concluded during the second quarter of 2022.

Non-financial Assets that are Measured at Fair Value on a Non-recurring Basis

Non-financial assets, such as property, plant and equipment, operating lease assets, goodwill, and intangible assets, are required to be measured at fair value only when an impairment loss is recognized. The Company evaluates these long-lived assets for impairment whenever events or changes in circumstances, referred to as "triggering events," indicate the carrying value maydid not be recoverable. The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets for potential impairment as of May 26, 2020, which resulted in operating lease assetrecord impairment charges of $2,534,000 (referrelated to Notes 6 and 16) that werenon-financial assets during the three-month or nine-month periods ended October 2, 2022 or October 3, 2021.
10


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
included in "Restructuring charges" on the Consolidated Statements of Operations, and intangible asset impairment charges of $19,571,000 (refer to Note 8) in the second quarter of 2020. These fair value measurements were based upon the present values of future cash flows using significant inputs that were not observable in the market, and were therefore classified as Level 3.
No triggering event occurred in the nine-month period ended October 3, 2021 that would indicate a potential impairment of long-lived assets. However, the Company continues to monitor global economic conditions, as events or changes in circumstances could result in an impairment of long-lived assets in a future period.

NOTE 4: Cash, Cash Equivalents, and Investments
Cash, cash equivalents, and investments consisted of the following (in thousands):
October 3, 2021December 31, 2020October 2, 2022December 31, 2021
CashCash$199,863 $266,609 Cash$265,500 $185,624 
Money market instrumentsMoney market instruments3,616 2,464 Money market instruments504 537 
Cash and cash equivalentsCash and cash equivalents203,479 269,073 Cash and cash equivalents266,004 186,161 
Treasury bills87,014 35,403 
Corporate bondsCorporate bonds69,844 32,714 Corporate bonds151,014 73,088 
Asset-backed securitiesAsset-backed securities23,133 25,160 Asset-backed securities28,119 37,655 
Agency bondsAgency bonds15,759 2,802 
Treasury billsTreasury bills12,918 18,912 
Municipal bondsMunicipal bonds6,320 1,303 Municipal bonds620 4,998 
Agency bonds2,802 — 
Sovereign bonds 8,660 
Current investmentsCurrent investments189,113 103,240 Current investments208,430 137,455 
Corporate bondsCorporate bonds486,148 203,428 Corporate bonds304,206 481,218 
Asset-backed securitiesAsset-backed securities60,763 67,058 Asset-backed securities28,389 43,940 
Treasury billsTreasury bills27,984 96,458 Treasury bills8,673 39,753 
Sovereign bondsSovereign bonds1,930 2,119 
Agency bondsAgency bonds16,164 19,006 Agency bonds 16,077 
Sovereign bonds1,089 3,440 
Municipal bondsMunicipal bonds646 5,735 Municipal bonds 641 
Non-current investmentsNon-current investments592,794 395,125 Non-current investments343,198 583,748 
$985,386 $767,438 $817,632 $907,364 

Cash equivalents are highly liquid investments with insignificant interest rate risk and maturities of ninety days or less at the time of acquisition. Cash equivalents consist primarily of government and institutional money market funds; treasury bills consist of debt securities issued by the U.S. government; corporateCorporate bonds consist of debt securities issued by both domestic and foreign companies; asset-backed securities consist of debt securities collateralized by pools of receivables or loans with credit enhancement; municipal bonds consist of debt securities issued by state and local government entities; agency bonds consist of domestic or foreign obligations of government agencies and government-sponsored enterprises that have government backing; treasury bills consist of debt securities issued by the U.S. government; municipal bonds consist of debt securities issued by state and local government entities; and sovereign bonds consist of direct debt issued by foreign governments. All of the Company's securities as of October 3, 20212, 2022 and December 31, 20202021 were denominated in U.S. Dollars.

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $3,481,000$3,011,000 and $1,560,000$3,037,000 as of October 3, 20212, 2022 and December 31, 2020,2021, respectively.
11


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the Company’s available-for-sale investments as of October 3, 20212, 2022 (in thousands):
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair ValueAmortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Current:Current:Current:
Treasury bills$86,657 $357 $— $87,014 
Corporate bondsCorporate bonds69,562 290 (8)69,844 Corporate bonds$154,399 $— $(3,385)$151,014 
Asset-backed securitiesAsset-backed securities22,990 147 (4)23,133 Asset-backed securities28,764 — (645)28,119 
Agency bondsAgency bonds16,140 — (381)15,759 
Treasury billsTreasury bills13,106 (189)12,918 
Municipal bondsMunicipal bonds6,340 (23)6,320 Municipal bonds635 — (15)620 
Agency bonds2,800 — 2,802 
Non-current:Non-current:Non-current:
Corporate bondsCorporate bonds485,290 1,631 (773)486,148 Corporate bonds328,548 — (24,342)304,206 
Asset-backed securitiesAsset-backed securities60,418 346 (1)60,763 Asset-backed securities30,227 — (1,838)28,389 
Treasury billsTreasury bills27,821 163 — 27,984 Treasury bills8,987 — (314)8,673 
Agency bonds16,124 40 — 16,164 
Sovereign bondsSovereign bonds1,090 — (1)1,089 Sovereign bonds2,106 — (176)1,930 
Municipal bonds635 11 — 646 
$779,727 $2,990 $(810)$781,907 
$582,912 $1 $(31,285)$551,628 
The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of October 3, 20212, 2022 (in thousands):
Unrealized Loss Position For:  Unrealized Loss Position For: 
Less than 12 Months12 Months or GreaterTotal Less than 12 Months12 Months or GreaterTotal
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Corporate bondsCorporate bonds$216,480 $(781)$— $— $216,480 $(781)Corporate bonds$390,656 $(23,263)$64,564 $(4,464)$455,220 $(27,727)
Asset-backed securitiesAsset-backed securities56,125 (2,455)383 (28)56,508 (2,483)
Treasury billsTreasury bills19,427 (499)101 (4)19,528 (503)
Agency bondsAgency bonds15,759 (381)— — 15,759 (381)
Sovereign bondsSovereign bonds1,930 (176)— — 1,930 (176)
Municipal bondsMunicipal bonds3,917 (23)— — 3,917 (23)Municipal bonds620 (15)— — 620 (15)
Asset-backed securities3,732 (5)— — 3,732 (5)
Sovereign bonds1,089 (1)— — 1,089 (1)
$484,517 $(26,789)$65,048 $(4,496)$549,565 $(31,285)
$225,218 $(810)$ $ $225,218 $(810)
The Company'sManagement monitors debt securities that are in an unrealized loss position to determine whether a loss exists related to the credit quality of the issuer. When developing an estimate of expected credit losses, management considers all relevant information including historical experience, current conditions, and reasonable forecasts of expected future cash flows. Based on this evaluation, no allowance for credit losses on debt securities was 0recorded as of October 3, 2021 and2, 2022 or December 31, 2020.2021. There was 0no activity recorded in the allowance for credit losses during the three-month or nine-month periods ended October 2, 2022 or October 3, 2021.
The Company recorded no gross realized gains on the sale of debt securities for the three-month period ended October 2, 2022 and gross realized gains on the sale of debt securities totaling $133,000 for the nine-month period ended October 2, 2022, and gross realized losses on the sale of debt securities totaling $79,000 and $236,000 for the three-month and nine-month periods ended October 3, 2021. The Company recorded 0 gross credit losses or gross credit recoveries for the three-month period ended September 27, 2020, and gross credit losses of $160,000 and gross credit recoveries of $85,000 for the nine-month period ended September 27, 2020.

2, 2022, respectively. The Company recorded gross realized gains on the sale of debt securities totaling $19,000 and $87,000 for the three-month and nine-month periods ended October 3, 2021, respectively, and 0no gross realized losses on the sale of debt securities for the three-month and nine-month periods ended October 3, 2021. The Company recorded gross realized gains on the sale of debt securities totaling $787,000 and $3,613,000 for the three-month and nine-month periods ended September 27, 2020, respectively, and gross realized losses on the sale of debt securities totaling $1,000 and $22,000, respectively, for the three-month and nine-month periods ended September 27, 2020. TheseRealized gains and losses are included in "Investment income" on the Consolidated Statements of Operations. Prior to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, arewere recorded in shareholders’ equity as accumulated other comprehensive loss.
12


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table presents the effective maturity dates of the Company’s available-for-sale investments as of October 3, 20212, 2022 (in thousands):
<1 year1-2 Years2-3 Years3-4 Years4-5 YearsTotal<1 year1-2 Years2-3 Years3-4 Years4-5 YearsTotal
Corporate bondsCorporate bonds$69,844 $192,354 $151,615 $94,993 $47,186 $555,992 Corporate bonds$151,014 $157,264 $104,838 $42,104 $— $455,220 
Asset-backed securitiesAsset-backed securities28,119 16,384 3,202 8,803 — 56,508 
Treasury billsTreasury bills87,014 27,984 — — — 114,998 Treasury bills12,918 6,265 2,408 — — 21,591 
Asset-backed securities23,133 41,115 6,217 13,431 — 83,896 
Agency bondsAgency bonds2,802 16,164 — — — 18,966 Agency bonds15,759 — — — — 15,759 
Sovereign bondsSovereign bonds— 970 — 960 — 1,930 
Municipal bondsMunicipal bonds6,320 646 — — — 6,966 Municipal bonds620 — — — — 620 
Sovereign bonds— — — — 1,089 1,089 
$189,113 $278,263 $157,832 $108,424 $48,275 $781,907 $208,430 $180,883 $110,448 $51,867 $ $551,628 

NOTE 5: Inventories
Inventories consisted of the following (in thousands):
October 3, 2021December 31, 2020October 2, 2022December 31, 2021
Raw materialsRaw materials$32,598 $26,800 Raw materials$55,801 $50,452 
Work-in-processWork-in-process2,975 4,780 Work-in-process1,182 5,293 
Finished goodsFinished goods45,597 29,250 Finished goods51,570 57,357 
$81,170 $60,830 $108,553 $113,102 

The Company recorded provisionsRefer to Note 17 for excess and obsolete inventories of $304,000 and $2,120,000 for the three-month and nine-month periods ended October 3, 2021, respectively, and $603,000 and $9,386,000 for the three-month and nine-month periods ended September 27, 2020, respectively, which reduced the carrying value of the inventories to their net realizable value. Estimates in 2020 took into account the global economic conditions resultinginformation regarding losses incurred from the COVID-19 pandemic.fire at the Company's primary contract manufacturer's plant in Indonesia during the second quarter of 2022, including the impact on inventories.
NOTE 6: Leases
The Company's leases are primarily leased properties across different worldwide locations where the Company conducts its operations. All of these leases are classified as operating leases. Certain leases may contain options to extend or terminate the lease at the Company's sole discretion. There
As of October 2, 2022, there were notwo options to terminate and six options to extend or terminate that were includedaccounted for in the determination of the lease term for the leases outstanding as of October 3, 2021.leases. Certain leases contain leasehold improvement incentives, retirement obligations, escalating clauses, rent holidays, and variable payments tied to a consumer price index. There were no restrictions or covenants for outstanding leases as of October 3, 2021.2, 2022.
The total operating lease expense for the three-month and nine-month periods ended October 2, 2022 were $2,255,000 and $6,699,000, respectively. The total operating lease cash payments for the three-month and nine-month periods ended October 2, 2022 were $2,161,000 and $6,467,000, respectively. The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and nine-month periods ended October 2, 2022 was $35,000 and $110,000, respectively.
The total operating lease expense for the three-month and nine-month periods ended October 3, 2021 waswere $2,068,000 and $6,091,000, respectively. The total operating lease cash payments for the three-month and nine-month periods ended October 3, 2021 were $2,079,000 and $6,154,000, respectively. The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and nine-month periods ended October 3, 2021 was $36,000 and $114,000, respectively.
The total operating lease expense for the three-month and nine-month periods ended September 27, 2020 was $2,047,000 and $6,100,000, respectively. The total operating lease cash payments for the three-month and nine-month periods ended September 27, 2020 were $2,041,000 and $5,995,000, respectively. The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and nine-month periods ended September 27, 2020 was $22,000 and $84,000, respectively.

