Exhibit 99.1
Cognex Corporation Announces Third Quarter Results
NATICK, Mass.--(BUSINESS WIRE)--Nov. 1, 2007--Cognex Corporation
(NASDAQ: CGNX) today announced its financial results for the third
quarter ended September 30, 2007. Revenue, net income and earnings per
share as reported under GAAP for the quarter and nine months ended
September 30, 2007 are compared to the third quarter of 2006, the
second quarter of 2007, and the first nine months of 2006 in Table 1
below (for non-GAAP financial measures, see Exhibit 2).
Table 1
Earnings per
Revenue Net Income Diluted Share
------------- ------------ --------------
Quarterly Comparisons
- -----------------------------
Current quarter: Q3-07 $54,745,000 $7,343,000 $0.17
Prior year's quarter: Q3-06 $58,005,000 $10,116,000 $0.22
Change from Q3-06 to Q3-07 (6%) (27%) (24%)
Prior quarter: Q2-07 $54,742,000 $3,827,000 $0.09
Change from Q2-07 to Q3-07 0% 92% 95%
Year to Date Comparisons
- -----------------------------
Nine months ended September
30, 2007 $160,416,000 $15,805,000 $0.36
Nine months ended October 1,
2006 $180,119,000 $30,350,000 $0.64
Change from first nine months
of 2006 to first nine months
of 2007 (11%) (48%) (45%)
"I am pleased to report that earnings for the third quarter of
2007 are much better than we expected when we gave guidance to
investors in August, and that we nearly doubled the earnings reported
for the prior quarter on essentially the same revenue level," said Dr.
Robert J. Shillman, Cognex's Chairman and Chief Executive Officer.
"These positive results were due to several items in the quarter,
including a higher gross margin due to product mix, lower than planned
sales and marketing expenses and professional fees, a discrete tax
benefit, and a foreign exchange gain."
Dr. Shillman continued, "In addition to the higher than expected
earnings we reported for the third quarter, I am also pleased to
report that some of the sales and marketing initiatives we put into
place earlier in the year are starting to gain traction. This is
likely to lead to higher revenue in the fourth quarter, both on a
sequential basis and year-on-year."
Details of the Quarter
Statement of Operations Highlights - Third Quarter of 2007
-- Revenue for the third quarter of 2007 decreased 6% from the
third quarter of 2006 due to lower sales to the Semiconductor
and Electronics and Surface Inspection markets, which more
than offset an increase in sales to the Factory Automation
market, primarily in Europe. On a sequential basis, revenue
was flat as higher revenue from the Semiconductor and
Electronics market and, to a lesser extent, the Factory
Automation market, offset lower surface inspection revenue.
The increase in Semiconductor and Electronics revenue is
primarily due to an adjustment, which was reported by Cognex
on August 15, 2007, that reduced second quarter revenue by
$1,060,000 to correct for an overstatement in prior periods.
-- Gross margin was 73% in the third quarter of 2007, 73% in the
third quarter of 2006 and 67% in the second quarter of 2007.
Gross margin was flat year-on-year in spite of the lower sales
volume due to product mix. The increase in gross margin on a
sequential basis is also due to product mix as well as a
pre-tax charge of $2,126,000 for excess inventory in the
second quarter that did not repeat in the third quarter.
-- Research, Development & Engineering (R, D & E) spending in the
third quarter of 2007 increased 9% from both the third quarter
of 2006 and the prior quarter. The increase in R, D & E
spending year-on-year is due to additional headcount and
higher outside services, contract labor and patent-related
costs, all of which are related to new product development.
The sequential increase in R, D & E spending is due to higher
outside services and patent-related costs in the third
quarter, and the timing of the bonus accrual.
-- Selling, General & Administrative (S, G & A) spending in the
third quarter of 2007 increased 4% from the third quarter of
2006 and decreased 1% on a sequential basis. The increase in
S, G & A spending year-on-year is due to higher costs related
to additional sales headcount, and the impact of foreign
exchange rates on the company's international operations. S, G
& A spending decreased on a sequential basis due to lower
marketing costs, including seminars and tradeshows, which were
partially offset by higher professional fees and the timing of
the bonus accrual.
-- Cognex reported a foreign currency gain of $353,000 in the
third quarter of 2007, a loss of $282,000 in the third quarter
of 2006 and a loss of $323,000 in the second quarter of 2007.
