Exhibit 99.1
Cognex Corporation Announces Second Quarter Results; Machine Vision Company
Reports Significant Increases in Both Revenue and Net Income
NATICK, Mass.--(BUSINESS WIRE)--July 18, 2006--Cognex Corporation (NASDAQ:
CGNX) today announced its financial results for the second quarter ended July 2,
2006. Revenue, net income and earnings per share for the quarter and six months
ended July 2, 2006 are compared to the second quarter of 2005, the first quarter
of 2006, and the first six months of 2005 in the table below.
Earnings per
Diluted
Revenue Net Income Share
- ----------------------------- ------------- ------------ -------------
Quarterly Comparisons
- ----------------------------- ------------- ------------ -------------
Current quarter: Q2-06 $63,074,000 $11,434,000 $0.24
- ----------------------------- ------------- ------------ -------------
Prior year's quarter: Q2-05 $54,603,000 $7,800,000 $0.17
- ----------------------------- ------------- ------------ -------------
Change from Q2-05 to Q2-06 16% 47% 45%
- ----------------------------- ------------- ------------ -------------
Prior quarter: Q1-06 $59,040,000 $8,800,000 $0.18
- ----------------------------- ------------- ------------ -------------
Change from Q1-06 to Q2-06 7% 30% 32%
- ----------------------------- ------------- ------------ -------------
Year to Date Comparisons
- ----------------------------- ------------- ------------ -------------
Six months ended July 2, 2006 $122,114,000 $20,234,000 $0.42
- ----------------------------- ------------- ------------ -------------
Six months ended July 3, 2005 $97,801,000 $13,094,000 $0.28
- ----------------------------- ------------- ------------ -------------
Change from first six months
of 2005 to first six months
of 2006 25% 55% 53%
- ----------------------------- ------------- ------------ -------------
Beginning in the first quarter of 2006, Cognex included the expenses
associated with stock options in its results; those expenses reduced earnings by
$0.04 per share in the first quarter, $0.05 per share in the second quarter and
$0.09 per share in the first six months of the year (Exhibit 2 shows the effect
of stock option expensing on certain line items in the P&L as reported under
GAAP).
Reported results for 2006 and for the second quarter of 2005 include the
operating results of DVT Corporation (acquired on May 9, 2005), and they also
include pre-tax amortization costs related to that acquisition of $1,143,000 in
both the first and second quarters of 2006 (or $2,286,000 in the first six
months of 2006), and $762,000 in the second quarter and in the first six months
of 2005.
"I am very pleased with our results for the second quarter of 2006," said
Dr. Robert J. Shillman, Cognex's Chairman and Chief Executive Officer. "We
reported significant increases both year-on-year and sequentially at both the
top and bottom lines. We were highly profitable with net income equal to 18% of
revenue (or 22% excluding stock option expense). And, we reported earnings of
$0.24 per share (or $0.27 per share excluding both the benefit of a one-time,
favorable tax settlement described herein and excluding stock option expense),
which was better than Wall Street's consensus expectations."
Dr. Shillman continued, "Our outlook for Q3 is cautious; the Factory
Automation market is typically soft during the summer months, and demand from
the Semiconductor and Electronics Capital Equipment market seems to have reached
a peak. As a result, we now expect that third quarter revenue will be between
$61 million and $64 million, and earnings per diluted share will be between
$0.19 and $0.23."
Details of the Quarter
Statement of Operations Highlights - Second Quarter of 2006
-- Revenue for the second quarter of 2006 increased 16% over the second
quarter of 2005 due primarily to higher revenues from the
Semiconductor and Electronics Capital Equipment market, and, to a
lesser extent, the Factory Automation market. On a sequential basis,
revenue increased 7% due to higher revenue from both the Surface
Inspection and Factory Automation markets.
-- Gross margin was 74% in the second quarter of 2006, 71% in the second
quarter of 2005 and 72% in the prior quarter. Gross margin increased
year-on-year due to higher sales of modular vision systems. On a
sequential basis, gross margin increased due to lower costs relating
to higher production throughput.
-- Research, Development & Engineering (R, D & E) spending in the second
quarter of 2006 increased 19% from the second quarter of 2005 and 8%
from the prior quarter (or 6% and 7%, respectively, excluding stock
option expense). Spending increased year-on-year due to higher outside
service costs related to patent activities and new product
initiatives. The increase on a sequential basis is due to higher
employee-related costs and higher outside service costs related to new
product initiatives.