13


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Future operating lease cash payments are as follows (in thousands):
Year Ended December 31,Year Ended December 31,AmountYear Ended December 31,Amount
Remainder of fiscal 2021$2,348 
20228,221 
Remainder of fiscal 2022Remainder of fiscal 2022$2,245 
202320236,588 20238,511 
202420243,526 20245,794 
202520252,033 20253,837 
202620261,297 20262,656 
202720272,590 
ThereafterThereafter5,160 Thereafter10,808 
$29,173 $36,441 
The discounted present value of the future lease cash payments resulted in a lease liability of $26,811,000$33,371,000 and $26,230,000$25,581,000 as of October 3, 20212, 2022 and December 31, 2020,2021, respectively. The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of October 3,2, 2022.
In December 2021, or December 31, 2020.the Company entered into a lease for a 65,000 square-foot building in Southborough, Massachusetts for a term of ten years to serve as a new distribution center for customers in the Americas. The Company has the right and option to extend the term of this lease for an additional period of five years, commencing upon the expiration of the original ten-year term. This lease commenced during the first quarter of 2022, and therefore the Company recorded approximately $9,271,000 within "Operating lease assets" and "Operating lease liabilities" on the Consolidated Balance Sheets on the commencement date.
The weighted-average discount rate was 3.5%2.9% and 4.0%3.4% for the leases outstanding as of October 3, 20212, 2022 and December 31, 2020,2021, respectively. The weighted-average remaining lease term was 5.26.7 and 5.1 years for the leases outstanding as of October 3, 20212, 2022 and December 31, 2020,2021, respectively.
Management closed 11 leased offices in 2020, prior to the end of their lease terms, as a part of the Company's restructuring plan (refer to Note 16). The carrying value of the lease assets associated with the majority of these offices was reduced to 0, resulting in operating lease asset impairment charges of $2,534,000 in the second quarter of 2020 that are included in "Restructuring charges" on the Consolidated Statements of Operations. Management is currently negotiating early contract terminations for the remaining lease liability obligations associated with these abandoned offices, which obligations totaled $2,019,000 and $2,877,000 as of October 3, 2021 and December 31, 2020, respectively, and are included in "Operating lease liabilities" on the Consolidated Balance Sheets.
NOTE 7: Goodwill
The changes in the carrying value of goodwill were as follows (in thousands):
Balance as of December 31, 20202021$244,078241,713 
  Foreign exchange rate changes(2,279)(4,204)
Balance as of October 3, 20212, 2022$241,799237,509 
The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets, including goodwill, for potential impairment during the second quarter of 2020. Based on this assessment, management concluded that events and circumstances did not indicate the fair value of the reporting unit was less than its carrying value. Factors that management considered in this qualitative assessment included macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management or strategy, changes in the composition or carrying amount of net assets, and market capitalization.

14


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 8: Intangible Assets
Amortized intangible assets consisted of the following (in thousands):
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Distribution networks$38,060 $38,060 $ 
Completed technologies24,217 14,548 9,669 
Customer relationships10,578 7,700 2,878 
Non-compete agreements710 478 232 
Trademarks110 107 3 
Balance as of October 3, 2021$73,675 $60,893 $12,782 
 Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Distribution networks$38,060 $38,060 $— 
Completed technologies24,217 12,397 11,820 
Customer relationships10,578 7,160 3,418 
Non-compete agreements710 436 274 
Trademarks110 67 43 
Balance as of December 31, 2020$73,675 $58,120 $15,555 

Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Distribution networks$38,060 $38,060 $ 
Completed technologies24,217 17,132 7,085 
Customer relationships10,578 8,420 2,158 
Non-compete agreements710 533 177 
Trademarks110 110  
Balance as of October 2, 2022$73,675 $64,255 $9,420 
 Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Distribution networks$38,060 $38,060 $— 
Completed technologies24,217 15,234 8,983 
Customer relationships10,578 7,891 2,687 
Non-compete agreements710 492 218 
Trademarks110 110 — 
Balance as of December 31, 2021$73,675 $61,787 $11,888 
As of October 3, 2021,2, 2022, estimated future amortization expense related to intangible assets was as follows (in thousands):
Year Ended December 31,Amount
Remainder of fiscal 2021$883 
20223,286 
20232,594 
20242,080 
20251,757 
20261,452 
Thereafter730 
$12,782 

The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets, including intangible assets, for potential impairment during the second quarter of 2020. Based on this assessment, management concluded that certain of the Company's finite-lived intangible assets failed the recoverability test, and recorded impairment charges for these assets equal to the amount by which their carrying value exceeded their fair value. The Company also measured the fair value and recorded an impairment charge for its indefinite-lived intangible asset related to in-process technologies. The fair values were established, with the assistance of an outside valuation advisor, using the income approach based on a discounted cash flow model that estimated future revenue streams and expenses attributable to those revenue streams provided by management.
15


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
This review resulted in intangible asset impairment charges totaling $19,571,000 in the second quarter of 2020, primarily related to lower projected cash flows from the technologies and customer relationships acquired from Sualab Co. Ltd. ("Sualab") as a result of the deteriorating global economic conditions from the COVID-19 pandemic. Completed technologies, in-process technologies, and customer relationships acquired from Sualab were impaired in the amounts of $10,070,000, $5,900,000, and $3,382,000, respectively. In addition, customer relationships acquired from EnShape GmbH that had a gross carrying value of $447,000 and accumulated amortization of $228,000 on the measurement date were reduced to 0, resulting in an impairment charge of $219,000. The Company did not record impairment charges related to intangible assets during the three-month or nine-month periods ended October 3, 2021.
Year Ended December 31,Amount
Remainder of fiscal 2022$807 
20232,594 
20242,080 
20251,757 
20261,452 
2027730 
$9,420 
NOTE 9: Warranty Obligations
The Company records the estimated cost of fulfilling product warranties at the time of sale based upon historical costs to fulfill claims. Obligations may also be recorded subsequent to the time of sale whenever specific events or changes in circumstances impacting product quality become known that would not have been taken into account using historical data. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers and third-party contract manufacturers, the Company’s warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. An adverse change in any of these factors may result in the need for additional warranty provisions. Warranty obligations are included in “Accrued expenses” on the Consolidated Balance Sheets.
The changes in the warranty obligation were as follows (in thousands):
Balance as of December 31, 20202021$5,4065,427 
Provisions for warranties issued during the period2,5281,733 
Fulfillment of warranty obligations(2,517)(2,170)
Balance as of October 3, 20212, 2022$5,4174,990 
15


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 10: Commitments and Contingencies
As of October 2, 2022, the Company had outstanding purchase orders totaling $81,565,000 to procure inventory from various vendors, due in part to higher inventory purchases in response to global supply chain constraints. Certain of these purchase orders may be canceled by the Company, subject to cancellation penalties. These purchase commitments relate primarily to expected sales in the next twelve months. The Company expects the level of outstanding purchase orders to increase for the remainder of the year as it continues to replenish inventories destroyed in the fire on June 7, 2022 at its primary contract manufacturer (refer to Note 17).
A significant portion of the Company's outstanding inventory purchase orders as of October 2, 2022, as well as additional preauthorized commitments to procure strategic components based on the Company's expected customer demand, are placed with the Company's primary contract manufacturer for the Company's assembled products. The Company has the obligation to purchase any non-cancelable and non-returnable components that have been purchased by this contract manufacturer with the Company's preauthorization, when these components have not been consumed within the period defined in the terms of the Company's agreement with this contract manufacturer.
NOTE 10:11: Derivative Instruments
The Company’s foreign currency risk management strategy is principally designed to mitigate the potential financial impact of changes in the value of transactions and balances denominated in foreign currencies resulting from changes in foreign currency exchange rates. The Company enters into economic hedges utilizing foreign currency forward contracts with maturities of up to 95 daysthat do not exceed approximately three months to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and payables. The gains and losses on these derivatives are intended to be offset by the changes in the fair value of the assets and liabilities being hedged. These economic hedges are not designated as hedging instruments for hedge accounting treatment.

16


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company had the following outstanding forward contracts (in thousands):
October 3, 2021December 31, 2020October 2, 2022December 31, 2021
CurrencyCurrencyNotional
Value
USD
Equivalent
Notional
Value
USD
Equivalent
CurrencyNotional
Value
USD
Equivalent
Notional
Value
USD
Equivalent
Derivatives Not Designated as Hedging Instruments:Derivatives Not Designated as Hedging Instruments:Derivatives Not Designated as Hedging Instruments:
EuroEuro38,500 $44,687 50,000 $61,342 Euro70,000 $68,290 65,000 $73,748 
Chinese RenminbiChinese Renminbi55,069 8,500 — — Chinese Renminbi175,000 25,352 54,374 8,500 
Mexican PesoMexican Peso120,000 5,823 155,000 7,776 Mexican Peso185,000 9,155 140,000 6,842 
Korean Won6,770,000 5,714 6,925,000 6,377 
Japanese YenJapanese Yen600,000 5,405 600,000 5,808 Japanese Yen600,000 4,159 600,000 5,213 
British PoundBritish Pound3,115 4,224 1,675 2,287 British Pound3,135 3,481 3,370 4,552 
Hungarian ForintHungarian Forint1,235,000 3,992 1,330,000 4,494 Hungarian Forint1,280,000 2,948 1,355,000 4,155 
Taiwanese Dollar45,405 1,637 38,035 1,362 
Singapore Dollar1,800 1,328 1,465 1,110 
Canadian DollarCanadian Dollar1,370 1,080 1,285 1,010 Canadian Dollar— — 1,480 1,167 

