Cognex Corporation Announces Second Quarter Results; Machine Vision Company
Reports Significant Growth in Both Revenue and Net Income
NATICK, Mass.--July 19, 2004--
Overview of the Quarter
Cognex Corporation (NASDAQ: CGNX) today announced revenue for the
second quarter ended July 4, 2004 of $54,467,000, and net income of
$10,878,000, or $0.23 per diluted share. These results compare very
favorably with both the comparable quarter in 2003 and with the prior
quarter, as shown in the table below:
Earnings per
Time Period Revenue Net Income Diluted Share
- ----------------------------------------------------------------------
Current quarter: Q2-04 $54,467,000 $10,878,000 $0.23
- ----------------------------------------------------------------------
Prior year's quarter: Q2-03 $36,622,000 $3,306,000 $0.08
- ----------------------------------------------------------------------
Increase from Q2-03 to Q2-04 49% 229% 204%
- ----------------------------------------------------------------------
Prior quarter: Q1-04 $48,169,000 $8,567,000 $0.18
- ----------------------------------------------------------------------
Increase from Q1-04 to Q2-04 13% 27% 26%
- ----------------------------------------------------------------------
For the six months ended July 4, 2004, Cognex reported revenue of
$102,636,000, a 48% increase over revenue of $69,510,000 reported for
the same six-month period a year ago. And, net income for the six
months ended July 4, 2004 increased 281% to $19,445,000, or $0.41 per
diluted share, from $5,099,000, or $0.12 per diluted share, for the
comparable period in 2003.
"I am very pleased with our second quarter results and the growth
we achieved in the first half of 2004," said Dr. Robert J. Shillman,
Cognex's Chief Executive Officer and Chairman. "We reported
significant increases in revenue for both the quarter and for the
first six months of the year over the comparable periods in 2003. Net
income increased at an even faster rate than revenue because we kept a
tight rein on spending, except in targeted areas such as sales and
marketing. And, best of all, net income is once again 20% of revenue,
which has been a long-standing goal for the company."
Dr. Shillman continued, "Customer demand is strong, and we expect
continued growth in revenue and net income through the remainder of
this year."
Details of the Quarter
Statement of Operations Highlights - Second Quarter of 2004
-- Revenue for the second quarter of 2004 increased 49% over the
comparable quarter in 2003 and 13% on a sequential basis. The
increase year-on-year is due to higher sales to customers who
make capital equipment for the semiconductor industry. On a
sequential basis, the increase is due to higher sales to
customers who make capital equipment for the electronics
industry, to end-user customers making a variety of electronic
products, and to higher sales of the company's surface
inspection products.
-- Gross margin was 71% in the first quarter of 2004 compared to
67% in the comparable quarter in 2003 and 69% in the prior
quarter. Cost of revenue for the first and second quarters of
2004 as well as the second quarter of 2003 includes a benefit
of $262,000, $234,000 and $569,000, respectively, relating to
an inventory reserve recorded in the fourth quarter of 2001.
Excluding this benefit, gross margin would have been 70% in
the second quarter of 2004, 66% in the second quarter of 2003,
and 69% in the prior quarter. The increase in gross margin
year-on-year is due to higher sales volume as well as product
mix. On a sequential basis, gross margin increased due to the
higher sales volume.
-- Research, Development & Engineering (R, D & E) spending in the
second quarter of 2004 increased 6% from the comparable
quarter in 2003. The increase in R, D & E spending
year-on-year is principally due to the accrual of anticipated
company bonuses for 2004. On a sequential basis, R, D & E
decreased slightly due to lower employee-related expenses.
-- Selling, General & Administrative (S, G & A) spending in the
second quarter of 2004 increased 26% from the comparable
quarter in 2003 and 8% on a sequential basis. The increase in
S, G & A spending, both year-on-year and sequentially, is due
to higher employee-related costs, including higher commissions
resulting from the higher revenue level and the accrual of
anticipated company bonuses for 2004, as well as an investment
in additional end-user sales personnel and marketing
activities. Also adding to the year-on-year increase in S, G &
A spending was the impact of foreign exchange rates on the
company's international operations.
-- Investment and other income was $1,031,000 in the second
quarter of 2004 compared to $1,615,000 in the comparable
quarter of 2003 and $1,274,000 in the prior quarter. The
decrease in investment and other income, both year-on-year and
sequentially, is due to lower yields on cash and investment
balances as well as lower realized gains on investments.
-- The foreign currency loss was $50,000 in the second quarter of
2004 as compared to a loss of $1,164,000 in the comparable
quarter of 2003 and a gain of $625,000 in the prior quarter.
The company recognizes foreign currency gains and losses on
the revaluation and settlement of accounts receivable balances
that are reported in one currency and collected in another.