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 $1,881,000 in the third
quarter of 2007, $1,518,000 in the third quarter of 2006 and
$1,938,000 in the prior quarter. Investment and other income
increased year-on-year due to higher rental income and higher
yields on invested balances, which were somewhat offset by a
lower average invested balance as Cognex used cash to
repurchase its common stock. The sequential decrease in
investment and other income is due to a higher percentage of
the invested balances being held in short-term accounts.
-- The effective tax rate was 21% in the third quarter of 2007,
18% in the third quarter of 2006 and 34% in the second quarter
of 2007. Excluding the one-time discrete items described
below, the tax rate would have been 26% in the second and
third quarters of 2007, and 23% in the third quarter of 2006.
The effective tax rate excluding discrete tax items increased
year-on-year due to more of the company's profits being earned
in higher tax jurisdictions than in the third quarter of 2006.
The third quarter of 2007 includes a net tax benefit of $421,000
resulting primarily from the difference between taxes paid upon filing
the actual tax returns and the estimated expense recorded in 2006. The
second quarter of 2007 includes an unfavorable adjustment of $438,000
resulting from the filing of the actual amended tax returns arising
out of the Japanese tax audit settlement that occurred in the third
quarter of 2006. The third quarter of 2006 includes a net tax benefit
of $567,000 resulting from the unfavorable settlement of the Japanese
tax audit and the favorable impact of both the expiration of the
statute of limitations for a particular tax year and the adjustment of
estimates made based upon the filing of the actual tax returns for
2005.
Balance Sheet Highlights - September 30, 2007
-- Cognex's financial position at September 30, 2007 was very
strong, with over $265,000,000, or $6.13 per outstanding
share, in cash and investments and no debt. In the first nine
months of 2007, Cognex generated positive cash flow from
operations of approximately $35,000,000, paid out over
$11,000,000 in dividends to shareholders, and spent over
$32,600,000 to repurchase nearly 1,430,000 shares of its
common stock on the open market.
-- Days sales outstanding (DSO) for the third quarter of 2007 was
64 days, and remains within the company's targeted range.
-- Inventories at September 30, 2007, decreased by $535,000, or
2%, from the end of 2006, and inventory turns in the third
quarter were equivalent to 1.8 times per year. The impact of
foreign exchange rates added approximately $1,400,000 to the
inventory balance in the first nine months of 2007, of which
approximately $1,000,000 was in the third quarter.
Financial Outlook
-- For the fourth quarter of 2007, Cognex expects revenue to be
between $59 million and $62 million. Gross margin, including
estimated stock option expense of $300,000, is expected to be
in the low-to-mid-70% range. Operating expenses (R, D & E and
S, G & A), including estimated stock option expense of
$2,400,000, are expected to increase by between 5% and 10% on
a sequential basis. The effective tax rate is expected to be
26%. As a result of the above, earnings for the fourth quarter
of 2007 are expected to be between $0.17 and $0.23 per diluted
share.
Non-GAAP Financial Measures
Exhibit 2 of this press release includes a reconciliation of
certain financial measures from GAAP to non-GAAP. Cognex believes that
these non-GAAP financial measures are useful to investors because they
allow investors to more accurately assess and compare the company's
results over multiple periods and to evaluate the effectiveness of the
methodology used by management to review its operating results. 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). Cognex 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 its continuing operational
performance and in connection with its budgeting process and the
allocation of resources, 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. Cognex also excludes certain items if
they are one-time discrete events, such as those affecting cost of
revenue and the tax provision. Cognex does not intend for these
non-GAAP financial measures 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
third quarter of 2007, as well as its financial outlook, today at 4:30
p.m. eastern time. The telephone number for the live call is
866-244-4517 (or 703-639-1169 if outside the United States). A replay
will begin at 7:30 p.m. eastern time today and will run continuously
until 11:59 p.m. eastern time on Sunday, November 4, 2007. The
telephone number for the replay is 888-266-2081 (or 703-925-2533 if
outside the United States) and the access code is 1147233.