Information regarding the fair value of the outstanding forward contracts was as follows (in thousands):
Asset DerivativesLiability Derivatives Asset DerivativesLiability Derivatives
BalanceFair ValueBalanceFair Value BalanceFair ValueBalanceFair Value
Sheet
Location
October 3, 2021December 31, 2020Sheet
Location
October 3, 2021December 31, 2020 Sheet
Location
October 2, 2022December 31, 2021Sheet
Location
October 2, 2022December 31, 2021
Derivatives Not Designated as Hedging Instruments:Derivatives Not Designated as Hedging Instruments:Derivatives Not Designated as Hedging Instruments:
Economic hedge forward contractsEconomic hedge forward contractsPrepaid expenses and other current assets$129 $265 Accrued expenses$88 $38 Economic hedge forward contractsPrepaid expenses and other current assets$835 $39 Accrued expenses$442 $230 

16


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table presents the gross activity for all derivative assets and liabilities which were presented on a net basis on the Consolidated Balance Sheets due to the right of offset with each counterparty (in thousands):
Asset DerivativesAsset DerivativesLiability DerivativesAsset DerivativesLiability Derivatives
October 3, 2021December 31, 2020October 3, 2021December 31, 2020October 2, 2022December 31, 2021October 2, 2022December 31, 2021
Gross amounts of recognized assetsGross amounts of recognized assets$129 $265 Gross amounts of recognized liabilities$88 $38 Gross amounts of recognized assets$835 $39 Gross amounts of recognized liabilities$442 $230 
Gross amounts offsetGross amounts offset — Gross amounts offset — Gross amounts offset — Gross amounts offset — 
Net amount of assets presentedNet amount of assets presented$129 $265 Net amount of liabilities presented$88 $38 Net amount of assets presented$835 $39 Net amount of liabilities presented$442 $230 

Information regarding the effect of derivative instruments on the consolidated financial statements was as follows (in thousands):
 Location in Financial StatementsThree-months EndedNine-months Ended
 October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Derivatives Not Designated as Hedging Instruments:
Gains (losses) recognized in current operationsForeign currency gain (loss)$1,529 $(1,521)$3,676 $(9,701)

 Location in Financial StatementsThree-months EndedNine-months Ended
 October 2, 2022October 3, 2021October 2, 2022October 3, 2021
Derivatives Not Designated as Hedging Instruments:
Gains (losses) recognized in current operationsForeign currency gain (loss)$7,161 $1,529 $15,091 $3,676 
17


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11:12: Revenue Recognition
The following table summarizes disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands):
Three-months EndedNine-months EndedThree-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020October 2, 2022October 3, 2021October 2, 2022October 3, 2021
AmericasAmericas$113,758 $86,482 $330,012 $215,696 Americas$65,847 $113,758 $284,057 $330,012 
EuropeEurope65,146 60,189 182,161 144,758 Europe48,930 65,146 173,561 182,161 
Greater ChinaGreater China65,813 77,292 163,757 135,593 Greater China66,460 65,813 193,481 163,757 
Other AsiaOther Asia40,131 27,110 117,103 91,358 Other Asia28,385 40,131 115,558 117,103 
$284,848 $251,073 $793,033 $587,405 $209,622 $284,848 $766,657 $793,033 

The following table summarizes disaggregated revenue information by revenue type (in thousands):
Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Standard products and services$212,567 $174,797 $669,215 $486,458 
Application-specific customer solutions72,281 76,276 123,818 100,947 
$284,848 $251,073 $793,033 $587,405 

Three-months EndedNine-months Ended
October 2, 2022October 3, 2021October 2, 2022October 3, 2021
Standard products and services$158,244 $212,567 $637,598 $669,215 
Application-specific customer solutions51,378 72,281 129,059 123,818 
$209,622 $284,848 $766,657 $793,033 
Costs to Fulfill a Contract
Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $13,308,000$15,581,000 and $6,846,000$10,854,000 as of October 3, 20212, 2022 and December 31, 2020,2021, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities
Accounts receivable represent amounts billed and currently due from customers which are reported at their net estimated realizable value. The Company maintains an allowance against its accounts receivable for credit losses. Contract assets consist of unbilled revenue which arises when revenue is recognized in advance of billing for certain application-specific customer solutions contracts. Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition.

The following table summarizes the allowance for credit losses activity for the nine-month period ended October 3, 20212, 2022 (in thousands):
Balance as of December 31, 20202021$831776 
Increases to the allowance for credit losses— 
Write-offs, net of recoveries(39)(36)
Foreign exchange rate changes1 
Balance as of October 3, 20212, 2022$792741 
18


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the deferred revenue and customer deposits activity for the nine-month period ended October 3, 20212, 2022 (in thousands):
Balance as of December 31, 20202021$21,27435,743 
Deferral of revenue billed in the current period, net of recognition33,88851,297 
Recognition of revenue deferred in prior period(17,130)(29,351)
Foreign exchange rate changes(189)(2,912)
Balance as of October 3, 20212, 2022$37,84354,777 

As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations, as our contracts have an original expected duration of less than one year.
NOTE 12:13: Stock-Based Compensation Expense
Stock Plans
The Company’s stock-based awards that result in compensation expense consist of stock options, and restricted stock units ("RSUs"), and performance restricted stock units ("PRSUs"). As of October 3, 2021,2, 2022, the Company had 15,661,00013,748,000 shares available for grant under its stock plans. Stock options are granted with an exercise price equal to the market value of the Company’s common stock at the grant date and generally vest over four or five years based upon continuous service and expire ten years from the grant date. RSUs generally vest upon three or four years of continuous employment or incrementally over such three-yearthree or four-year period. PRSUs generally vest upon three years of continuous employment and achievement of performance criteria established by the Compensation Committee of our Board of Directors on or prior to the grant date. Participants are not entitled to dividends on RSUs.RSUs or PRSUs.
Stock Options
The following table summarizes the Company’s stock option activity for the nine-month period ended October 3, 2021:2, 2022:
Shares
(in thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (in years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding as of December 31, 20208,970 $44.73 
Granted549 88.80 
Exercised(1,582)37.70 
Forfeited or expired(225)50.29 
Outstanding as of October 3, 20217,712 $49.15 6.79$252,476 
Exercisable as of October 3, 20213,290 $39.03 5.56$139,215 
Options vested or expected to vest as of October 3, 2021 (1)7,157 $48.36 6.70$239,568 
Shares
(in thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (in years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding as of December 31, 20217,610 $49.38 
Granted1,399 59.79 
Exercised(158)41.83 
Forfeited or expired(170)58.01 
Outstanding as of October 2, 20228,681 $51.03 6.40$22,376 
Exercisable as of October 2, 20224,335 $43.54 5.08$22,334 
Options vested or expected to vest as of October 2, 2022 (1)8,189 $50.48 6.27$22,375 
 (1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.
19


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The fair values of stock options granted in each period presented were estimated using the following weighted-average assumptions:
 Three-months EndedNine-months Ended
 October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Risk-free rate1.4 %— %1.3 %1.6 %
Expected dividend yield0.28 %— %0.27 %0.43 %
Expected volatility39 %— %39 %37 %
Expected term (in years)7.1— 6.06.0

No stock options were granted during the three-month period ended September 27, 2020.

 Three-months EndedNine-months Ended
 October 2, 2022October 3, 2021October 2, 2022October 3, 2021
Risk-free rate2.7 %1.4 %2.1 %1.3 %
Expected dividend yield0.54 %0.28 %0.44 %0.27 %
Expected volatility37 %39 %37 %39 %
Expected term (in years)6.47.15.56.0
Risk-free rate
The risk-free rate was based upon a treasury instrument whose term was consistent with the contractual term of the option.
Expected dividend yield
Generally, the current dividend yield is calculated by annualizing the cash dividend declared by the Company’s Board of Directors and dividing that result by the closing stock price on the grant date. 
Expected volatility
The expected volatility was based upon a combination of historical volatility of the Company’s common stock over the contractual term of the option and implied volatility for traded options of the Company’s stock.
Expected term
The expected term was derived from the binomial lattice model from the impact of events that trigger exercises over time.
The weighted-average grant-date fair values of stock options granted during the three-month and nine-month periods ended October 2, 2022 were $18.81 and $21.40, respectively, and during the three-month and nine-month periods ended October 3, 2021 were $35.64 and $33.78, respectively, and during the nine-month period ended September 27, 2020 was $18.52. There were no stock options granted during the three-month period ended September 27, 2020.respectively.
The total intrinsic values of stock options exercised for the three-month and nine-month periods ended October 3, 20212, 2022 were $21,415,000$516,000 and $75,363,000,$3,615,000, respectively, and for the three-month and nine-month periods ended September 27, 2020October 3, 2021 were $62,787,000$21,415,000 and $116,600,000,$75,363,000, respectively. The total fair values of stock options vested for the three-month and nine-month periods ended October 3, 20212, 2022 were $1,498,000$1,159,000 and $38,928,000,$27,882,000, respectively, and for the three-month and nine-month periods ended September 27, 2020October 3, 2021 were $1,331,000$1,498,000 and $39,282,000,$38,928,000, respectively.
Restricted Stock Units (RSUs)
The following table summarizes the Company's RSUs activity for the nine-month period ended October 3, 2021:2, 2022:
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
Nonvested as of December 31, 2020554 $51.27 
Nonvested as of December 31, 2021Nonvested as of December 31, 2021823 $65.26 
GrantedGranted318 87.38 Granted691 58.44 
VestedVested(15)56.61 Vested(141)65.33 
Forfeited or expiredForfeited or expired(43)56.49 Forfeited or expired(61)65.18 
Nonvested as of October 3, 2021814 $65.01 
Nonvested as of October 2, 2022Nonvested as of October 2, 20221,312 $61.67 
20


