Cognex (CGNX) 30 Oct 172017 Q3 Earnings call transcript

Company Profile

Participants

John J. Curran	Cognex Corp.
Dr. Robert J. Shillman	Cognex Corp.
Robert J. Willett	Cognex Corp.
Joe Ritchie	Goldman Sachs & Co. LLC
Joseph Giordano	Cowen & Co. LLC
Richard Eastman	Robert W. Baird & Co., Inc.
James Ricchiuti	Needham & Company, LLC
Jonathan DeCourcey	Canaccord Genuity
Josh Pokrzywinski	Wolfe Research LLC
Paul Coster	JPMorgan Securities LLC
Jairam Nathan	Daiwa Capital Markets America, Inc.
Jagadish K. Iyer	Summit Redstone Partners LLC
Bobby Eubank	Chevy Chase Trust

Call transcript

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Operator

Greetings and welcome to the Cognex Corporation Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. An question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Curran, Cognex's CFO.

John J. Curran

evening, good and you everyone. Thank Cognex's I'm welcome I'd to and to John our Curran, you call. third like conference CFO, quarter earnings me are With call today's Dr. on Cognex's Bob and Rob Chairman, Shillman, Willett, Cognex's CEO. and President are point out at earnings Form Cognex I'd like available that the to on release our and XX-Q www.cognex.com. website financial information Both contain results. highly-detailed about our

understand business call, the it a it useful investors to use help is we will measure believe or financial During non-GAAP may our investors better or trends. we believe if results if we

based see release. can from certain in from statements may anticipated. You and any reconciliation often a items we information X change made that be or those results today. GAAP make are believe differ of Exhibit in may projected Things that during of to we actual the we Any non-GAAP this or materially earnings release upon the true call earnings to as forward-looking of

to for our the including company's filings list You factors. risk detailed should these a refer SEC XX-K Form most-recent of

Now, Dr. Bob. call over I'd to the to like turn

Dr. Robert J. Shillman

John, thank joining today. you and and hello, us for Thanks, everyone,

Natick today's far in quarter reporting Cognex's QX And net new and spectacular revenue, everyone results and share else for also profitable, history. shown Right XX-year XXXX. we previous We As of release, in set we of records were is San Diego on per our earnings an XX%, now, at income exceeded margin operating headquarters. ridiculously quarterly a news call I'm new record. any that reported for for the

of me the that Rob available have microphone Cognex's going that answer details, to further the yours. Willet. at the microphone my at will for any to CEO, I'm may questions for I Rob, So call you be time. is over the end hand partner, to

Robert J. Willett

XX% Cognex am third from I report Growth quarter. Thank focus. where revenue of industries: products came applied largest best growth driven range and tasks pleased markets consumer a everyone. are broadening difficult three to Dr. Bob. electronics, Good the logistics. our over prior of we being to automotive industrial quarter evening, ever, our very in by strength you, widespread increasingly year's the in

result the investments. growth, ever Cognex history. the level QX, expanded reported margin increased is in This even in strong of As with highest our a by operating to revenue XX-year XX%

While cumulative success business team leverage the that it's as exceptional, indicative substantial of leading-edge we are that of hard in of our today of many enjoy Underpinning work grow. special and have Cognoids. years the the we engineering our we model

at culture served Our represent investments We in and have engineering, to invest in provided They entry and systems any us to for a and continue improvements time than large well. barrier history. the Cognoids equipment come. support since and any plan new our January, processes We operational for more for to Cognoids our necessary competitors. in sales years recruited, force, XXX over to to prospective growth trained,

expect President that will surpass Sheila Services Cognex's group. employees Senior to of We to we're the head Corporate reason to DiPalma promotion one pleased X,XXX so worldwide. That's our Vice announce Employee workforce year-end

Sheila Resources, understands appointed of continue Cog to and Communications. years our will in experience Sheila and than what culture call will With of at Cognex, role companies most success Sheila Cog and Corporate more company. Career, that but played as has the In Health XX Cognex, important Wealth, Human has play the refer a the variously Board addition, Cog as we Officer. to at lead

to now the turn quarter. third of Let's details for John

John J. Curran

Thank you, Rob.

to primarily in sequentially. which electronics our all both Growth company's Revenue quarter first continuing from substantially industry, the consumer $XXX from operations. from a the and was $XXX million. also which the third million, exceed year-on-year was all-time came record. highlights represents increased history new Here are It the quarter

representing market, and where was excluding This automation electronics QX both system. Operating We Most increase Gross sequential year-on-year product a increase of initiatives result growth revenue for our related revenue basis. were broad points down higher in bonuses target well an the XX%, of expenses also above grew $XX margin our XX% a and material were our a implementation customer mix around percentage and saw of strong consumer growth. consumer industry. as sequentially. million, the long-term XX%. X resources growth due is this new on new electronics sales development, was factory the from of revenue to in also to of ERP the primarily Commissions

QX excellent. XX% savings Net by tax fall related year. margin revenue exercises option operating was margin on QX. in stock As expanded XX% noted, The outstanding our to a significant through to last previously in at helped of was from growth XX%

Excluding Revenue business for in estimate. consensus all in QX were total QX. per of is market, which Thomson our discrete $X.XX from Reuters items, share earnings the XX% with factory automation, line represented our first call tax largest

from at year-on-year geographic a revenue a look take automation Let's factory perspective.