-- Selling, General & Administrative (S, G & A) spending in the second
quarter of 2006 increased 18% from the second quarter of 2005 and 6%
on a sequential basis (or 8% and 5%, respectively, excluding stock
option expense). The increase year-on-year is primarily due to one
month of incremental DVT costs and the company's investment in sales
and marketing. On a sequential basis, S, G & A increased due to higher
sales and marketing expenses, including travel and entertainment and
marketing communications, and the impact of foreign exchange rates on
the company's international operations.
-- The company reported a foreign currency loss of $280,000 in the second
quarter of 2006, a loss of $291,000 in the second quarter of 2005 and
a loss of $145,000 in the prior quarter. The company recognizes
foreign currency gains and losses on the revaluation and settlement of
accounts receivable and payable balances that are reported in one
currency and collected or paid in another.
-- Investment and other income was $1,772,000 in the second quarter of
2006 compared to $973,000 in the second quarter of 2005 and $1,566,000
in the prior quarter. The increase in investment and other income,
both year-on-year and sequentially, is due to higher yields.
-- The effective tax rate was 19% in the second quarter of 2006 compared
to 26% in the second quarter of 2005 and 27% in the prior quarter. The
second quarter of 2006 includes a benefit of $869,000 from the
settlement of a multi-year state tax audit during the quarter.
Excluding this benefit, the tax rate would have been 25%. The decrease
in the effective tax rate on a sequential basis is due to more of the
Company's profits being earned in lower tax jurisdictions than had
been anticipated.
Balance Sheet Highlights - July 2, 2006
-- Cognex's financial position at July 2, 2006, was very strong, with
$274,000,000 in cash and investments, and no debt. For the first six
months of 2006, Cognex generated positive cash flow from operations of
approximately $25,000,000, paid out approximately $7,500,000 in
dividends to shareholders, and spent nearly $62,000,000 to repurchase
approximately 2.3 million shares of its common stock on the open
market.
-- Days sales outstanding (DSO) for the second quarter of 2006 was 63
days, and remains within the company's targeted range.
-- Inventories at July 2, 2006, increased by approximately $7,200,000, or
38%, from the end of 2005, and inventory turns were equivalent to 2.7
times per year. Cognex increased its inventory in 2006 to better
support its distributors, to obtain an adequate supply of end-of-life
components, and to support new product introductions while shifting a
portion of its manufacturing operations from Massachusetts to Ireland.
Financial Outlook
-- For the third quarter of 2006, Cognex expects revenue to be between
$61 million and $64 million. Gross margin is expected to be in the
low-to-mid-70% range. Operating expenses (R, D & E and S, G & A) are
expected to increase by no more than 3% on a sequential basis. The
effective tax rate is expected to be 26%. As a result of the above,
earnings for the third quarter of 2006 are expected to be between
$0.19 and $0.23 per diluted share (or between $0.24 and $0.28 per
diluted share excluding an estimated $0.05 per diluted share for stock
option expense of $400,000 in Cost of Goods Sold and $3,100,000 in
Operating Expenses).
Non-GAAP Financial Measures
This press release and its attachments contain non-GAAP financial measures.
In particular, Cognex incurs expense related to stock options included in its
GAAP presentation of cost of revenue, research, development, and engineering
expenses (R,D&E), and selling, general and administrative expenses (S,G&A).
Management excludes these expenses for the purpose of calculating non-GAAP
adjusted gross margin, non-GAAP adjusted operating income, non-GAAP adjusted net
income and non-GAAP adjusted earnings per share when it evaluates the continuing
operational performance of Cognex because these expenses have no current effect
on cash or the future uses of cash and they fluctuate as a result of changes in
Cognex's stock price. In addition, Cognex has excluded the benefit from the
settlement of a multi-year state tax audit from the non-GAAP adjusted earnings
per share because it is a one-time favorable item. Cognex believes that these
non-GAAP financial measures are useful to investors because they allow investors
to more accurately assess and compare Cognex's results over multiple periods.
However, these non-GAAP financial measures are not meant to be considered in
isolation, nor as a substitute for financial information provided in accordance
with GAAP.