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The fair value of RSUs is determined based on the observable market price of the Company's stock on the grant date less the present value of expected future dividends. The weighted-average grant-date fair values of RSUs granted during the three-month and nine-month periods ended October 3, 20212, 2022 were $86.34$47.12 and $87.38,$58.44, respectively, and during the three-month and nine-month periods ended September 27, 2020October 3, 2021 were $67.14$86.34 and $51.73,$87.38, respectively. There were 15,00067,000 and 141,000 RSUs that vested during the three-month and nine-month periods ended October 2, 2022, respectively, and 0 and 15,000 that vested during the three-month and nine-month periods ended October 3, 2021, respectively.
Performance Restricted Stock Units (PRSUs)
The following table summarizes the Company's PRSUs activity for the nine-month period ended October 3, 2021. There2, 2022:
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
Nonvested as of December 31, 2021— $— 
Granted33 62.49 
Vested— — 
Forfeited or expired— — 
Nonvested as of October 2, 202233 $62.49 
No PRSUs were 0 RSUs thatgranted or vested during the three-month period ended October 3, 20212, 2022. No PRSUs were granted or vested during the three-month and nine-month periods ended September 27, 2020.October 3, 2021.
The fair value of PRSUs is calculated using the Monte Carlo simulation model to estimate the probability of satisfying the service and market conditions stipulated in the award grant.
Stock-Based Compensation Expense
The Company segmentsstratifies its employee population into 2two groups: one consisting of senior management and another consisting of all other employees. The Company currently applies an estimated annual forfeiture rate of 8%7% to all stock-based awards for senior management and a rate of 12% for all other employees. Each year during the first quarter, the Company revises its forfeiture rate based on updated estimates of employee turnover. This resulted in an increase to compensation expense of $1,536,000 in 2022 and a decrease to compensation expense of $255,000 in 2021 and an increase to compensation expense of $1,787,000 in 2020.2021.
As of October 3, 2021,2, 2022, total unrecognized compensation expense related to non-vested equity awards, including stock options, RSUs, and RSUs,PRSUs, was $56,579,000,$68,089,000, which is expected to be recognized over a weighted-average period of 1.6 years.
The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended October 2, 2022 were $13,366,000 and $2,133,000, respectively, and for the nine-month period ended October 2, 2022 were $41,419,000 and $6,496,000, respectively. The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended October 3, 2021 were $10,614,000 and $1,637,000, respectively, and for the nine-month period ended October 3, 2021 were $33,353,000 and $5,101,000, respectively. The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended September 27, 2020 were $9,268,000 and $1,524,000, respectively, and for the nine-month period ended September 27, 2020 were $32,076,000 and $5,365,000, respectively. Stock-based compensation expense recognized for the three-month and nine-month periods ended September 27, 2020 included credits of $1,401,000 relating to grants cancelled as a result of the Company's workforce reduction in the second quarter of 2020. No compensation expense was capitalized as of October 3, 20212, 2022 or December 31, 2020.2021.
The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands):
Three-months EndedNine-months Ended Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020 October 2, 2022October 3, 2021October 2, 2022October 3, 2021
Cost of revenueCost of revenue$366 $324 $965 $1,041 Cost of revenue$468 $366 $1,513 $965 
Research, development, and engineeringResearch, development, and engineering3,091 2,815 10,158 10,582 Research, development, and engineering4,209 3,091 12,508 10,158 
Selling, general, and administrativeSelling, general, and administrative7,157 6,129 22,230 20,453 Selling, general, and administrative8,689 7,157 27,398 22,230 
$10,614 $9,268 $33,353 $32,076 $13,366 $10,614 $41,419 $33,353 
21


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 13:14: Stock Repurchase Program
In October 2018,On March 12, 2020, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's common stock. As of October 3, 2021,2, 2022, the Company repurchased 3,398,0002,737,000 shares at a cost of $169,643,000$200,000,000 under this program, including 581,0001,677,000 shares at a cost of $48,294,000$117,000,000 during the nine-month period ended October 3, 2021, leaving a remaining balancefirst quarter of $30,357,000. 1,215,000 shares at a cost of $51,036,000 were repurchased during the nine-month period ended September 27, 20202022, which completed purchases under this October 2018 program. On March 12, 2020,3, 2022, the Company's Board of Directors authorized the repurchase of an additional $200,000,000$500,000,000 of the Company's common stock. PurchasesDuring the nine-month period ended October 2, 2022, the Company repurchased 1,125,000 shares, and an additional 5,000 shares that were repurchased in 2021 and settled in 2022, at a total cost of $61,387,000 under this March 2020 program will commence upon completionadditional authorization, leaving a remaining balance of the$438,613,000 as of October 2018 program.2, 2022. The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

21


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 14:15: Income Taxes
A reconciliation of the United States federal statutory corporate tax rate to the Company’s income tax expense, orThe Company's effective tax rate was as follows:
 Three-months EndedNine-months Ended
 October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Income tax expense at U.S. federal statutory corporate tax rate21 %21 %21 %21 %
State income taxes, net of federal benefit2 %%2 %%
Foreign tax rate differential(5)%(5)%(5)%(5)%
Tax credit(1)%(1)%(1)%(1)%
Discrete tax benefit related to stock options(4)%(4)%(4)%(9)%
Discrete tax expense (benefit) related to tax return filings(3)%— %(1)%%
Other1 %%1 %%
Income tax expense11 %14 %13 %12 %

14% and 16% for the three-month and nine-month periods ended October 2, 2022, respectively, and 11% and 13% for the three-month and nine-month periods ended October 3, 2021, respectively.
The Company recorded a net discrete tax benefit totaling $930,000 and a net discrete tax expense totaling $616,000 for the three-month and nine-month periods ended October 2, 2022, respectively, and net discrete tax benefits totaling $6,262,000 and $12,365,000 for the same periods in 2021.
Discrete tax items for the three-month and nine-month periods ended October 2, 2022 included (1) a decrease in tax expense during the three-month and nine-month periods ended October 2, 2022 of $928,000 and $3,368,000, respectively, arising from the impact of the loss from fire recorded (refer to Note 17), (2) an increase in tax expense of $1,417,000 arising from an Internal Revenue Service (IRS) audit recorded during the three-month period ended April 3, 2022, which was offset by a decrease in tax expense of $2,519,000 related to releases of reserves for income taxes due to the closure of this Internal Revenue Service (IRS) audit during the three-month period ended July 3, 2022, (3) an increase in tax expense of $1,734,000 to establish a full valuation allowance against deferred tax assets related to foreign tax credits during the three-month period ended April 3, 2022, (4) an increase in tax expense of $883,000 and $4,236,000 during the three-month and nine-month periods ended October 2, 2022, respectively, primarily consisting of transfer pricing and return-to-provision adjustments, and (5) a decrease in tax expense of $884,000 during both the three-month and nine-month periods ended October 2, 2022 related to the release of tax reserves due to closed periods.
Discrete tax items for the three-month and nine-month periods ended October 3, 2021 included a decrease in tax expense of $3,250,000 and $9,888,000, respectively, related to stock-based compensation, primarily from the excess tax benefit arising from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes from stock option exercises that resulted in a favorableexercises. This impact towas not material for the three-month and nine-month periods ended October 2, 2022. The remaining discrete tax benefits for the three-month and nine-month periods ended October 3, 2021 of $3,012,000 and $2,477,000, respectively, consisted of primarily return-to-provision adjustments and the release of tax reserves.
Excluding the impact of these discrete tax items, the Company’s effective tax rate of 4%was 16% for both the three-month and nine-month periods ended October 2, 2022, and 18% for both the three-month and nine-month periods ended October 3, 2021,2021.
The Company has defined its major tax jurisdictions as the United States, Ireland, China, and 4%Korea, and 9% forwithin the three-monthUnited States, Massachusetts. The statutory tax rate is 12.5% in Ireland, 25% in China, and nine-month periods ended September 27, 2020, respectively. In addition22% in Korea compared to stock option exercises, other discrete adjustments recorded included the final true-upU.S. federal statutory corporate tax rate of the prior year's tax accrual upon filing the related tax return that21%. These differences resulted in a favorable impact to thelower effective tax rate of 3% and 1% for the three-month and nine-month periods ended October 3,2, 2022 as compared to the same periods in 2021 respectively,due to more of the Company's profits being earned and an unfavorable impact totaxed in lower tax jurisdictions. The remaining decrease in the effective tax rate of 3% for the nine-month period ended September 27, 2020.
Excluding the impact of these discrete items, the Company’s effective tax rate was 18% of pre-tax income for the three-month and nine-month periods ended October 3, 2021, and 18% of pre-tax income for the same periods in 2020.was primarily attributable to lower state taxes.
During the nine-month period ended October 3, 2021, the Company recorded a $495,000 increase in reserves for income taxes, net of deferred tax benefit. Estimated interest and penalties included in these amounts totaled $450,000 for the nine-month period ended October 3, 2021.
22


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company’s reserve for income taxes, including gross interest and penalties, was $15,833,000$12,772,000 as of October 3, 2021,2, 2022, which included $14,805,000$12,204,000 classified as a non-current liability and $1,028,000$568,000 recorded as a reduction to non-current deferred tax assets. If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period. During the three-month period ending October 3, 2021, the Company released $648,000 in reserves related to statute expiration and tax return positions.
The Company has defined its major tax jurisdictions as the United States, Ireland, China, and Korea, and within the United States, Massachusetts. The statutory tax rate is 12.5% in Ireland, 25% in China, and 25% in Korea compared to the U.S. federal statutory corporate tax rate of 21%. These differences resulted in a favorable impact to the effective tax rate of 5% for both the three-month and nine-month periods ended October 3, 2021, and for the same periods in 2020.
Within the United States, the tax years 20172019 through 2020 remain open to examination by the Internal Revenue Service ("IRS")IRS, and 2017 through 2020 remain open to examination by various state tax authorities. The tax years 2016 through 20202021 remain open to examination by various taxing authorities in other jurisdictions in which the Company operates. The Company received the Closing Letter for Agreed Income Tax Cases from the IRS and the Company is no longer under audit by the IRS for the tax years 2017 and 2018. Additionally, theThe Company is no longer under audit by the Commonwealth of Massachusetts for tax years 2017 and 2018. Management believesThese audits were completed during the Company is adequately reserved for these audits. The final determination ofnine-month period ended October 2, 2022 and resulted in no material tax audits could result in favorable or unfavorable changes in our estimates.
22
impact to the Company's financial statements.


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 15:16: Weighted-Average Shares
Weighted-average shares were calculated as follows (in thousands):
Three-months EndedNine-months Ended Three-months EndedNine-months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020 October 2, 2022October 3, 2021October 2, 2022October 3, 2021
Basic weighted-average common shares outstandingBasic weighted-average common shares outstanding176,812 173,943 176,572 172,881 Basic weighted-average common shares outstanding173,256 176,812 173,640 176,572 
Effect of dilutive equity awardsEffect of dilutive equity awards3,530 3,195 3,537 3,157 Effect of dilutive equity awards1,071 3,530 1,593 3,537 
Weighted-average common and common-equivalent shares outstandingWeighted-average common and common-equivalent shares outstanding180,342 177,138 180,109 176,038 Weighted-average common and common-equivalent shares outstanding174,327 180,342 175,233 180,109 

Stock options to purchase 586,0006,167,000 and 655,0003,297,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and nine-month periods ended October 3, 2021,2, 2022, respectively, and 1,416,000586,000 and 5,540,000655,000 for the same periods in 2020,2021, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive. Restricted stock units totaling 1,000607,000 and 26,000 shares of common stock, on a weighted-average basis, were outstanding during both the three-month and nine-month periods ended October 3, 2021,2, 2022, respectively, and 3,0001,000 for both the three-month and 2,000 for the samenine-month periods in 2020,2021, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.
NOTE 16: Restructuring Charges

On May 26, 2020, the Company's Board PRSUs totaling 33,000 and 0 shares of Directors approvedcommon stock, on a restructuring plan intended to reduce the Company's operating costs, optimize its business model, and address the impact of the COVID-19 pandemic. The restructuring plan included a global workforce reduction of approximately 8% and office closures.