performance placed Cognex logistics the Revenue fastest growth Asia excess in lines our year-on-year assembly an was Asia largest result our and contribution from dollars. helped absolute in QX, by to more than from European sales in automation in grew in customers broader and of Americas, food industry XX% as of The in and the China. automotive, more region. by orders of China XX% and electronics led large orders, beverage. consumer Europe higher revenue on a revenue and logistics factory electronics those rest Outside in the used automotive. grew And market. the in strong doubled to Greater consumer region Europe than the of that products was for by were growing delivered

the back to Now, Rob. I'll hand microphone

Robert J. Willett

electronics. spectacular helped was Cognex by summary, orders reported consumer in a In from volume QX John. that quarter Thanks,

million. QX Our is between expected is outlook for QX $XXX for nicely. up shaping $XXX be Revenue million and to

average. effective decline single-digits with Gross expenses a higher While expected is to XXXX low continue in from add discrete year-to-date QX is will excel. Operating tax to they rate and year-on-year. XX%, represents team expected QX, they tax in to XX% XX% excluding we our growth be represents to with still as mid-to-high exceeding broadly in our that from resources need but Cognoids the expected The the decline range, provide be items. than are growing be it margin line by to QX, substantially

for Operator, the Now, up ready we call your to are let's questions. open take questions.

Operator

At we session. this time, will a conducting question-and-answer be

Our Ritchie, from question. Goldman your Joe first Please question is proceed with Sachs.

Joe Ritchie

Good afternoon, everybody.

Robert J. Willett

Hi, Joe.

Joe Ritchie

a really electronics those all different year-over-year more maybe electronics, Rob, bit. basis? Can a details a on end was the on any just on either markets were in quarter touching this little give of how quarter you us basis. much on Clearly, logistics, auto, strong year-over-year up

Robert J. Willett

some Factory in increasing automation a demonstrated that. phenomenal can give growth in you color general I QX, on Sure. XX% year-on-year.

and continued many prior was a strengths. growth Outside which XD electronics, XX% We're are and in you years and automotive electronics consumer noted, demonstrated, investments QX all grew in And more revenue in like delivered of of areas seeing strength than industries but growing growth. year-on-year substantial growth Our consumer electronics, delivering by XX% logistics, is more than remarkable as logistics. led from came logistics, this year. range consumer

to the geographic of specifically grew the than major automotive automotive fastest at rate our at looking long-term. automotive expect increased and quicker do Americas Europe, it In we'd China, regions. to the over So,

Joe Ritchie

about cycle, business I expectation I I'm pretty expectations. guess, your helpful one I But That's the is your that growth color. framework if short know you. longer thinking guess, where the in quarter hence, in Thank of term revenue been bottom XX% in how about were like framework be is particularly light XXXX? growth, things for line top should strong kind to thinking have or year XX% line how in that we next and out of

Robert J. Willett

has year. about think at long-term, five-year we've growth we're to some in in Yeah, also the XX% in with and products the of on long-term this the in engineering, making But doing we're like Joe. technology than the that plans successful long-term that the for grow three again. we're we're that But growth confident plan year that like variously you've processes which I us year. Obviously, acquisitions automation against we're It's over mind, mean, Rob to investments we last Cognex new implementing. over think that hence, factory business that the better make much about at I continue we're and growth doing the investing to the obviously, been plan terms and execute periods – seen a plans and making. we is a this investments

to to year, really early mean, say, we It be growth that it's prospects. we're to the to budgeting confident too would next really growth terms into now. fair quarter really of at to next quarters be our normal any then and right about think, we expect this growth year, QX early I say specific about as the QX be and our And getting it's continue optimistic In I process would to lowest down QX. be nail this or to tend point. too our potential grow to we're but numbers understand big

Joe Ritchie

and Thanks, Rob Okay. nice Great. quarter.

Robert J. Willett

Thank you.

Operator

question is Joseph next & your Please Company. of proceed Our from question. Cowen with Giordano

Joseph Giordano

Hey, guys.

Robert J. Willett

Hi, Joe.

Joseph Giordano

fourth you've that orders that's the The are only in quick – revenue cleanup. Just large in release, from is unusually that revenue mentioned quarter? like unbilled the happening that the

John J. Curran

a revenue as consumer is in well electronics Hi, This Joe. logistics. as large mix John. Yes, of that's from in orders

bit a of a in there. mix there's So,

kind QX. to clear We – most expect of the in up for that part,

Joseph Giordano

Okay.

in some particular, the or a be the how But of customers with of this proven just how capacity is now, you getting of questions new support to I to seeing want space, explosive of technology? grow a have build – and detail with in out maybe on the you of one on – there much there nature you've bigger to without more a any like kind profile the on ability to think a what the going consumer recurring and growth you're right frame customers. electronics, way seeing is to are on much anyone that in have, things customer you're OLED existing growth industry structural people more some I with build-out is into in in like is the with the relative guess,

Robert J. Willett

Hi, It's Rob. Joe.

customer you're that asking asking Let about me question what that clarify about? your revenue, is electronics' ongoing you're