Analyst Conference Call and Simultaneous Webcast
Cognex will host a conference call to discuss its results for the second
quarter of 2006, as well as its financial outlook, today at 5:00 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 7:00
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 7515154.
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 sensors and systems, or devices that can "see." Cognex vision sensors are
used in factories around the world to automate the manufacture of a wide range
of items and to assure their quality. Cognex is the world's leader in the
machine vision industry, having shipped more than 300,000 machine vision
systems, representing over $2 billion in cumulative revenue, since the company's
founding in 1981. In addition to its corporate headquarters in Natick,
Massachusetts, Cognex also has regional offices and distributors located
throughout North America, Japan, Europe, Asia, and Latin America. Visit Cognex
on-line at http://www.cognex.com/.
Forward-Looking Statement
Certain statements made in this press release, 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 known and
unknown 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 reliance upon certain
sole-source suppliers to manufacture and deliver critical components for the
company's products; (4) the inability to design and manufacture high-quality
products; (5) the technological obsolescence of current products and the
inability to develop new products; (6) the inability to protect the company's
proprietary technology and intellectual property; (7) the challenges in
integrating acquisitions and achieving anticipated benefits; and (8) 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, 2005. 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
(Unaudited)
In thousands, except per share amounts
Three Months Ended Six Months Ended
July 2, April 2, July 3, July 2, July 3,
2006 2006 2005 2006 2005
-------- -------- -------- --------- -------
Revenue $63,074 $59,040 $54,603 $122,114 $97,801
Cost of revenue (1) 16,593 16,710 16,065 33,303 29,855
------- ------- ------- -------- -------
Gross margin 46,481 42,330 38,538 88,811 67,946
Percentage of
revenue 74% 72% 71% 73% 69%
Research, development,
and engineering
expenses (1) 8,582 7,917 7,185 16,499 13,500
Percentage of
revenue 14% 13% 13% 14% 14%
Selling, general, and
administrative
expenses (1) 25,277 23,779 21,494 49,056 39,002
Percentage of
revenue 40% 40% 39% 40% 40%
------- ------- ------- -------- -------
Operating income 12,622 10,634 9,859 23,256 15,444
Percentage of
revenue 20% 18% 18% 19% 16%
Foreign currency loss (280) (145) (291) (425) (192)
Investment and
other income 1,772 1,566 973 3,338 2,443
------- ------- ------- -------- -------
Income before taxes 14,114 12,055 10,541 26,169 17,695
Income tax provision 2,680 3,255 2,741 5,935 4,601
------- ------- ------- -------- -------
Net income $11,434 $ 8,800 $ 7,800 $ 20,234 $13,094
Percentage of
revenue 18% 15% 14% 17% 13%
======= ======= ======= ======== =======
Net income per diluted
common and common
equivalent share (2) $ 0.24 $ 0.18 $ 0.17 $ 0.42 $ 0.28
Diluted weighted-average
common and common
equivalent shares
outstanding 47,517 48,419 47,141 47,756 47,269
Cash dividends per
common share $ 0.08 $ 0.08 $ 0.08 $ 0.16 $ 0.16
======= ======= ======= ======== =======
(1) Amounts include
stock option
expense, as
follows:
Cost of revenue $ 426 $ 355 - 781 -
Research,
development,
and
engineering 948 782 - 1,730 -
Selling,
general, and
administrative 2,131 1,819 - 3,950 -
------- ------- ------- -------- -------
Total stock
option expense $ 3,505 $ 2,956 - $ 6,461 -
======= ======= ======= ======== =======
(2) Net income per
diluted common and
common equivalent
share excluding
stock option
expense $ 0.29 $ 0.22 $ 0.17 $ 0.51 $ 0.28
======= ======= ======= ======== =======
COGNEX CORPORATION
Reconciliation of Selected Items from GAAP to Non-GAAP
(Unaudited)
In thousands, except per share amounts