As of December 31, 2020, the majority of these actionsweighted-average basis, were completed and no additional charges are expected to be incurred in future periods in relation to this restructuring plan. There were 0 restructuring charges recognizedoutstanding during the three-month or nine-month periods ended October 3, 2021.

The following table summarizes the restructuring charges incurred in the three-month and nine-month periods ended September 27, 2020 (in thousands):
Incurred in the Three-months Ended September 27, 2020Incurred in the Nine-months Ended September 27, 2020
One-time termination benefits$(36)$10,350 
Contract termination costs104 4,099 
Other associated costs183 600 
$251 $15,049 

One-time termination benefitsOctober 2, 2022, respectively, but were not included severance, health insurance, and outplacement services for 181 employees whoin the calculation of dilutive net income per share because they were either terminatedanti-dilutive. There were no anti-dilutive PRSUs outstanding, on a weighted-average basis, during the second quarterthree-month and nine-month periods October 3, 2021.
NOTE 17: Loss from Fire
On June 7, 2022, the Company’s primary contract manufacturer experienced a fire at its plant in Indonesia. The fire destroyed a significant amount of 2020, or were notified during the second quarter of 2020 that they would be terminated at a future date. For employees not required to render service beyond a minimum retention period, the one-time termination benefits were recognized in the second quarter of 2020. Otherwise, these benefits, including retention bonuses for selected employees, were recognized over the service period, which was completed by December 31, 2020.

Contract termination costs included operating lease asset impairment charges for offices closed prior to the end of the contractual lease term. These costs also included the write-off of leasehold improvements and other equipment related to these abandoned offices that had no alternative use,Cognex-owned consigned inventories as well as other associated operating costs, such as utilities,component inventories owned by the contract manufacturer that were designated for Cognex products. There was no significant damage to the Company's production equipment. Since the date of the fire and through the date of financial statement issuance, the Company is obligatedhas worked with the contract manufacturer to pay forassess the remainderdamage, resume production, and replenish inventories destroyed by the fire. Additionally, beginning last year, the Company has been working to ramp up an additional contract manufacturer to further mitigate risk, diversify supply chain, and expand production capacity. We expect this additional contract manufacturer to commence production later in the year. As a result of the lease term. These contract termination costs were primarily recognized in the second quarter of 2020 whenfire, the Company ceased usingrecorded $47,794,000 in gross losses in 2022, including $44,903,000 during the property for economic benefit.three-month period ended July 3, 2022 and $2,891,000 during the three-month period ended October 2, 2022. Gross losses related to $37,643,000 of primarily Cognex-owned inventory that was destroyed or deemed to have a net realizable value of zero, $8,184,000 of primarily prepayments related to Cognex-designated components that were owned by the contract manufacturer, and $1,967,000 related to deleveraging of costs related to our distribution centers.
Based on the provisions of the Company's insurance policies, the gross losses have been reduced by the estimated insurance proceeds expected to be received from the Company’s insurance carrier. The Company has determined that partial recovery of the incurred losses is probable and therefore recorded an insurance recovery of $27,500,000
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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Other associated costs primarily included legal fees related toduring the employee termination actions, which were recognized when the services were performed.

The following table summarizes the activity for the nine-monththree-month period ended OctoberJuly 3, 2021 in the Company’s restructuring reserve which2022. The insurance receivable is included in “Accrued expenses”“Prepaid expenses and other current assets” on the Consolidated Balance Sheets (in thousands):as of October 2, 2022. Gross losses, net of insurance recovery, total $2,891,000 and $20,294,000 for the three-month and nine-month periods ended October 2, 2022, respectively, and are presented in the caption “Loss from fire” on the Consolidated Statements of Operations. Subsequent to the October 2, 2022 balance sheet date, but prior to the date of financial statement issuance, the Company received insurance proceeds of $27,560,000 from the Company's insurance carrier. In the fourth quarter of 2022, the loss from fire will be reduced by the proceeds received in excess of the original estimated insurance recovery recorded of $27,500,000.
One-time Termination BenefitsContract Termination CostsOther Associated CostsTotal
Balance as of December 31, 2020$1,624 $750 $15 $2,389 
Cash payments(1,133)(176)(15)(1,324)
Foreign exchange rate changes— (5)— (5)
Balance as of October 3, 2021$491 $569 $ $1,060 
As of October 2, 2022 and through the date of financial statement issuance, management cannot yet estimate additional recoveries that could be available from the contract manufacturer. Any future, additional recoveries in excess of recognized losses will be treated as gain contingencies and will be recognized when the gain is realized or realizable. There can be no assurance, however, that the insurance coverage and/or recoveries from the contract manufacturer will be available to cover the losses from the fire.
After considering all the relevant events and circumstances resulting from the fire, management does not believe that the carrying value of the Company exceeds its fair value, or that the carrying amount of the Company’s intangible assets may not be recoverable. As such, no goodwill or intangible asset impairment charges were recorded during 2022 as a result of the fire.
NOTE 17:18: Subsequent Events
On November 4, 2021,3, 2022, the Company’s Board of Directors declared a cash dividend of $0.065$0.07 per share. The dividend is payable on December 3, 20212, 2022 to all shareholders of record as of the close of business on November 19, 2021.