Joseph Giordano

a is is how grows technology trying of to infrastructure with a Yeah. type support development, how to I'm base existing just a new OLED separate thing? kind of that much like much kind and new an customers this of of

Robert J. Willett

customers, last a into it's coming very particularly demonstrated final new would and we've but electronics of years, around technologies electronics and and really been been say, market. in also that's around consumer and around consistent number the that over I the growth assembly four substantial test Yeah, are relatively

wages bodies eyes that and and the first in are it's products think manufacturing of on as that as get who a continuing evolution, and So, that involved more towards drive I to that replace are thousands of literally go they're involved as harder fast at effective a brains who involved just less up products means whose are in productivity. to rate process. able part, technology of to hundreds sophisticated, a people and that need And be assemble

way great that's going underlying isn't So, has I long think and away a go. a to that just trend

So, I that. think seeing you're

I is, think the areas sensors; like sensors, is difficult we've electronics market continue. facial things. new, seeing to exciting to recognitions Generally referred around new range another as OLEDs, implement new that every year, technology pretty coming or technology whether XD you technologies a into new and cameras, of it's factor new and there displays, seen you're very other and

to partner would So, have a you maturation. is in for where in getting the of run say vision of that the I those on OLED, early world to terms factors best machine technology, industry I the think production relatively to am way and of point the Cognex I it's underlying happen. into And – that's them difficulty make kind long

other real just seeing over in technology going of capacity market examples find and we're years kind into might technology estate offices is has just and the be but potential to the the its itself moment automotive, its kinds maxed scale all of out up think huge way I I come. smartphone to the think other multiple at where markets;

So, to companies space. and we offer value think we have sustainable book in advantage that competitive really

the and in challenges that to kind – kind business sort in of that perhaps that's were some kick lines picture overall to capital are looking of deployed. win and spaces say would of degree our in of forecast try the you I the of I what what our investment some major So, cycles this

cycles, annual think very, think but positive very quarterly I kind may or of short-term I even long-term, Cognex. the for revenue that So, it's over impact

Joseph Giordano

business rate John. a rate do for a what That's at maybe you run like just to get obviously, of start base more And the there leverage percent longer but your R&D, investments a helpful. more if When kind here your one I could basis? but margin, I of sustainable XX% SG&A move to a notwithstanding you scale have and of like sneak you really on feel one as a huge like your look can on I quarter think rate kind business the to quick you operating benefit getting now to right real making the XX% to and seeing closer from term XX-ish you're we

John J. Curran

I years different run I of we in expect we've to think term. so until something a to the – – number fundamentally the matures near we're wouldn't see business and don't I that of got see growth,

XX% So, the for range we're future. calling the foreseeable for something in

Joseph Giordano

John. Thanks, enough. Fair

Robert J. Willett

(XX:XX) sure. –

Operator

proceed question. next Company. question & Our Richard Eastman, from with your Please Robert is W. Baird

Richard Eastman

Yes. Good afternoon.

Robert J. Willett

Hey, Rick.

Richard Eastman

us you of Could driving you possibly that kind size A in of a Rob, that bit called third give terms here or just the little John. quick XD quarter. in growth Robert, out the question, out? there sure business the is was high and uptake just rate some scale then significant two of end where market I'm quick? of the is but also maybe sense growth call particularly or kind a

Robert J. Willett

Hi, Yeah. Rick.

And XD growth overall our user of very our and think and overall mirror excess a the rate biggest from but all XX% We electronics market of variety is in sales of largest, is automotive rate about years a market and is future of ago. well markets our business coverage end at applications the our market, second force we're for we So, growth is what being perhaps pretty XX%, actually might shooting overall. gone foreseeable achievable. our business serve increasing approximate nothing and pretty breakdown really few well consumer kinds with in areas that overall the X%

Richard Eastman

automotive, you're how growth manufacturers or Chinese these biggest any And obviously, are But do can share about I being you China just where for the there. are indigenous – driver talk when applications, is surprise you that Maybe to a customer-driven? gaining throw applications-driven growth there a you is could you on be account significant for it of – some that. it seems after or Any pretty quarter pleasant kind quarter? color little auto new

Robert J. Willett

Yeah, Sure. yeah.

suppliers, of much very So, than asking a X electronic which It's know, model less companies about, a Cognex our electronic also going changes, more there, in very into most all world. is of areas users. electric a well-known more China devices. there's and SUVs, like of tier But of lot automotive more in electric and consumer investment as changing vehicle And automotive reduce is pressure engines. lot and right? in business, and kind and with of become – half as the and there's the hybrid well-penetrated been lot less you're that systems – So, cars pollution, like components are very so at sedans, end to all large more particularly in China not rapidly we increasingly

investment in that So, growth. certainly, we levels of domestic support particularly their of all see see big China and very we to

Richard Eastman

I see.

products logistics component? we perform did just business the question. excluding then, the there see XX% Did growth still ID or...? How And Okay. last the

Robert J. Willett

In excess in long-term of of our well in excess the XX% actually quarter, of or our in in excess. excess target. – Yes,

Richard Eastman

Okay.

Okay, great. Thank you.

Operator

Please Jim Our & Needham next question question. from proceed with is Ricchiuti, your Company.

James Ricchiuti

Thanks. afternoon. Good

Robert J. Willett

Hi, Jim.