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 350,000 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 Statements
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," "should," "shall" and similar
words. These forward-looking statements, which include statements
regarding business trends, the company's sales and marketing
initiatives, revenue growth 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; (8) the failure to effectively manage product transitions or
accurately forecast customer demand; (9) the inability to attract and
retain skilled employees; and (10) 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, 2006. 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)
Dollars in thousands, except per share amounts
Three Months Ended Nine Months Ended
September July October September October
30, 1, 1, 30, 1,
2007 2007 2006 2007 2006
--------- -------- -------- --------- ---------
Revenue $54,745 $54,742 $58,005 $160,416 $180,119
Cost of revenue (1) 14,618 17,981 15,447 47,020 48,750
--------- -------- -------- --------- ---------
Gross margin 40,127 36,761 42,558 113,396 131,369
Percentage of revenue 73% 67% 73% 71% 73%
Research, development,
and engineering
expenses (1) 8,704 8,019 7,997 24,654 24,496
Percentage of revenue 16% 15% 14% 15% 14%
Selling, general, and
administrative
expenses (1) 24,303 24,594 23,414 72,870 72,470
Percentage of revenue 44% 45% 40% 45% 40%
--------- -------- -------- --------- ---------
Operating income 7,120 4,148 11,147 15,872 34,403
Percentage of revenue 13% 8% 19% 10% 19%
Foreign currency gain
(loss) 353 (323) (282) (88) (707)
Investment and other
income 1,881 1,938 1,518 5,597 4,856
--------- -------- -------- --------- ---------
Income before taxes 9,354 5,763 12,383 21,381 38,552
Income tax provision 2,011 1,936 2,267 5,576 8,202
--------- -------- -------- --------- ---------
Net income $ 7,343 $ 3,827 $10,116 $ 15,805 $ 30,350
Percentage of revenue 13% 7% 17% 10% 17%
========= ======== ======== ========= =========
Net income per diluted
common and common
equivalent share (2) $ 0.17 $ 0.09 $ 0.22 $ 0.36 $ 0.64
--------- -------- -------- --------- ---------
Diluted weighted-
average common and
common equivalent
shares outstanding 43,506 44,281 45,682 44,257 47,086
--------- -------- -------- --------- ---------
Cash dividends per
common share $ 0.085 $ 0.085 $ 0.085 $ 0.255 $ 0.245
========= ======== ======== ========= =========
(1) Amounts include
stock option expense,
as follows:
Cost of revenue $ 278 $ 297 $ 413 $ 867 $ 1,194
Research,
development, and
engineering 723 723 941 2,268 2,671
Selling, general, and
administrative 1,723 1,509 2,121 5,110 6,071
--------- -------- -------- --------- ---------
Total stock option
expense $ 2,724 $ 2,529 $ 3,475 $ 8,245 $ 9,936
========= ======== ======== ========= =========
(2) Net income per
diluted common and
common equivalent
share excluding stock
option expense. $ 0.21 $ 0.13 $ 0.27 $ 0.48 $ 0.79
========= ======== ======== ========= =========
COGNEX CORPORATION
Reconciliation of Selected Items from GAAP to Non-GAAP
(Unaudited)
Dollars in thousands, except per share amounts
Three Months Ended Nine Months Ended
September July October September October
30, 1, 1, 30, 1,
2007 2007 2006 2007 2006
--------- -------- -------- --------- ---------
Revenue (GAAP) $54,745 $54,742 $58,005 $160,416 $180,119
========= ======== ======== ========= =========
Gross margin (GAAP) $40,127 $36,761 $42,558 $113,396 $131,369
Stock option expense 278 297 413 867 1,194
Charge for excess
inventory (1) - 2,126 - 2,126 -
--------- -------- -------- --------- ---------
Gross margin (Non-
GAAP) $40,405 $39,184 $42,971 $116,389 $132,563
========= ======== ======== ========= =========
Percentage of
revenue 74% 72% 74% 73% 74%
R, D & E expenses
(GAAP) $ 8,704 $ 8,019 $ 7,997 $ 24,654 $ 24,496
Stock option expense (723) (723) (941) (2,268) (2,671)
--------- -------- -------- --------- ---------
R, D & E expenses
(Non-GAAP) $ 7,981 $ 7,296 $ 7,056 $ 22,386 $ 21,825
========= ======== ======== ========= =========
S, G & A expenses
(GAAP) $24,303 $24,594 $23,414 $ 72,870 $ 72,470
Stock option expense (1,723) (1,509) (2,121) (5,110) (6,071)
--------- -------- -------- --------- ---------