18, 2022.
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 Securities Exchange Act of 1934, as amended. Readers can identify these forward-looking statements by our use of the words “expects,” “anticipates,” “estimates,” “believes,” “projects,” “intends,” “plans,” “will,” “may,” “shall,” “could,” “should,” 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, the expected impact of the COVID-19 pandemicfire at our primary contract manufacturer's warehouse on our assets, business and results of operations and related insurance recoveries, customer demand and order rates and timing of related revenue, managing supply shortages, delivery lead times, future product mix, restructuring and other cost-savings initiatives, research and development activities, sales and marketing activities, new product offerings and product development activities, capital expenditures, investments, liquidity, dividends and stock repurchases, strategic and growth plans, 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 reliance on key suppliers such as our primary contract manufacturer to manufacture and deliver quality products; (2) delays in the delivery of our products, the failure to meet delivery schedules, and resulting customer dissatisfaction or loss of sales; (3) the inability to obtain, or the delay in obtaining, components for our products at reasonable prices; (4) the failure to effectively manage product transitions or accurately forecast customer demand; (5) the inability to manage disruptions to our distribution centers or to our key suppliers; (6) the inability to design and manufacture high-quality products; (7) the impact, duration, and severity of the COVID-19 pandemic; (2) potential disruptions to our business due to restructuring activities; (3)pandemic, including the availability and effectiveness of vaccines as well as government lockdowns; (8) the loss of, or curtailment of purchases by, large customers in the logistics or consumer electronics and logistics industries; (4) the reliance on revenue from the automotive industry; (5) the reliance on key suppliers to manufacture and deliver critical components for our products; (6) disruptions in the supply chain, which could impact timely delivery of customer orders, cause customer orders to decrease, or increase costs to fulfill orders, including costs for components or freight; (7) the failure to effectively manage product transitions or accurately forecast customer demand; (8)(9) information security breaches; (10) the inability to designprotect our proprietary technology and manufacture high-quality products; (9)intellectual property; (11) the inability to attract and retain skilled employees and maintain our unique corporate culture; (10) the failure to effectively manage our growth; (11) the inability to achieve growth in revenue and profits from the logistics industry; (12) the technological obsolescence of current products and the inability to develop new products; (13) the failure to properly manage the distribution of products and services;services, including the management of lead times and delivery dates; (14) the impact of competitive pressures; (15) the challenges in integrating and achieving expected results from acquired businesses; (16) potential disruptions in our business systems; (17) information security breaches and cyber-attacks; (18) the inability to protect our proprietary technology and intellectual property; (19) potential impairment charges with respect to our investments or acquired intangible assets; (20)(18) exposure to additional tax liabilities; (21)(19) fluctuations in foreign currency exchange rates and the use of derivative instruments; (22) our involvement in time-consuming and costly litigation; (23)(20) unfavorable global economic conditions;conditions, including increases in interest rates and (24)high inflation rates; (21) business disruptions from natural or man-made disasters, such as fire, or public health issues; (22) economic, political, and other risks associated with international sales and operations.operations, including the impact of the war in Ukraine; and (23) our involvement in time-consuming and costly litigation. 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, 2020,2021, as updated by Part II - Item 1A of this Quarterly Report on Form 10-Q. 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.
Executive Overview
Cognex Corporation is a leading worldwide provider of machine vision products that capture and analyze visual information in order to automate manufacturing and distribution tasks where vision is required. In addition to product revenue derived from the sale of machine vision products, the Company also generates revenue by providing maintenance and support, consulting, and training services to its customers; however, service revenue accounted for less than 10% of total revenue for all periods presented.
Cognex machine vision is used to automate manufacturing and distribution processes in a variety of industries, where the technology is widely recognized as an important component of automated production and quality assurance. Virtually every manufacturer or distributor can achieve better quality and manufacturing efficiency by using machine vision, and therefore, Cognex products are used by a broad base of customers across a variety of industries, including logistics, automotive, consumer electronics, automotive,medical-related, semiconductor, consumer products, and food and beverage, and medical-related. Cognex products are also used to automate distribution processes in the logistics industry, including for applications in retail distribution and e-commerce to scan, track, and sort goods through distribution centers.
Revenue for the third quarter of 2021 totaled $284,848,000, an increase of 13% from the third quarter of 2020. Thebeverage.
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increaseRevenue for the third quarter of 2022 totaled $209,622,000, representing a decrease of 26% from the third quarter of 2021. The decrease was due to significantly higherdriven by three primary factors: (i) lower revenue from the logistics industry which was our largest and fastest-growing market inas a result of the third quarter of 2021, partially offset by lower consumer electronics revenue that was primarily driven by the timingslowing of large customer deployments.
projects due to a slowdown in capacity expansion for e-commerce fulfillment; (ii) the impact of the fire on June 7, 2022 at our primary contract manufacturer in Indonesia, which destroyed a large amount of component inventory limiting our ability to fulfill certain orders in the quarter; and (iii) the unfavorable impact of foreign currency exchange rate changes on revenue. Gross margin as a percentage of revenue was 73% for the third quarter of 2022 compared to 70% for the third quarter of 2021 compareddue to 76%a more favorable revenue mix, partially offset by the unfavorable effect of currency exchange rates on revenue.
Operating expenses of $112,216,000 were flat for the third quarter of 2020, primarily due to an unfavorable revenue mix, as well as higher prices paid to purchase inventories in2022 over the prior year. On June 7, 2022, our primary third-party contract manufacturer suffered a fire at its Indonesian facility destroying a large portion of the Company's component inventories. In the third quarter, the Company recorded a loss of 2021.
Operating$2,891,000 primarily related to the deleveraging of fixed costs of distribution centers and inventory write-offs for products deemed to have a net realizable value of zero as a result of the fire. Excluding this recorded loss from fire, operating expenses increased by $16,892,000, or 18%, forwere 2% lower from the third quarter of 2021 compareddue primarily to the same quarter in 2020, which had relatively low operating expenses due to our restructuring actions in the second quarter of 2020. The increase was due, in part, to higher personnel-related costs, which included the impact of headcount additions to support our future growth plans, as well as higherlower incentive compensation costs and the favorable impact of foreign currency exchange rate changes.changes on expenses, partially offset by additional headcount to support our continued growth plans and salary increases provided to employees related to merit and promotions.
As a result of the lower gross margin percentage and higher operating expenses,revenue level, operating income decreaseddeclined to 19% of revenue for the third quarter of 2022 as compared to 31% of revenue for the third quarter of 20212021. Operating income, excluding the impact of the recorded loss from 38%fire of $2,891,000, was 20% of revenue for the third quarter of 2020.2022. Tax expense declined as a result of lower operating income in the third quarter of 2022 as compared to the third quarter of 2021. Net income wasdeclined to 16% of revenue for the third quarter of 2022 from 28% of revenue for the third quarter of 2021, or $0.44 per diluted share, compared to 35% of revenue for the third quarter of 2020, or $0.49 per diluted share.2021.
Results of Operations
As foreign currency exchange rates are a factor in understanding period-to-period comparisons, we believe the presentation of results on a constant-currency basis in addition to reported results helps improve investors’ ability to understand our operating results and evaluate our performance in comparison to prior periods. We also use results on a constant-currency basis as one measure to evaluate our performance. Constant-currency information compares results between periods as if exchange rates had remained constant period-over-period. We generally refer to such amounts calculated on a constant-currency basis as excluding the impact of foreign currency exchange rate changes. Results on a constant-currency basis are not in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and should be considered in addition to, and not as a substitute for, results prepared in accordance with U.S. GAAP.
Revenue
Revenue increaseddecreased by $33,775,000,$75,226,000, or 13%26%, for the three-month period and increaseddecreased by $205,628,000,$26,376,000, or 35%3%, for the nine-month period. The most significant increase came from customers in the logistics industry, particularly in the e-commerce and omni-channel retail sectors. Growth in the automotive, semiconductor, medical-related, and consumer products industries also contributedperiod compared to the increase. The increasessame periods in these industries were partially offset by a decrease in revenue from the consumer electronics industry. A higher concentration of consumer electronics revenue from large customer deployments in the third quarter of 2020 resulted in a more significant decrease in revenue in this industry for the three-month period in 2021.
We believe the increases in revenue for the three-month and nine-month periods would have been moderately higher were it not for global supply shortages that continued to delay customer deliveries of certain products and worsened throughout the quarter. Based in part on product availability, the Company was able to fulfill customer orders in the logistics industry in the third quarter of 2021 that were originally expected to be fulfilled in the fourth quarter of 2021, which lessened the impact of delays of other customer deliveries during the third quarter.
From a geographic perspective, revenue from customers based in the Americas increased by 32% for the three-month period and 53% for the nine-month period driven primarily by higher revenue in the logistics industry. Revenue from customers in medical-related industries was also notably higher for nine-month period.
Revenue from customers based in Europe increased by 8% for the three-month period and 26% for the nine-month period. Changes in foreign currency exchange rates resulted in a higherlower level of reported revenue in 2021,2022 as compared to 2021. Excluding the impact of foreign currency exchange rate changes, revenue decreased 21% for the three-month period and was flat for the nine-month period compared to the same periods in 2021.
The largest contributors to the revenue decline over the prior year for the three-month and nine-month periods were lower revenue from the logistics industry as a result of the slowing of large customer projects, the impact of the fire at our primary contract manufacturer in Indonesia, which destroyed a large amount of component inventory limiting our ability to fulfill certain orders, and the unfavorable impact of foreign currency exchange rate changes on revenue.
Changes in revenue from a geographic perspective were as follows:
Revenue from customers based in the Americas decreased from the prior year by 42% for the three-month period and 14% for the nine-month period compared to the same periods in 2021. The decrease in revenue for the three-month and nine-month periods was primarily driven by lower revenue from customers in the logistics industry due to the slowing of large customer projects and the impact of the June fire on inventory levels, partially offset by increases in the automotive industry.
Revenue from customers based in Europe decreased by 25% for the three-month period and 5% for the nine-month period compared to the same periods in 2021. Changes in foreign currency exchange rates resulted in a lower level of reported revenue in 2022, as sales denominated in Euros were translated into U.S. Dollars at a higherlower rate. Excluding the impact of foreign currency exchange rate changes, revenue from customers based in Europe decreased by 13% for the three-month period, due to a decline in revenue from
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customers in the logistics industry due to the slowing of large customer projects and the impact of the June fire on inventory levels. Excluding the impact of foreign currency exchange rate changes, revenue from customers based in Europe increased by 7% for the three-month period and 20%5% for the nine-month period. The increase came from customers inperiod with broad-based growth across a variety of industries, most notably logistics, automotive, and consumer products, partially offset by lower revenue in the consumer electronics industry. The decline in revenue from consumer electronics was partially a result of procurement changes made by certain customers, shifting their purchases to China from Europe.industries.
Revenue from customers based in Greater China decreased by 15%was flat for the three-month periodperiod and increased by 21%18% for the nine-month period. Changesperiod compared to the same periods in foreign currency exchange rates resulted in a higher level of reported revenue in 2021, as sales denominated in Chinese Renminbi were translated into U.S. Dollars at a higher rate.2021. Excluding the impact of foreign currency exchange rate changes, revenue from customers based in Greater China
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decreased by 22% increased 5% for the three-month period and increased by 13%21% for the nine-month period. Although revenue increasedThe increase in a variety of industries over the prior year, most notably automotive and semiconductor, this increasethree-month period was offsetled by a decreasestrong growth in consumer electronics revenue, partially offset by the impact of the June fire on inventory levels. The increase in revenue for the three-monthnine-month period as there was a higher concentration of this revenuecame from large customer deploymentscustomers in the third quarter of 2020 as compared to the third quarter of 2021.multiple industries, led by strong growth in consumer electronics.
Revenue from other countries in Asia increaseddecreased by 48%29% for the three-month period and 28%was flat for the nine-month period compared to the same periods in 2021. Excluding the impact of foreign currency exchange rate changes, revenue decreased by 20% for the three-month period due to higherdeclines in revenue from customers in multiple industries and the impact of the June fire on inventory levels. Excluding the impact of foreign currency exchange rate changes, revenue increased 6% for the nine-month period, as a rangeresult of industries, includingincreases in revenue from customers in the automotive and semiconductor.logistics industries.
As of the date of this report, we currently expect that revenue for the fourth quarter of 2021 to2022 will be lowersignificantly higher than the third quarter of 20212022. Production has resumed at our primary contract manufacturer in Indonesia and relativelycomponent inventory has returned to more typical levels. We currently expect that revenue for the fourth quarter of 2022 will be roughly flat with the fourth quarter of 2020. The decrease from the third quarter of 2021 is expected to result fromas we anticipate that lower revenue in the consumer electronics and logistics industries, due particularly to the timing ofspending on large customer deployments in these industries, as well as the earlier fulfillment of customer ordersprojects in the logistics industry and the unfavorable impact of foreign currency exchange rate changes will be offset by broad-based growth in the third quarter of 2021. Revenue in the fourth quarter of 2020 benefited from higher consumer demand for electronic products that we believe related to the COVID-19 pandemic. Our current expectations regarding revenue for the fourth quarter of 2021 assume continued delays of customer deliveries for certain products due to global supply shortages that we believe will continue throughout the quarter, while similar challenges did not exist in the prior year.other industries.