James Ricchiuti

I'm in – if might John based can to your customer year-to-date wondering XXXX. you Wondering one or than wondering Rob, more numbers, say on XX% have whether if be I'm tracking you

Robert J. Willett

our it is But material mean enough. one? we customer about so, we would would certainly not – talk So, in question another Jim, general, don't but have clearly your

James Ricchiuti

Right.

Robert J. Willett

think on say limb there go I And I no. and a can

James Ricchiuti

Fair enough. Okay.

I into that a if how I'm larger visibility of into projects logistics you to – you do and too it's Now, you that, I have wondering any know consumer for I'm you kind specific guidance early give have XXXX? electronics something XXXX. in now? wondering, Is but much understand pipeline and for to

Robert J. Willett

Right.

companies with all the work electronics of pretty we much the kind So, consumer large world. in

so different into substantial and in some And changing, ready pretty the kind about and mean So, to that a you one one-trick are last be prime view both we not. two those also question, But back want have electronics time does what's months wouldn't other as be pretty, down nothing that But right, can have electronics implementation. coming the that We're that that at of to tend X are there out, to take get out. we we're XX I change, of what kind do good way all. we kind to we are to logistics, about deployments my then, very And customers like answer your slightly in and pony. pike I say it years would year. referring that for is of discussing technologies

we what's be year which for fitting and So is start that in we into next budgeting deck our go with process to that. nicely on visibility zeroing of of get as to on kind

the kind slower that's are other automotive. of than in a lot we we perhaps is So, shorter get visibility which moving see industries like that

James Ricchiuti

Korea last Got it appears that question, a capacity is in and to jump or good appears to OLED year big how driver market half? look The sensing, based China. an good the next it. plans and that has opportunity be Wondering over have And a for to certainly and the queue. back you out potentially on as likes year the XD is in you

Robert J. Willett

XD in in about or OLED sensing XD question your sensing Is general?

James Ricchiuti

and both then about and XD how specifically Well, the general? on sensing market OLED in

Robert J. Willett

Yes.

XD OLED and and which So, There Vision assembling in Vision it's currently. XD up being many Vision that generally, a scale problem. But inspecting material I that aligning produce to a techniques manufacturing fragile material. moving and see OEMs are that general, other of problem material helping and applied don't very a to about not lot is XD

that our the excess of our XX% business. we forward It's going for achieve overall, we that it's previously on annual the I think few In well, growing growth well said, terms represents next XD overall years. of an X% rate very in with like, about of can basis market

James Ricchiuti

you. Okay. Thank

Operator

question proceed Canaccord with Bobby your question. next Our Genuity. Please Burleson, from is

Jonathan DeCourcey

This on on haven't upon and how have been received? the guys. Bobby. the asked. just Hi, on touch is you kind Mobile for could hoping product my was I'm traction there I Congratulations that Jon questions been Terminal seeing of quarter. what Most DeCourcey of product. just you has

Robert J. Willett

Yeah. Thanks the question. Thanks. for

XD an at an and significant contributions market. markets, of in yeah, and lot and stage, generating will market. big lot mobile and what of technology we change terms customer of like material We're offer in looking new kind funnel start large think or markets we is the move it terminals we're where early advantage on but market is revenue And other that turn a to logistics next be revenue where a we interest this like have So, is major showing of the to learning moment. potential those And exciting I it's that and through really not of year. as opportunities it a into about more hope the a

We adoptors companies innovative our that to using would some and have some technology very substantial who early our like technology. implement are

and with So, to at releasing results, as time. overall moment. of not through it's progress going market, we But here material making those the the the terms we are in we see in the have we're opportunities be the pleased to and contributions that products move the

Jonathan DeCourcey

Okay. Thank you.

Operator

Our from question. proceed Wolfe question your Josh next Research. is with Pokrzywinski, Please

Josh Pokrzywinski

guys. Halloween. Hi. Good evening, Happy

Robert J. Willett

Josh. Hi,

Josh Pokrzywinski

OpExes see OpEx up support to to to, revenue that that this I I really just expenses step as sign pipeline in something hasn't trying we the that how of is operating what for XXXX? unbilled here. over trying as there down specific smaller invest you a of down an ramping up much just we Should not specific first to really gear Is sequential much. robust you're sequential asking on you as from normally that for questions usual with going or guys forward faded of big you're I'm have quarter. in read and the we should into as than that so carry eye would out guidance some step revenue? those Just a guess, take maybe for. couple more a Just guess the calibrate fourth expense

Robert J. Willett

invite comment Yeah. It's also and to I'll John Rob. comment I'll here.

long-term I the we look Cognex. think, at at

we we And we're implementing we're around to map going need process need and So, going where faster. year. s where we're of coverage see better lots IT need – opportunities SAP improvements, where sales going particularly implemented technology to next and and road our to would

don't the are of of are growth be to that issues, revenue other for these what you're challenges. Sure, maxing tend those great to shy plans is there I some new seeing around our we overall, an line there So, their sales our that's get things expense fourth guys would the a away things. message short-term that say, based some business our to and where in you broadly are with that certainly I like that. is bonuses expense – of this option our from and on earnings is in tier understand and happen stock that's some out growth up investing and year And highest impressive want rather need any expense going produced some that year-on-year than and expenses they're But into of eye broadly driving that John? we products pipeline have commission, in and of quarter.