Six Months
Three Months Ended Ended
July 2, April 2, July 2,
2006 2006 2006
-------- ----------- -------------
Gross margin (GAAP) $ 46,481 $ 42,330 $ 88,811
Stock option expense 426 355 781
-------- ---------- -------------
Gross margin (Non-GAAP) $ 46,907 $ 42,685 $ 89,592
======== ========== =============
Percentage of revenue (1) 74% 72% 73%
R, D & E expenses (GAAP) $ 8,582 $ 7,917 $ 16,499
Stock option expense (948) (782) (1,730)
-------- ---------- -------------
R, D & E expenses (Non-GAAP) $ 7,634 $ 7,135 $ 14,769
======== ========== =============
S, G & A expenses (GAAP) $ 25,277 $ 23,779 $ 49,056
Stock option expense (2,131) (1,819) (3,950)
-------- ---------- -------------
S, G & A expenses (Non-GAAP) $ 23,146 $ 21,960 $ 45,106
======== ========== =============
Operating income (GAAP) $ 12,622 $ 10,634 $ 23,256
Stock option expense 3,505 2,956 6,461
-------- ---------- -------------
Operating income (Non-GAAP) $ 16,127 $ 13,590 $ 29,717
======== ========== =============
Percentage of revenue (1) 26% 23% 24%
Net income (GAAP) $ 11,434 $ 8,800 $ 20,234
Stock option expense, net of
tax 2,274 1,918 4,192
-------- ---------- -------------
Net income (Non-GAAP) $ 13,708 $ 10,718 $ 24,426
======== ========== =============
Percentage of revenue (1) 22% 18% 20%
Net income per diluted
share (GAAP) $ 0.24 $ 0.18 $ 0.42
Stock option expense,
net of tax 0.05 0.04 0.09
-------- ---------- -------------
Net income per diluted share
excluding stock option
expense (Non-GAAP) 0.29 0.22 0.51
Tax benefit (0.02) - (0.02)
-------- ---------- -------------
Net income per diluted share excluding
stock option expense and tax
benefit (Non-GAAP) $ 0.27 $ 0.22 $ 0.49
======== ========== =============
(1) Calculated based upon revenue of $63,074,000 in the second quarter
of 2006, $59,040,000 in the first quarter of 2006, and
$122,114,000 for the first six months of 2006.
COGNEX CORPORATION
Balance Sheets
(Unaudited)
In thousands
July 2, December 31,
2006 2005
-------------- -----------
Assets
Cash and investments $ 274,107 $ 312,258
Accounts receivable 44,639 42,051
Inventories 26,039 18,819
Property, plant, and equipment 24,220 24,175
Other assets 169,344 167,259
------------- -----------
Total assets $ 538,349 $ 564,562
============= ===========
Liabilities and Shareholders' Equity
Current liabilities $ 64,455 $ 58,041
Shareholders' equity 473,894 506,521
------------- -----------
Total liabilities and shareholders' equity $ 538,349 $ 564,562
============= ===========
COGNEX CORPORATION
Additional Information Schedule
(Unaudited)
Dollars in thousands
Three Months Ended Six Months Ended
July 2, April 2, July 3, July 2, July 3,
2006 2006 2005 2006 2005
-------- -------- ------- --------- -------
Revenue $63,074 $59,040 $54,603 $122,114 $97,801
======= ======= ======= ======== =======
Revenue by division:
Modular Vision Systems
Division 86% 89% 83% 87% 83%
Surface Inspection
Systems Division 14% 11% 17% 13% 17%
------- ------- ------- -------- -------
Total 100% 100% 100% 100% 100%
======= ======= ======= ======== =======
Revenue by geography:
United States 35% 33% 37% 34% 37%
Europe 30% 27% 31% 29% 30%
Japan 26% 30% 26% 28% 27%
Other 9% 10% 6% 9% 6%
------- ------- ------- -------- -------
Total 100% 100% 100% 100% 100%
======= ======= ======= ======== =======
Revenue by market:
Discrete factory
automation 55% 56% 60% 55% 57%
Semiconductor and
electronics capital
equipment 31% 33% 23% 32% 26%
Surface inspection 14% 11% 17% 13% 17%
------- ------- ------- -------- -------
Total 100% 100% 100% 100% 100%
======= ======= ======= ======== =======
Revenue by product:
Vision sensors 46% 48% 44% 37% 42%
PC-based vision
systems 35% 36% 32% 45% 34%
Surface inspection
vision systems 10% 7% 13% 9% 12%
Service 9% 9% 11% 9% 12%
------- ------- ------- -------- -------
Total 100% 100% 100% 100% 100%
======= ======= ======= ======== =======
CONTACT: Cognex Corporation
Susan Conway, 508-650-3353
susan.conway@cognex.com