Gross Margin
Gross margin as a percentage of revenue was 73% and 72% for the three-month and nine-month periods in 2022 compared to 70% and 74% for the three-month and nine-month periods in 2021, respectively, compared to 76% and 74% for the same periodsrespectively. The increase in 2020. The decrease for the three-month period was primarily due to ana more favorable revenue mix, partially offset by the unfavorable revenue mix. This decrease was a resulteffect of delays of higher-margin product sales due to global supply shortages, as well as a greater percentage of total revenue coming from the logistics industry, which has relatively lower gross margins. Logistics revenue for the third quarter of 2021 included some comparatively lower margins from strategic logistics projects.foreign currency exchange rates on revenue. The decrease forin the three-monthnine-month period was also due to higher prices paid to purchase inventories, in 2021including higher cost of components, due primarilylargely to global supply chain constraints, including higher costs for components and freight, that we expect to continue for several quarters.
For the nine-month period, the unfavorable impact of a higher percentage of logisticswhich include broker-buy purchases at higher-than-normal prices, offset slightly by an overall, more favorable revenue and higher inventory purchases prices was offset by lower provisions for excess and obsolete inventories as compared to the prior year and manufacturing efficiencies related to the higher revenue level. The higher provisions for excess and obsolete inventories in 2020 took into account the global economic conditions resulting from the COVID-19 pandemic.mix.
As of the date of this report, we currently expect that gross margin as a percentage of revenue for the fourth quarter of 2021 to2022 will be in the low-70%low 70% range. We expectThe expected gross margin percentage reflects our expectations that higher inventory purchase prices will continue to have a more favorable revenue mix input pressure on margins throughout and beyond the fourth quarter of 20212022 as comparedthe cost to replenish inventories destroyed by the third quarter of 2021. We also expect higherJune fire includes broker-buy purchases at higher-than-normal prices, which will be expensed as inventory purchase prices in the fourth quarter of 2021 as compared to the third quarter of 2021.is sold.
Operating Expenses
Research, Development, and Engineering Expenses
Research, development, and engineering (RD&E) expenses increaseddecreased by $4,236,000,$522,000, or 14%2%, for the three-month period and $3,300,000,increased by $4,116,000, or 3%4%, for the nine-month period compared to the same periods in 2021 as detailed in the table below (in thousands).
Three-month periodNine-month periodThree-month periodNine-month period
RD&E expenses in 2020$30,240 $96,583 
RD&E expenses in 2021RD&E expenses in 2021$34,476 $99,883 
Personnel-related costsPersonnel-related costs2,535 6,117 
Stock-based compensation expenseStock-based compensation expense1,282 2,776 
Incentive compensationIncentive compensation(2,620)(3,997)
Foreign currency exchange rate changesForeign currency exchange rate changes492 3,057 Foreign currency exchange rate changes(1,905)(4,063)
Incentive compensation377 1,928 
Outsourced engineering services1,171 950 
Personnel-related costs1,506 (1,131)
OtherOther690 (1,504)Other186 3,283 
RD&E expenses in 2021$34,476 $99,883 
RD&E expenses in 2022RD&E expenses in 2022$33,954 $103,999 
Personnel-related costs increased due to headcount additions to support new product initiatives and salary increases provided to employees as part of merit and promotion process. Stock-based compensation expense was
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also higher than the prior year due to a higher level of stock-based grants at a higher average economic value, as well as the impact of a forfeiture rate true-up that resulted in higher expense.
These increases were offset by lower incentive compensation expenses than the prior year. Relevant performance goals for these compensation plans are set at the beginning of each year, with the ability to earn upside if the goals are exceeded. In contrast to the current year, performance goals set for 2021 incentive bonuses were exceeded, resulting in a higher level of bonus expense recorded in 2021. RD&E expenses increasedwere also lower than the prior year primarily due to the impact of foreign currency exchange rate changes, as costs denominated in foreign currencies were translated into U.S. Dollars at a higherlower rate. Incentive bonus accruals were also higher than the prior year based on management's assessment of the Company's expected performance against relevant full-year goals. Higher spending on outsourced engineering services due to the timing of product development activities,
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including engineering prototypes for large sales opportunities, also contributed to the increase.
These increases were partially offset by lower personnel-related costs for the nine-month period due to a workforce reduction in the second quarter of 2020. Higher costs from annual salary increases and fringe benefits provided to employees, as well as headcount additions to support new product initiatives, partially offset the lower costs from the workforce reduction in the nine-month period and resulted in an increase in costs for the three-month period.
RD&E expenses as a percentage of revenue were 12%16% and 13%14% for the three-month period and nine-month period, respectively, compared to 12% and 16%13% for the same periods in 2020.2021. We believe that a continued commitment to RD&E activities is essential in order to maintain or achieve product leadership with our existing products and to provide innovative new product offerings, as well as to provide engineering support for large customers. In addition, we consider our ability to accelerate the time to market for new products to be critical to our revenue growth. This quarterly percentage is impacted by revenue levels and investing cycles.
Selling, General, and Administrative Expenses
Selling, general, and administrative (SG&A) expenses increaseddecreased by $12,907,000,$1,742,000, or 20%2%, for the three-month period and $32,883,000,increased $9,776,000, or 17%4%, for the nine-month period compared to the same periods in 2021 as detailed in the table below (in thousands).
Three-month periodNine-month periodThree-month periodNine-month period
SG&A expenses in 2020$64,206 $193,497 
SG&A expenses in 2021SG&A expenses in 2021$77,113 $226,380 
Personnel-related costsPersonnel-related costs5,977 19,814 
Stock-based compensation expenseStock-based compensation expense1,708 5,574 
Travel expensesTravel expenses1,675 4,631 
Sales demonstration equipmentSales demonstration equipment(429)637 
Incentive compensationIncentive compensation2,931 14,292 Incentive compensation(6,977)(16,041)
Foreign currency exchange rate changesForeign currency exchange rate changes1,207 7,029 Foreign currency exchange rate changes(4,275)(9,512)
Personnel-related costs4,313 3,292 
Business system investments624 1,931 
Stock-based compensation expense1,037 1,486 
Marketing programs455 1,426 
Recruiting costs524 1,187 
Travel expenses949 754 
OtherOther867 1,486 Other579 4,673 
SG&A expenses in 2021$77,113 $226,380 
SG&A expenses in 2022SG&A expenses in 2022$75,371 $236,156 
SG&A expenses increased due to higher expenses related to annual incentive compensation plans, which include incentive bonuses and sales commissions. Incentive bonus accruals were higher than the prior year based on management's assessment of the Company's expected performance against relevant full-year goals. Likewise, sales commissions increased due to the higher business levels. Personnel-related costs increased due to higher costs from annualheadcount additions, primarily for Sales personnel to support the Company's anticipated revenue growth, and salary increases and fringe benefits provided to employees as well as sales headcount additions in strategic growth areas ofgiven the business. The increase was more significant in the three-month period than in the nine-month period due to the impact of the workforce reduction that took place in the second quarter of 2020.increasingly competitive job market within certain regions and specialties. In addition to salaries and fringe benefits, these personnel-related costs included sales commissions and travel expenses related to the additional headcount. The headcount additionsStock-based compensation expense was also drove higher recruiting costs.than the prior year due to a higher average economic value of stock-based grants, as well as the impact of a forfeiture rate true-up that resulted in higher expense. While travel expenses increased due to the number of sales personnel added, expenses also increased due to a higher level of travel activity as restrictions related to COVID-19 continued to ease. Higher spending on sales demonstration equipment tied to new product launches in the first quarter also contributed to the year-to-date increase.
Foreign currency exchange rate changes resultedThese increases were offset by lower incentive compensation expenses than the prior year, which included sales commissions and incentive bonuses. Relevant performance goals for these plans are set at the beginning of each year, with the ability to earn upside if the goals are exceeded. In contrast to the current year, performance goals set for 2021 incentive bonuses were exceeded, resulting in a higher level of bonus expense recorded in 2021. SG&A expenses as comparedwere also lower than the prior year due to the prior year,impact of foreign currency exchange rate changes, as costs denominated in foreign currencies were translated into U.S. Dollars at a higherlower rate. Expenses
Loss from Fire
On June 7, 2022, the Company’s primary contract manufacturer experienced a fire at its plant in Indonesia. The fire destroyed a significant amount of Cognex-owned consigned inventories, as well as component inventories owned by the contract manufacturer that were also higher duedesignated for Cognex products. There was no significant damage to investmentsthe Company's production equipment. Since the date of the fire and continuing through the date of this report, the Company is making in business systems relatedhas worked with the contract manufacturer to its sales process, including systemsassess the damage, resume production, and replenish inventories destroyed by the fire. Additionally, beginning last year, the Company has been working to help our sales team more efficiently manage customer relationshipsramp up an additional contract manufacturer to further mitigate risk, diversify supply chain, and sales opportunities. A portion of these costs is expensed as incurred, while the majority of these investments will be accounted for as a capital asset that is expectedexpand production capacity. We expect this additional contract manufacturer to be placed into servicecommence production later in the first quarter of 2022. In addition, stock-based compensation increased asyear. As a result of changes in equity awards over time (e.g., increased number of restricted stock units, varied vesting schedules, timing of awards, etc.), partially offset by decreases due to the impact of forfeiture rates revised infire, the first quarter of 2021. Stock-based compensation expense for the nine-month period also increased due to credits related to the workforce reduction that were recorded in the second quarter of 2020 and did not repeat. The Company also increased spending on marketing programs in an effort to generate future sales opportunities, particularly related to new product introductions, and incurred higher travel expenses as restrictions related to COVID-19 continued to ease in certain regions.
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RestructuringCompany recorded $47,794,000 in gross losses in 2022, including $44,903,000 in the second quarter and Intangible Asset Impairment Charges$2,891,000 in the third quarter. Gross losses related to $37,643,000 of Cognex-owned inventories, $8,184,000 of primarily prepayments related to Cognex-designated components that were owned by the contract manufacturer, and $1,967,000 related to deleveraging of costs related to our distribution centers.
On May 26, 2020,Based on the provisions of the Company's Board of Directors approved a restructuring plan intendedinsurance policies, the gross losses have been reduced by the estimated insurance proceeds expected to reducebe received from the Company's operating costs, optimize its business model, and address the impactCompany’s insurance carrier. The Company has determined that partial recovery of the COVID-19 pandemic. The Companyincurred losses is probable and therefore recorded restructuring chargesan insurance recovery of $251,000$27,500,000 in the second quarter of 2022. Gross losses, net of insurance recovery, total $2,891,000 and $15,049,000$20,294,000 for the three-month and nine-month periods ended October 2, 2022, respectively, and are presented in 2020, respectively, as a resultthe caption “Loss from fire” on the Consolidated Statements of actions relatedOperations. Subsequent to the restructuring plan, which included a global workforce reductionOctober 2, 2022 balance sheet date, but prior to the date of approximately 8% and office closures.financial statement issuance, the Company received insurance proceeds of $27,560,000 from the Company's insurance carrier. In addition, the adverse impactfourth quarter of 2022, the loss from fire will be reduced by the proceeds received in excess of the COVID-19 pandemic triggered a revieworiginal estimated insurance recovery recorded of long-lived assets for potential impairment$27,500,000.
As of October 2, 2022 and through the date of financial statement issuance, management cannot yet estimate additional recoveries that could be available from the contract manufacturer. Any future, additional recoveries in excess of recognized losses will be treated as gain contingencies and will be recognized when the second quarter of 2020. This review resulted in intangible asset impairment charges totaling $19,571,000 recorded ingain is realized or realizable. There can be no assurance, however, that the second quarter of 2020.insurance coverage and/or recoveries from the contract manufacturer will be available to cover the losses from the fire.
Non-operating Income (Expense)
The Company recorded foreign currency losses of $586,000$1,880,000 and $2,233,000$4,367,000 for the three-month and nine-month periods in 2021,2022, respectively, compared to foreign currency gains of $2,357,000 and foreign currency losses of $310,000$586,000 and $2,233,000 for the same periods in 2020.2021. Foreign currency gains and losses result primarily from the revaluation and settlement of accounts receivable, accounts payable,assets and intercompany balancesliabilities that are reporteddenominated in onecurrencies other than the functional currency and collected in another.of the Company, which is the U.S. Dollar, or its subsidiaries.
Investment income decreased by $742,000,$332,000, or 30%19%, for the three-month period and $5,985,0000,$636,000, or 54%13%, for the nine-month period.period, compared to the same periods in 2021. The decrease for the three-month period was due primarily to lower investment balances, partially offset by higher yields on the Company's portfolio of debt securities. The decrease in the nine-month period was due to lower investment balances and lower yields on the Company's portfolio of debt securities partially offset by higher invested balances.year-to-date.
The Company recorded other expense of $125,000$214,000 and $420,000$450,000 for the three-month and nine-month periods in 2021,2022, respectively, compared to other expense of $173,000$125,000 and $153,000$420,000 for the same periods in 2020. Other income (expense) includes fair value adjustments of contingent consideration liabilities arising from business acquisitions.2021.
Income Tax Expense (Benefit)
The Company’sCompany's effective tax rate was 11%14% and 13% of pre-tax income16% for the three-month and nine-month periods inended October 2, 2022, respectively, and 11% and 13% for the three-month and nine-month periods ended October 3, 2021, respectively.
The Company recorded a net discrete tax benefit totaling $930,000 and a net discrete tax expense totaling $616,000 for the three-month and nine-month periods ended October 2, 2022, respectively, compared to 14% and 12%net discrete tax benefits totaling $6,262,000 and $12,365,000 for the same periods in 2020.2021.
The effectiveDiscrete tax rateitems for the three-month and nine-month periods ended October 2, 2022 included (1) a decrease in tax expense during the three-month and nine-month periods ended October 2, 2022 of $928,000 and $3,368,000, respectively, arising from the impact of the loss from fire recorded (refer to Note 17), (2) an increase in tax expense of $1,417,000 arising from an Internal Revenue Service (IRS) audit recorded during the three-month period ended April 3, 2022, which was offset by a decrease in tax expense of $2,519,000 related to releases of reserves for income taxes due to the closure of this Internal Revenue Service (IRS) audit during the three-month period ended July 3, 2022, (3) an increase in tax expense of $1,734,000 to establish a full valuation allowance against deferred tax assets related to foreign tax credits during the three-month period ended April 3, 2022, (4) an increase in tax expense of $883,000 and $4,236,000 during the three-month and nine-month periods ended October 2, 2022, respectively, primarily consisting of transfer pricing and return-to-provision adjustments, and (5) a decrease in tax expense of $884,000 during both the three-month and nine-month periods ended October 2, 2022 related to the release of tax reserves due to closed periods.
Discrete tax items for the three-month and nine-month periods ended October 3, 2021 included a decrease in tax expense of $3,250,000 and $9,888,000, for the three-month and nine-month periods in 2021, respectively, and $4,354,000 and $10,447,000 for the same periods in 2020, related to stock options,stock-based compensation, primarily from the excess tax benefit arising from the difference between the deduction for tax purposes and the compensation cost
29