John J. Curran

it say better couldn't than Rob. that, I

Robert J. Willett

Okay.

John J. Curran

really Yeah. perfect. leaning just were was long-term We That into opportunities. our

Josh Pokrzywinski

what kind need fourth the to to of Anything closer for That's with stay that wraps technology road is us would of get until thought say. share the that we guys you. or quarter does I on map that imperative under Got kind you can XXXX? you

Robert J. Willett

discuss don't No. we our road map. Thanks. technology Yeah,

Josh Pokrzywinski

a big set? Okay. to towards the any adoption gravitate space, And side. the ecommerce you in is has naming names, logistics else that but Have shifting just logistics broadening push, anybody the over I of to seen terms then without out in product know there? more been customer gears starting

Robert J. Willett

the within grow this and we it's represents excess very I Certainly, with year, about mean which currently growth rate the is think and well. growing exciting business very is we've ecommerce had XX% parts ID of Vision-related those retail that long-term. in biggest other well now logistics similar our base. It the but companies growing over fulfillment our business prospects. customer Again, is is can XX% certainly, which think XX% productivity of labor, we as mostly face part broadening see exciting of for and I somewhat applications at and longer that for challenges into own of our – more we're and that, in our we term but

certainly So the into drivers beyond term also there's broaden there's markets that, which business and potential... for growth we America and like growth our have are as potential longer in date the being evolution just Europe which China major newer is (XX:XX) and to huge

Dr. Robert J. Shillman

I don't hear anything. Is any...

Robert J. Willett

can you Operator, us? Okay. hear

Operator

(XX:XX) I you, hear still can guys

Robert J. Willett

Okay.

expansion I'll we? geographic continue. is Asia, exciting. certainly particularly so Where Sorry, into is, are See,

So, say I that's logistics. what about think I'd

I'm glad focused on few years. over I we market. a the think great very it's it last

airport other interesting logistics, have course, we long-term architectures. smaller customers, lot but think are mention value smartphone-based where it's and to want in to didn't in of would And has baggage today. actually a of sales lasers customers where segments The implement with Vision so increasingly much to, offer And exciting think to want there mobile I in market growth a also I is where predominantly that forward. driven terminals handling, and technology space. can thing add served particularly small I also, that going be one be

runway. of So, you a area as is, see logistics it's can anyway tell, lot an we

Josh Pokrzywinski

Excellent.

I'll little follow-up go. it then and Just let one

a cycles where what as logistics the lines in you there as richness get continues imagine way as to aren't front, surprises guess, always the mind of I that product would product there regular can, keep maybe would upgrades, upgrade quite business? the the we about in factory have refreshes, Is mix, this of anything refreshed. as there along anything grow just should that On automation piece I see

Robert J. Willett

where I think new and Yeah. of new very being around are IT where towards operating say I around things. And and lot shorter moving other and XX moving market implemented being a a architecture so delivery models fast are times, and big don't from shorter dynamic hours. centers it's and systems distribution within built there's would Windows away challenges other and

of market I say I of would – So, am evolution very the that no, fast. pace is

Josh Pokrzywinski

Rob. Thanks, Excellent.

Operator

Coster, is JPMorgan question. Our Paul Please from next Securities. question with proceed your

Paul Coster

for Thanks up If is Is it the EMS we specifically, And with my whom assembly, provider doing be consumer around taking it discrete you helpful. the at if and in look is bit large can that automation or factory above? the dialogue OEM, around Yeah. manufacturer us segment do of contract generally is electronics it of question. the end who's final or would all it suppliers, color you give component a deployments?

Robert J. Willett

Rob Yeah. again. It's Paul. Sure,

solutions of to supply the – it. I through owners of with And back say big and OEMs, would implemented how upstream huge being up that big or chain. I that's and say, the So, some of then with coming brand technology certainly some through have do meeting that the and kind demand would the some industry influence operates over of the the OEMs that tasked flows

passive big that it's we I sold. more cycle, influence, and do really shorter real – both into we that closely can process transactional our or solve the they job, a where problems those the to Cognex is reputation weeks work imagers or a buy owners they're less the occurring brand say component real But connectors OEMs. So, suppliers differentiation product, the and with And and the are see supplying think we to of few components we of with other goes technology get like – groups. or maybe things a work then I who closely would it's with practically basis electronics on

Paul Coster

would And been it have true...

Robert J. Willett

And then...

Paul Coster

...to say that – sorry.