-- The effective tax rate was 29% in the second quarter of 2004
as compared to 32% in the comparable quarter of 2003 and 29%
in the prior quarter. The decrease in the effective tax rate
year on year is due to more of the company's profits being
earned and taxed in lower tax jurisdictions in 2004 than in
2003.
Balance Sheet Highlights - July 4, 2004
-- Cognex's financial position remains strong at July 4, 2004,
with over $360,000,000 in cash and investments and no debt.
Cash and investments increased over $57,000,000 from the end
of 2003, the net result of positive cash flow from operations
and cash received from the exercise of employee stock options,
less dividend payments of approximately $5,400,000.
-- Days sales outstanding (DSO) for the second quarter of 2004
was 55 days, and is well within the company's targeted range.
-- Inventories at July 4, 2004 decreased by nearly 5% from the
end of 2003. In addition, inventory turns improved in the
second quarter to a rate equivalent to 4.4 times per year from
3.8 times per year in the prior quarter.
Business Trends and Financial Outlook
-- Bookings for the second quarter of 2004 were significantly
higher than in any quarter in 2003. However, on a sequential
basis, orders decreased by 7% primarily due to an
exceptionally high level of business in the prior quarter from
customers who make capital equipment for the semiconductor and
electronics industries as they ramped up their production in
response to demands they were seeing for their products.
Nevertheless, the company's book-to-bill ratio remained above
1.0 for the quarter.
-- Cognex expects revenue for the third quarter of 2004 to
increase on a sequential basis to between $55 million and $58
million, in spite of the expected seasonal slowdown in orders
from end-user customers that the company has historically
experienced during the summer months. At that revenue level,
gross margin is expected to be in the 70% range. For the third
quarter, operating expenses (R, D & E and S, G & A) are
expected to increase on a sequential basis by approximately 5%
as the company further increases its investment in sales and
marketing to help drive revenue. The effective tax rate for
the third quarter of 2004 is expected to be 29%. As a result
of the above, earnings for the third quarter are expected to
be between $0.24 and $0.26 per diluted share.
Analyst Conference Call and Simultaneous Webcast
Cognex Corporation will host a conference call to discuss its
results for the second quarter of 2004, as well as its financial
outlook, today at 6:00 p.m. eastern time. The telephone number for the
live call is 800-770-5589 (or 973-935-2039 if outside the United
States). A replay will begin tonight at approximately 8:00 p.m.
eastern time and will run continuously for 72 hours. The telephone
number for the replay is 877-519-4471 (or 973-341-3080 if outside the
United States) and the access code is 4873439.
Internet users can listen to a real-time audio broadcast of the
conference call, as well as an archive replay of the call, on Cognex's
website at http://www.cognex.com/investor/default.asp.
About Cognex Corporation
Cognex Corporation designs, develops, manufactures, and markets
machine vision systems, or computers that can "see." Cognex is the
world's leader in the machine vision industry, having shipped more
than 200,000 vision systems, representing over $1.5 billion in
cumulative revenue, since the company's founding in 1981. Cognex's
Modular Vision Systems Division, headquartered in Natick,
Massachusetts, specializes in machine vision systems that are used for
automating the manufacture of a wide range of discrete items and for
assuring their quality. Cognex's Surface Inspection Systems Division,
headquartered in Alameda, California, specializes in machine vision
systems that are used for inspecting the surfaces of products
manufactured in a continuous fashion, such as metals, papers and
plastics. In addition to its corporate headquarters in Natick,
Massachusetts, Cognex also has regional offices located throughout
North America, Japan, Europe, and Southeast Asia. Visit Cognex on-line
at http://www.cognex.com.
Forward-Looking Statement
Certain statements made in this press release and its attachments,
which do not relate solely to historical matters, are forward-looking
statements. You can identify these forward-looking statements by use
of the words "expects," "anticipates," "estimates," "believes,"
"projects," "intends," "plans," "will," "may," "shall" and similar
words. These forward-looking statements, which include statements
regarding business trends and the company's financial outlook, involve
risks and uncertainties that could cause actual results to differ
materially from those projected. Such risks and uncertainties include:
(1) global economic conditions that impact the capital spending trends
of manufacturers in a variety of industries; (2) the cyclicality of
the semiconductor and electronics industries; (3) the inability to
achieve significant international revenue; (4) fluctuations in foreign
exchange rates; (5) the loss of, or significant curtailment of
purchases by, any one or more principal customers; (6) the reliance
upon certain sole source suppliers to manufacture and deliver critical
components for the company's products; and (7) the other risks
detailed in the company's reports filed with the SEC, including the
company's Form 10-K for the fiscal year ended December 31, 2003. You
should not place undue reliance upon any such forward-looking
statements, which speak only as of the date made. The company
disclaims any obligation to update forward-looking statements after
the date of such statements.