S, G & A expenses
(Non-GAAP) $22,580 $23,085 $21,293 $ 67,760 $ 66,399
========= ======== ======== ========= =========
Operating income (GAAP) $ 7,120 $ 4,148 $11,147 $ 15,872 $ 34,403
Stock option expense 2,724 2,529 3,475 8,245 9,936
--------- -------- -------- --------- ---------
Operating income (Non-
GAAP) $ 9,844 $ 6,677 $14,622 $ 24,117 $ 44,339
========= ======== ======== ========= =========
Percentage of
revenue 18% 12% 25% 15% 25%
Net income (GAAP) $ 7,343 $ 3,827 $10,116 $ 15,805 $ 30,350
Stock option expense,
net of tax 1,828 1,701 2,253 5,544 6,445
--------- -------- -------- --------- ---------
Net income excluding
stock option
expense (Non-GAAP) $ 9,171 $ 5,528 $12,369 $ 21,349 $ 36,795
Discrete tax events (421) 438 (567) 17 (1,436)
--------- -------- -------- --------- ---------
Net income excluding
stock option expense
and discrete tax
events (Non-GAAP) $ 8,750 $ 5,966 $11,802 $ 21,366 $ 35,359
========= ======== ======== ========= =========
Percentage of
revenue 16% 11% 20% 13% 20%
Net income per diluted
share (GAAP) $ 0.17 $ 0.09 $ 0.22 $ 0.36 $ 0.64
Stock option expense,
net of tax 0.04 0.04 0.05 0.12 0.15
--------- -------- -------- --------- ---------
Net income per diluted
share excluding stock
option expense (Non-
GAAP) $ 0.21 $ 0.13 $ 0.27 $ 0.48 $ 0.79
Discrete tax events (0.01) 0.01 (0.01) 0.00 (0.03)
--------- -------- -------- --------- ---------
Net income per diluted
share excluding stock
option expense and
discrete tax events
(Non-GAAP) $ 0.20 $ 0.14 $ 0.26 $ 0.48 $ 0.76
========= ======== ======== ========= =========
(1)Other than the second quarter of 2007, the charge for excess
inventory was not material to the Company's reported results.
COGNEX CORPORATION
Balance Sheets
(Unaudited)
In thousands
September 30, December 31,
2007 2006
------------- -------------
Assets
Cash and investments $ 265,367 $ 266,220
Accounts receivable 39,687 40,055
Inventories 30,048 30,583
Property, plant, and equipment 26,327 26,028
Goodwill and intangible assets 125,644 128,306
Other assets 51,858 37,459
------------- -------------
Total assets $ 538,931 $ 528,651
============= =============
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities $ 39,099 $ 37,527
Income taxes (1) 22,943 9,548
Deferred revenue and customer deposits 15,184 7,726
Shareholders' equity (1) 461,705 473,850
------------- -------------
Total liabilities and shareholders' equity $ 538,931 $ 528,651
============= =============
(1) Upon the adoption of FIN 48 on January 1, 2007, Cognex recognized
a $4,021,000 increase in income tax liabilities and a corresponding
reduction in shareholders' equity.
COGNEX CORPORATION
Additional Information Schedule
(Unaudited)
Dollars in thousands
Three Months Ended Nine Months Ended
September July October September October
30, 1, 1, 30, 1,
2007 2007 2006 2007 2006
--------- -------- -------- --------- ---------
Revenue $54,745 $54,742 $58,005 $160,416 $180,119
========= ======== ======== ========= =========
Revenue by division:
Modular Vision
Systems Division 91% 88% 88% 89% 88%
Surface Inspection
Systems Division 9% 12% 12% 11% 12%
--------- -------- -------- --------- ---------
Total 100% 100% 100% 100% 100%
========= ======== ======== ========= =========
Revenue by geography:
Americas 34% 36% 37% 35% 35%
Europe 32% 34% 26% 32% 28%
Japan 25% 21% 28% 24% 28%
Asia 9% 9% 9% 9% 9%
--------- -------- -------- --------- ---------
Total 100% 100% 100% 100% 100%
========= ======== ======== ========= =========
Revenue by market:
Discrete factory
automation 64% 63% 56% 62% 56%
Semiconductor and
electronics capital
equipment 27% 25% 32% 27% 32%
Surface inspection 9% 12% 12% 11% 12%
--------- -------- -------- --------- ---------
Total 100% 100% 100% 100% 100%
========= ======== ======== ========= =========
Revenue by product:
Vision sensors 58% 59% 49% 57% 48%
PC-based vision
systems 27% 22% 34% 26% 35%
Surface inspection
vision systems 5% 8% 7% 6% 8%
Service 10% 11% 10% 11% 9%
--------- -------- -------- --------- ---------
Total 100% 100% 100% 100% 100%
========= ======== ======== ========= =========
CONTACT: Cognex Corporation
Susan Conway, 508-650-3353
Director of Investor Relations
susan.conway@cognex.com