Robert J. Willett

where that it's is And a made to challenges then engineer very really, much I was they going with discussion reputation sorry getting the engineer and to interrupt Cognex's well. doing an are decisions and the say you. I'm face. to That's

Paul Coster

scale? components would not So, it or be make upfront bring able discussion them? to in technology to obvious the to product they this kind would be about you needed the that I an of would add, that for are with deploy without industry instance, say technology to I in OLED order process to was be to certain down mean, possible that true it there required products

Robert J. Willett

– long a products we've we say in many made relatively much think been we be design be on here or viable. economically for and in cases, Vision, early help I've the made said way without to product as naturally that a really that be that's could Cognex in as cycle either I made What make longer do

But problems. great think our I case. their OLED what going different on in beyond pretty and Machine would I can substantial teams So, knowledge that is But there's on engineers in industries, There's different some that's well say. certainly end, who some they even the in realized amazing the it's do. of really working Vision engineering are manufacturing

So, those it to it Cognex problems. it do in. still bring works they do they works later, in bring better. us they When solve When it to earlier,

So play. that's state the of of kind

Paul Coster

it. Got

product margin it this volume is caused are little and of there Okay, weighed suggesting since XX% buying you're one be actual break that there at big the decline gross The had this margins off margins. And that the quarter? discount nonetheless, year, is you other a were although they price they this a have or won't function a on the get a would least quarter customer thing. attribute down this bit, you one – customer

Robert J. Willett

Yes.

mean Paul, got would customer didn't there to one thing, XX% you I is – correct So, The (XX:XX)? misunderstood. was to other I which be on be question

Paul Coster

I Oh, I'm see. bad. sorry. Oh, My

Robert J. Willett

quarter. this or year This

if comment. I that So, in apologize no, people misled I No.

to big with customers do and but – gross gross it? margin you question margin Can so electronics? consumer – in your restate other the outside that's had So

Paul Coster

Yeah.

price on quarter product So, customer? function would volume product volume the as – you Was that customer. mix the customer saw gross mix where enjoyed? and actually a this Was the a particular have it with that, of that breaks with it lower margins the

Robert J. Willett

gross individual in specifically to we're and very very large electronics cases QX which better for lot talk customers margin lower be expect don't large that that We – out able electronics, way about like there and margin impact would you a in us revenue sophisticated – cases, cases, and we consumer to In for in in rolling they not talk got it's for very And is some do a in involved our to can where deployments want saw can it's technology dilutive. in service in we pricing pricing margin. large to quite consumer customers. of customers, other the many can it but

Paul Coster

you, Thank Right. Rob.

Operator

Daiwa from Please next is question question. with Securities. Nathan, your Our proceed Jairam

Jairam Nathan

taking for is – you of kind hasn't driving just details it been characteristic what's some or question. Is If just to – of wanted (XX:XX) that. strict unbilled new more is a it from it Is timing-related my a get customer? that Thanks before. the Hi. I explain revenue. it? could It this

John J. Curran

the timing by Yes. It's John. underlying the predominantly of It's deployment. driven

did And able our electronics we invoicing the cycle. in cycle. process in a So complete consumer logistics have deployments many earnings and to prior have longer the to cases we're

for I and in part timing just purely will as that QX. said, it's So the itself clear most

Robert J. Willett

to here. that do Rob, in substantial that it's had this add I'll we so unprecedented. And have previous years, is unbilled revenue not

Jairam Nathan

seeing the they side? rate. some that which some Thank related be just that logistic logistic couple could on weeks to by large the seeing Are There in a slowdown of you back be company indicated order side, on kind there of any was hesistancy customers. seems you. And the a of

Robert J. Willett

I'm not we're that way. certainly Rob. in I aware seeing about. It's what talking any of you're know not

Jairam Nathan

Cognex? We And talent asking – question just we retaining a of recruitment you turnover? idea specifically that. last confident regard a to of an for with are get lot at And – do vision you're technology see seeing you if how of retaining how how to Okay. lot And I ads know experts. talent wanted

Robert J. Willett

kind the prepared I remarks Well, our initial, my culture. in about talked Yeah. of, I

who group the remarkably really success We a that love really committed have and Cognex seeing. are we're Cognoids of working enjoying at strong and

fortunate we're turnover. low So, very have to

lose – low And in very everything say a of fair that give to part it's kind and view goes we permeates we culture our would reporting like to but through options, that to out that and they of people ownership options the stock do to a now technology pride do doing. Cognex they empowerment for good our we're owners. goes it's engineers. range a as Cognoids And success, and great success very few at entrepreneurial support, to the about the want we that's go the are we and single-digits mid have of business particularly turnover engineers sense And current the of and particularly also well-rewarded for that company. and we be of fact we not result, to it the very feel kind on feel want Obviously, Our stock a that retain. we good a give

great in is from I'd that go able here. talent, attract our of for reasons just hold expanded to go to great. little some think Cambridge, and to engineering So, recent too. And Vision we're quarters, I interest footprint, to to opened Cognex with the highly in technical the the from we've and talent best people a seeing point in And Deep we're that really in as location of areas is certainly one we on work just work Learning office like something qualified bit certainly an away why

So, about that retaining about it. we're good optimistic and feeling

ridiculously the be be world to to San area. don't Francisco are big any those a we Munich Of have footprint. seems or where generally, another difficult area, like course, substantial where there are it's in places places would hire right? one engineering people But

Jairam Nathan

Okay. That's I had. Thanks. all

Operator

is ROBO your Cameron, Our (XX:XX). question. Jeremy Global next with proceed from Please question

Unknown Speaker

Thanks evening. and good

Robert J. Willett

Hello, Jeremy.

Unknown Speaker

has wondering that reached Vision an hear applications could of X% I'm you of you're XD idea the if traction to most us offering Great seeing give with? what sales.

Robert J. Willett

Jeremy. Hi, Yeah.