recognized for financial reporting purposes from stock option exercises. The Company cannot accurately predict the level of stock option exercises by employees in future periods.
Other discrete tax items included a decrease in tax expense of $3,012,000 and $2,477,000This impact was not material for the three-month and nine-month periods in 2021, respectively, and an increase inended October 2, 2022. The remaining discrete tax expense of $129,000 and $3,638,000benefits for the samethree-month and nine-month periods in 2020,ended October 3, 2021 of $3,012,000 and $2,477,000, respectively, fromconsisted of primarily return-to-provision adjustments and the final true-uprelease of the prior year's tax accrual upon filing the related tax return.reserves.
Excluding the impact of these discrete items, the Company’s effective tax rate was 16% for both the three-month and nine-month periods ended October 2, 2022, and 18% of pre-tax incomefor both the three-month and nine-month periods ended October 3, 2021. The decrease in the effective tax rate for the three-month and nine-month periods ended October 2, 2022 and October 3, 2021 was due to more of the Company's profits being earned and taxed in both 2021lower tax jurisdictions, as well as lower state taxes.
The Inflation Reduction Act ("IRA") was enacted into law on August 16, 2022. Included in the IRA was a provision to implement a 15% corporate alternative minimum tax on “adjusted financial statement income” for applicable corporations and 2020.a 1% excise tax on repurchases of stock. These provisions are effective for tax years beginning after December 31, 2022. We are in the process of evaluating the provisions of the IRA, but we do not currently believe the IRA will have a material impact on our reported results, cash flows, approach to stock repurchases, or financial position when it becomes effective.
Liquidity and Capital Resources
The Company has historically been able to generate positive cash flow from operations, which has funded its operating activities and other cash requirements and has resulted in an accumulated cash and investment balance of $985,386,000$817,632,000 as of October 3, 2021.2, 2022. The Company has established guidelines relative to credit ratings, diversification, and maturities of its investments that maintain liquidity.
The Company’s cash requirements for the nine-month period ended October 3, 2021in 2022 were primarily met with positive cash flows from operations, as well as the sale and the proceeds from stock option exercises.maturity of investments. Cash requirements consisted of operating activities, the repurchase of common stock, the payment of dividends, and capital expenditures. Cash flows from operating activities included an increase inthe purchase of inventories intended to support higher business levels, and to secure key strategic components. The Company expects inventorycomponents to meet customer demand, and carry higher stocking levels to continuemitigate the Company's exposure to increasedemand changes or supply disruptions. It is expected that payments related to the Company's outstanding inventory purchase orders, which total $81,565,000 as of October 2, 2022 (refer to Note 10), will result in significant cash outflows for inventories through the remainder of the year as we receive inventory that we are purchasingand thereafter. This is due in responsepart to global supply chain challenges.the Company's efforts to replenish inventories destroyed by the fire on June 7, 2022 at the Company's primary contract manufacturer.
Capital expenditures for the nine-month period ended October 3, 2021in 2022 totaled $10,689,000$15,605,000 and consisted primarily of computer hardware and software, manufacturing test equipment related to new product introductions, and leasehold improvements maderelated to a new distribution center in Southborough, Massachusetts. During the Company's headquarters building in Natick, Massachusetts. In 2021,first quarter of 2022, the Company is making investments inplaced into service new business systems related to its sales process, the majority of which will be accounted for as a capital asset that isprocess. The Company expects to continue to make investments in its business systems intended to improve productivity or provide competitive advantages, although these investments are not expected to be placed into service inmaterial over the first quarter of 2022.long term.
In October 2018,On March 12, 2020, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's
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common stock. As of October 3, 2021,2, 2022, the Company repurchased 3,398,0002,737,000 shares at a cost of $169,643,000$200,000,000 under this program, including 581,0001,677,000 shares at a cost of $48,294,000$117,000,000 during the nine-month period ended October 3, 2021, leaving a remaining balancefirst quarter of $30,357,000.2022, which completed purchases under this program. On March 12, 2020,3, 2022, the Company's Board of Directors authorized the repurchase of an additional $200,000,000$500,000,000 of the Company's common stock. PurchasesDuring the nine-month period ended October 2, 2022, the Company repurchased 1,125,000 shares, and an additional 5,000 shares that were repurchased in 2021 and settled in 2022, at a total cost of $61,387,000 under this March 2020 program will commence upon completionadditional authorization, leaving a remaining balance of the$438,613,000 as of October 2018 program.2, 2022. The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.
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The Company’s Board of Directors declared and paid cash dividends of $0.060$0.065 per share infor the first, second and third quarters of 2021,2022, totaling $31,800,000.$33,837,000. Future dividends will be declared at the discretion of the Company's Board of Directors and will depend uponon such factors as the Board deems relevant, including, among other things, the Company's ability to generate positive cash flow from operations.
The Company believes that its existing cash and investment balances, together with cash flow from operations, will be sufficient to meet its operating, investing, and financing activities for the next twelve months. In addition, the Company has no long-term debt and does not anticipate needing debt financing in the near future.debt. We believe that our strong cash position has put us in a relatively good position with respect to ouranticipated longer-term liquidity needs.

New Pronouncements
Refer to Part I - Note 2 within this Form 10-Q, for a full description of recently issued accounting pronouncements including the expected dates of adoption and the expected impact on the financial position and results of operations of the Company.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company’s exposures to market risk since December 31, 2020.2021.

ITEM 4: CONTROLS AND PROCEDURES
As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, the Company has evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of its disclosure controls and procedures (as defined in such rules) as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures were effective as of that date. From time to time, the Company reviews its disclosure controls and procedures, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that the Company’s systems evolve with its business.
There was no change in the Company's internal control over financial reporting that occurred during the quarter ended October 3, 20212, 2022 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. We have considered the impact of COVID-19 on our internal controls over financial reporting. Personnel constraints related to working from home have made our ability to execute certain controls more challenging; however, we have enhanced existing monitoring controls in an effort to ensure we continue to have effective internal controls during this time.
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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
Various claims and legal proceedings generally incidental to the normal course of business are pending or threatened on behalf of or against the Company. While we cannot predict the outcome of these matters, we believe that any liability arising from them will not have a material adverse effect on our financial position, liquidity, or results of operations.

ITEM 1A. RISK FACTORS
For a list of factors that could affect the Company’s business, results of operations, and financial condition, see the risk factors discussion provided in Part I—Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2021. The following information updates, and should be read in conjunction with, Part I - Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Our primary contract manufacturer experienced a fire at its plant in Indonesia at which Cognex products are manufactured and inventory is stored, which has had, and may continue to have, a negative impact on our business and results of operations.
On June 7, 2022, our primary contract manufacturer experienced a fire at its plant in Indonesia. The fire destroyed a significant amount of Cognex-owned consigned inventories as well as component inventories owned by the contract manufacturer that were designated for Cognex products. Since the date of the fire and continuing through the date of this report, we have worked with the contract manufacturer to assess the damage, resume production, and replenish inventories destroyed by the fire. We also have been working to ramp up an additional contract manufacturer to further mitigate risk, diversify supply chain, and expand production capacity. We expect this additional contract manufacturer to commence production later in the year, although no assurances can be made in this regard.
Our inability to manufacture and deliver quality product in a timely manner to our customers as a result of the fire could result in delayed shipments, loss of sales and/or customer dissatisfaction, any of which could adversely impact our business, financial condition or results of operations. Delays in customer orders also would result in delayed revenue recognition which could impact our operating results in a particular quarter. We cannot predict the extent to which orders may be delayed or sales may be lost. In addition, our efforts to replenish the inventory lost in the fire may include purchases at higher-than-normal prices to increase speed to production, which would put pressure on our operating margins. We also can provide no assurance that insurance coverage and/or recoveries from the contract manufacturer will be available to cover our losses from the fire. Our assessment of the impact of the fire on our business remains ongoing as of the date of this report and, as a result, we cannot predict the full extent of the impact that the fire may have on our business, results of operations and financial condition.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information with respect to purchases by the Company of shares of its common stock during the three-month period ended October 3, 2021:2, 2022:
Total
Number
of Shares
Purchased
Average
Price Paid
per Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1)
Approximate
Dollar Value
of Shares that
May Yet Be
Purchased
Under the
Plans or
Programs (1)
July 5, 2021 - August 1, 202154,000 $84.64 54,000 $253,216,000 
August 2, 2021 - August 29, 202186,000 85.53 86,000 245,817,000 
August 30, 2021 - October 3, 2021183,000 84.70 183,000 230,357,000 
Total323,000 $84.91 323,000 $230,357,000 
Total
Number
of Shares
Purchased
Average
Price Paid
per Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1)
Approximate
Dollar Value
of Shares that
May Yet Be
Purchased
Under the
Plans or
Programs (1)
July 4, 2022 - July 31, 2022— $— — $462,683,000 
August 1, 2022 - August 28, 2022211,000 46.75 211,000 452,827,000 
August 29, 2022 - October 2, 2022329,000 43.20 329,000 438,613,000 
Total540,000 $44.58 540,000 $438,613,000 
(1) In October 2018,On March 3, 2022, the Company's Board of Directors authorized the repurchase of $200,000,000an additional $500,000,000 of the Company's common stock. Purchases under this program commenced in October 2018. On March 12, 2020,2022. The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the Company's Boardimpact of Directors authorized the repurchase of an additional $200,000,000 of the Company's common stock. This new authorization will commence once the Company completes the October 2018 program, with repurchases subject to market conditionsdilution from employee stock awards, stock price, share availability, and other relevant factors.cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5. OTHER INFORMATION
None.
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 ITEM 6. EXHIBITS
Exhibit Number
31.1
31.2
32.1
32.2
101.SCHInline XBRL Taxonomy Extension Schema Document*
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document*
101.LABInline XBRL Taxonomy Extension Label Linkbase Document*
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document*
104Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)
*Filed herewith
**Furnished herewith

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Date:November 4, 20213, 2022 COGNEX CORPORATION
 By:/s/ Robert J. Willett
 Robert J. Willett
 President and Chief Executive Officer
 (Principal Executive Officer)
 By:/s/ Paul D. Todgham
 Paul D. Todgham
 Senior Vice President of Finance and Chief Financial Officer
 (Principal Financial Officer)

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