COGNEX CORPORATION
Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
July 4, April 4, June 29, July 4, June 29,
2004 2004 2003 2004 2003
------- ------- ------- -------- -------
(unaudited) (unaudited)
Revenue $54,467 $48,169 $36,622 $102,636 $69,510
Cost of revenue 15,905 14,789 11,999 30,694 23,715
------- ------- ------- -------- -------
Gross margin 38,562 33,380 24,623 71,942 45,795
Percentage of revenue 71% 69% 67% 70% 66%
Research, development, and
engineering expenses 6,655 6,898 6,263 13,553 12,246
Percentage of revenue 12% 14% 17% 13% 18%
Selling, general, and
administrative expenses 17,568 16,314 13,949 33,882 27,193
Percentage of revenue 32% 34% 38% 33% 39%
------- ------- ------- -------- -------
Operating income 14,339 10,168 4,411 24,507 6,356
Percentage of revenue 26% 21% 12% 24% 9%
Foreign currency gain (loss) (50) 625 (1,164) 575 (1,791)
Investment and other income 1,031 1,274 1,615 2,305 2,909
------- ------- ------- -------- -------
Income before taxes 15,320 12,067 4,862 27,387 7,474
Income tax provision 4,442 3,500 1,556 7,942 2,375
------- ------- ------- -------- -------
Net income $10,878 $ 8,567 $ 3,306 $ 19,445 $ 5,099
Percentage of revenue 20% 18% 9% 19% 7%
======= ======= ======= ======== =======
Net income per diluted common
and common equivalent share $ 0.23 $ 0.18 $ 0.08 $ 0.41 $ 0.12
======= ======= ======= ======== =======
Diluted weighted-average common
and common equivalent shares
outstanding 47,241 46,752 43,678 47,317 43,640
======= ======= ======= ======== =======
Cash dividends per common
share $ 0.06 $ 0.06 $ - $ 0.12 $ -
======= ======= ======= ======== =======
COGNEX CORPORATION
Balance Sheets
(In thousands)
July 4, December 31,
2004 2003
---------- --------
(unaudited)
Assets
Cash and investments $ 361,239 $303,502
Accounts receivable 34,204 26,697
Inventories 14,817 15,519
Property, plant, and equipment 24,117 24,980
Other assets 61,611 61,835
---------- --------
Total assets $ 495,988 $432,533
========== ========
Liabilities and Stockholders' Equity
Current liabilities $ 48,911 $ 47,287
Other liabilities 243 252
Stockholders' equity 446,834 384,994
---------- --------
Total liabilities and stockholders' equity $ 495,988 $432,533
========== ========
COGNEX CORPORATION
Additional Information Schedule
(Dollars in thousands)
Three Months Ended Six Months Ended
July 4, April 4, June 29, July 4, June 29,
2004 2004 2003 2004 2003
-------- ------- ----------- -------- -------
(unaudited) (unaudited)
Revenue $54,467 $48,169 $36,622 $102,636 $69,510
======== ======== ======== ========= ========
Revenue by division:
Modular Vision Systems
Division 85% 88% 80% 86% 80%
Surface Inspection
Systems Division 15% 12% 20% 14% 20%
-------- -------- -------- --------- --------
Total 100% 100% 100% 100% 100%
======== ======== ======== ========= ========
Revenue by geography:
Japan 41% 41% 35% 41% 35%
United States 31% 28% 32% 30% 31%
Europe 22% 26% 25% 24% 24%
Other 6% 5% 8% 5% 10%
-------- -------- -------- --------- --------
Total 100% 100% 100% 100% 100%
======== ======== ======== ========= ========
Revenue by industry:
Semiconductor Capital
Equipment 29% 35% 17% 32% 18%
Electronics Capital
Equipment 15% 12% 15% 13% 15%
Surface inspection 15% 12% 20% 14% 20%
Electronics Other 12% 9% 8% 11% 9%
Automotive 8% 8% 12% 8% 12%
Semiconductor Other 6% 5% 5% 5% 4%
Consumer products 1% 2% 2% 2% 2%
Medical 1% 2% 3% 2% 2%
Pharmaceutical 1% 1% 2% 1% 2%
Packaging 1% 1% 2% 1% 2%
Other 11% 13% 14% 11% 14%
-------- -------- -------- --------- --------
Total 100% 100% 100% 100% 100%
======== ======== ======== ========= ========
Revenue by product:
PC-based vision systems 50% 51% 43% 50% 45%
Vision sensors 27% 28% 27% 28% 26%
Surface inspection
vision systems 11% 9% 16% 10% 15%
Service 12% 12% 14% 12% 14%
-------- -------- -------- --------- --------
Total 100% 100% 100% 100% 100%
======== ======== ======== ========= ========
Number of new customer
accounts:
End user 257 191 219 448 429
Original equipment
manufacturer 32 37 23 69 59
-------- -------- -------- --------- --------
Total 289 228 242 517 488
======== ======== ======== ========= ========
CONTACT: Cognex Corporation
Susan Conway, 508/650-3353