So, it's Rob again.

of our I think in user see end applications general, caller, that a as broad we to previous mirror, I really profile. said range a

are might batteries applications. screws where attached inspections. consumer of loose that They getting cavities, into So, be they like not correctly for screws applications inserted might to mostly by problems be very products. where looking varied looking They or lithium-ion can connector robots. doing at be kinds Those can but be be components might being electronics

kind something lettering is there be a think, And food it In can circuit closed electronics these looking sometimes but again, looking can product, in kinds XD on automotive, at with areas the you beverage also is and – other can very all for So, I in the a of like then, may be are enough widespread be food do at really customers. like of valuable even applications tires, or It the solid increasingly provide what inspecting boards, automotives broad. it's of quite can we applications of our terms raised rubber (XX:XX), you for where there and correctly black matter applications instance. in Vision. in can't can be

think advantaged to is very, that have we those that's easy markets. are really applying Vision a varied, very challenging great technically products very So, sell. I we Machine to what's And sales force and increasingly all good have at and

So, a working think kind that's very of I for formula that's us. well

Unknown Speaker

I And to the on it past. wanted chip. Thanks. Cognex Vision know ask I with Machine in a about experimented

that up several I'm there's competitor drones, with if coming the applications for a chips companies that this video Now, vehicles. your to and seeing something pursue and continues core Cognex that vision to business? are wondering surveillance, around as autonomous machine if is you're

Robert J. Willett

Jeremy, we like challenges generally where really only of advantages the of see can't need do we custom that available engineering on huge sort find we market. when in-house we what

or own apply you're In applications and players We've to of really We so whether doing been that the choice I'm custom the ahead maps, the not with talk in that our going don't in certain our So, our about through market chip right. design. the technology first industry components what's generally at about not we're or moment. kind available on road to work our occasion, is technology use off-the-shelf to industry. talk of electronic past, reinvented to

Unknown Speaker

or terms market the but in level the automation of competitor, terms shift? showing growth any you landscape in are of pretty portfolio they in I And your know in some any the in particular, share general competitive Japanese competitor, the main seeing of and that change significant broader is market as Understood. well. a products have Americas in of competition

Robert J. Willett

I those KEYENCE, And, referred would matching lot in in We heavily, be increasingly look opportunities strong Cognex we we're say think we think would I you them haven't obviously, to to, of their company the in that of are strong as think, having their Well, or other But seeing as to sales are certainly seeing we ourselves you're adding from and particularly say, they very say them type very vision leading sales say competitive us market see technology. a are, both both are and invested and right that of of think of I machine aren't gaining would the both technology. competitors terms similar share in investing think I really investing who the channel sales presence. areas. that are people. that and and I we're just of other I

Cognex watching any I overall. substance are players share share say or the And of space. other So are, dynamics are strength other we although think, the smaller I of moment any overall competitors really KEYENCE losing would gaining are and at aren't the that emergence and always there

Unknown Speaker

Thanks good and very much luck.

Robert J. Willett

Thank you.

Operator

Cowen Giordano, your next Our Joseph question Company. is from Please with question. proceed and

Joseph Giordano

Thanks as down rather they production the the and it realistic? things production I they on something ability than they in you? clients customers is kind their new essentially every line? buy guess with recycle that off guys. one they – new much can product production and the see here. from practice, shut and Hi, it questions for line there's lines? in new that a do Cognex take electronics So, build you an is, into consumer old and one How put time product is roll automotive for their taking that has what generally like Cognex it's have a discussions get ones, incremental is old new of I essentially, Or lot of production product that's new as then next or a and if of and iteration to facility, the products follow-up the the our of you're at a whether line

Robert J. Willett

really I refurbishing the better another. unless Generally, our new of is answer money it's of So, we is much cost effective right? question a really Machine generally, see. Not and you products, to not equipment. line implement so And lot it. getting kind that time-consuming so that's very of what refurb-ing old technology mean, difficult, one to reapply want of lot to to Yeah. a to too that from worthwhile too and it's spend Vision generally quickly

Dr. Robert J. Shillman

it that a manufacturing or that to a the is calculator, watch, product is, examples, last this line company to Dr. – a preparing like new old are say, Bob. And let's I'd Yeah. when generally, a add the still to that, introduce they whatever bad is new new generation.

it So, of one generally to to nth generation. from N the the the it and possible, Vision use then be wouldn't move product generation minus to speaking,

So, is product efficient there generation are you older that have line. we to two generally, reason and better, that product gave reasons. prior being they'll is already use make still the next Rob's the on used faster, which more – a generation the one is Rob –

where great – the and of any product So, on some fine working the we degree, took experiencing. line was be to it degree, but wouldn't into line. older seen know don't put I we're happening a the new case I'm happen seeing must not phenomenal that it an retrofitted, companies it older in have general, we growth that on was sure

Unknown Speaker

you. Thank

Dr. Robert J. Shillman

Sure.

Operator

and Our Please Company. proceed question Richard Robert question. Eastman, Baird next with W. is your from

Richard Eastman

Sorry.

correct you kind when for of ask that look one year-to-date. interpretation? question Europe's at to but disclosure right the of XX% XX the – If have interpretation the there's because growth exclusive the the about all Is quarter, just going the else, But of to that? quarters. anyway. between that that, large is the a I out revenue hate that it that of interpretation customer the I rate and Sorry. customer, the this was Europe, timing and speaks page Q, Europe order Yeah, up talk John for I On to my large is take of – do I'm of

John J. Curran

Yes.

Richard Eastman

Oh.

Sorry.

John J. Curran

– yeah. business outside of orders north of large Yeah. our was growing of Rest our rest of XX%. business The

Richard Eastman

Okay. my rest you. of for questions Thank XX% right. in Sue. I'll the Europe? Thanks. footnote save All

Operator

your proceed is from Jagadish with question Please Iyer, next Redstone Partners. Our question. Summit

Jagadish K. Iyer

Thanks for my question, questions. taking Two Rob.

And base of adding is look between adding kind I something at existing customers? to new XXXX a between expansion vector we follow-up. – that versus how your electronics customer Which logistics customers? XXXX, of at with versus have an and a as growing segments, was able claim customers be velocity? been greater content had much existing First, growth there you has Then might consumer

Robert J. Willett

Yeah. Jagadish. Hi. Hi,

most it's in vision. important brand is well-known that the to think Cognex I the leader understand world's brand machine So, the and

I many customer. So, Vision, so, in that they're maybe and one focusing Cognex new their they're the generally, we're locations. is any think company what it major consumer But instead on multiple from and plants, new elsewhere finding applications, from they first for right? there of buying selling almost can time, too well-known or Cognex Cognex already Generally, aren't electronics customers plant a is, we taking technology see are multiple and on

of more verticals. it's where But entered. sort newer verticals where within customers expansion is that and So, customers we've and new it is would markets and be different

only the of growth of or winning been in still large we've a that years, market lot logistics, obviously, our great So, seeing we're we're logistics. customers new meeting share so existing in and And five in outside certainly space. at customers that

Jagadish K. Iyer

based on Then us three segments logistics view can please? likely kind you grow at just XX%. between final of on some think other look are year terms we this to for going mentioned of did segments, be automotive? follow-up. quarter, guidance give If market But you the the fourth you have a how as the end in how about your to up electronics, consumer is provided I

Robert J. Willett

Yes, Jagadish.

general seeing and the consumer growing we the start the percentage business automotive out more outstanding On for sort the year. seeing question QX sort growth QX than I sort we've a then had than at in we're long-term. think think to automotive the about over from logistics. grow in asked QX. for rate and basis, target and multiples well Normally, slower broad-based, we that overall outstanding of segments I expect but QX growth our I talked – even that of seasonality consumer be of more terms we're to And those both is in would XX-ish your year growth electronics. of right, revenue the also tends about say and of we and is in logistics expected XX% the north electronics of higher percent in company

Jagadish K. Iyer

a you. Thank on great quarter. Congrats

Robert J. Willett

you. Thank

Operator

question. your is Chevy Bobby with Eubank, Trust. proceed question next Chase Please Our from

Bobby Eubank

guys. Happy important quarter. holiday Hi, guys. Congratulations early the on know you for I that's strong Halloween.

Robert J. Willett

you. Thank

Bobby Eubank

Wanted acquisitions how over would from much. updates or year the you recent to so any acquisition see and two if last the Thanks the there's pipeline? label

Robert J. Willett

Halloween very and celebrated Cognex Bobby. Yeah, Hi, our we a in Friday. is thank it on holiday here way you. at spirited favorite Yeah.

us that. may so, be yes. worse of But from still feeling Some anyway, for wear

learning opportunities scope acquisitions, and barcode ViDi Our are of our they're or performing made perspective, helping Cognex for us EnShape the helping and applications, get And then year software Chiaro broaden in vision AQsense Webscan us machine helping us automotive open industry. techniques the for helping six XD with into And and last deep the acquisitions, up and so. verification. new from we XD acquisitions is GVi well. in really

So, with hard of acquisitions at those and pleased at we're work making Cognex. for them we're very all deliver very

Then looking there's to continue own surge and active we So, that. in at (XX:XX) within markets in new – very market. markets looking opportunities our at for acquisition new and

really have. So, we ongoing we're selective on. what that's the looked in very that at each quarter We like like process we an six and acquisitions We've choose move forward opportunities many to us are last help in advantage revenue, our we'd engineers year small give which technology, to in engineering done are great and existing teams around great going – the markets. that our that

expect I would us of you of more see – kind to that's what that's say So, would doing.

they come see often impressed when to don't with for acquire wouldn't up not those scrutinize sometimes what there. do, hesitate businesses, we we and larger or we're them, While when competitors sale,

really bolt-on So, to looking not quality. to revenue. bolt-on We're we're looking

Bobby Eubank

much. so Thanks Great.

Operator

reached Ladies turn of for the to like and to closing end session I back would Shillman Doctor have question-and-answer the remarks. and gentlemen, we the call

Dr. Robert J. Shillman

Yeah, thanks.

the Okay, world, results revenue just a team around The a did expanding for – quick record-breaking wrap margins. the up. and And tonight terrific a reported We job growing quarter. did third look on good with to again. reporting this to you and results and tonight path. speaking we joining growth once us our evening. hope forward Thank for you again, we And continue on

Operator

conference. today's concludes This

time. and great at disconnect Thank have you your this a may for lines You your participation day.

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