Cognex (CGNX) 1 May 182018 Q1 Earnings call transcript

Company Profile

Participants

Robert Shillman	Chairman
Robert Willett	President and CEO
John Curran	SVP and CFO
Richard Eastman	Robert W. Baird
Joe Giordano	Cowen and Company
Bobby Burleson	Canaccord
Karen Lau	Deutsche Bank
Jairam Nathan	Daiwa Asset Management
Ethan Potasnick	Needham & Company
Ben Rose	Battle Road Research
Joe Ritchie	Goldman Sachs
Paul Chung	JPMorgan
Bobby Eubank	Chevy Chase Trust

Call transcript

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Operator

Greetings, and welcome to the Cognex First Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Curran, Senior Vice President and Chief Financial Officer of Cognex. Please proceed.

John Curran

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

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

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

company's XX-K With list including Dr. refer filings our to should Bob. I will Form that, these the of call now turn most-recent over You the detailed to SEC risk a for factors.

Robert Shillman

you Hello, thanks thank for joining Yes, and everyone today. us John. all

are shown Despite line electronics, As earnings reported which we results with the business remains respect overall today’s our growth first we've XXXX XXXX. of our dramatic release, for expectations. seen that in a quarter consumer pullback solid with in in to following strong

leave on quite call I during I the a in unfortunately the to the been important attend past typically have presentation who period Q&A soon. and the questions very you after available to call therefore I’m of for those the have As need meeting but know, formal

take provide who of quarter. this key my will yours. now I turn So it's microphone, details to call over some the partner Willett, Rob will the Rob,

Robert Willett

Operating squarely operating in Bob and XX%. of the margin. middle year-on-year grew million in QX was guidance in good year reflected faster our Thank that $XXX and growth revenue you and evening of representing expenses than revenue our This was QX everyone. Dr.

the of investing across a all of of SG&A exceptionally handful customers We expect verticals geographic In is after typical an higher revenue. market largest OLED very and manufacturing as A conditions expand and remain as vertical. come level less percentage in highest a Overall, lowest this our and will that automation except and virtually industry is operating QX, and percentage to revenue. revenue expected that electronics, smartphone year in seasonal XXXX trend consumer revenue expenses anticipated will follow to to due display good be RD&E down QX includes areas margin XXXX. our for quarter appear and industry our strong of large

the we of half will face year. in tough such, As second comparisons this

products our two than in XD Regarding less revenue fastest business represented to in XX% roughly grow they total growing our Combined from from quickly. XX% continues areas, of of up QX QX and logistics XXXX.

We growth expect the both for us drivers long-term. to over be

to shared with are which We you an introduced September market previous most higher grow this sectors increase of XX estimate view $X.X believe in Notably, high served our in areas our reflects have applications serve. you single-digits the is enables market served years. understanding with increased. the update in XXXX. We in XD. we more of ago, XX% than market. by address these provisions new Plus first be and to our served our Overall for will estimate updated now of our both pleased billion, size our to emerging logistics last to coming up of has share Since us technology we months chosen the Cognex

we for to currently the margin and our machine the strength they high technology customer foundation opportunities our is strategy growth and and that a potential market of expand share superior as We long-term provide offer serve high for believe and relationship. to growth which Cognex expect to continue into our adjacent to we vision. applications markets of outperform result Together gain

You www.cognex.com/investor. see on can the updated at our section website market Relations the view Investor of

new to we that shop the got to two busy we new products development, launching product now year applications serve. a broaden Turning the

new codes systems. mixed high-performance readers interface, a a Cognex customers when Our unmatched expand for closely and challenging reading accurate, general and vision the new of of they're XXX production opportunity simultaneous DataMan spaced with symbologies for on performance XXX series even sets standard and and in With multiple conveyor industries XD industry and manufacturing XD user-friendly lines barcode logistics. high-speed DataMan

enabled extended a range as new also from vision product launched as succession feet. XX quick MX-XXXX the reading as range X far codes our to away terminal inches in to addition mobile We as ER, of capable near

MX-XXXX over manufacturing I and far the warehouse With with applications some first scanning now family. John the are call to near also addressable product turn the the financial details now ER from quarter. requiring will MX for

John Curran

Rob. you, Thank

revenue new took effect the reviewing on January X. by start that me standard Let

on Cognex call, of. mentioned primary sold impact has is our we by now on resulted our of in net basis. we accessories how QX and a and of basis on change increasing historically This report cost for sales revenue for account the same gross reported As goods amount we which the certain a

margin decreased gross XXX dollars not historical has our margin XXX by percentage basis to points. from gross have Our rates while changed

of all and retroactive earnings new today this QX release our adoption the discussions standard. reflect Our

a higher highlights; from Operating year of and a $XXX line increase $XX mentioned past over industry-leading Turning respect product now last Consistent was service year-on-year. XX% QX, expenses QX in result This margin development. large QX was to as of added year. proportion decrease XX% to one the million. percentage important expectations engineers mainly representing progress on to of at our Gross revenue to with our our made point QX for strategy million logistics. here from we with and were related team orders was with down of revenue target are slightly the a

than a business technology our in employees sustain support to grow in help Cognex position to have and come. We market to this across more XXXX the years now invested in worldwide. for invest to sales leadership fact, we any vision resources our will continue We served In than us industrial globe. Also believe machine more competitor.

engineering rate Operating slowed, the strong year While has the start in more XXXX. of sales. QX the continued was a and QX we margin in This our year. since XXX of down added reported XX% Cognoids have increase of ago decrease investments than new reflects the in QX and we XX% from

we $X.XX QX both share of Excluding QX earnings and discrete tax items, XXXX. per reported of of for XXXX

of as market, as The grew customers strong consumer perspective, electronics other leading higher in terms that the other also by finally, significant XXXX low the revenue in was XX% good ago nearly grew to constant electronics. products from XX%. to and China, vertical logistics, revenue well teens were from both quarter teens automotive delivered Europe with included consumer year-on-year continued over geographic market market revenue Greater globally currency. electronics conditions industries. way XXXX And featured in Korea. sales largest from declined Growth contribution and by which the the a both Americas dollars in by from consumer over by the and in revenue In and revenue industry. the overall of Asia high in substantially several from our at region a very higher year year-on-year a revenue absolute growth Looking QX from apart the increasing to QX led within strong well XX% logistics perform consumer percentage

factors. continue million to in buy to on to in repurchased QX. stock We we plan to and X.X Moving other our shares program, QX subject stock conditions buyback back market

we addition, a $X.XXX announced this quarter. payable dividend In tonight of cash

to balance Our shape. in sheet be great continues

We value dividends. our now through With organic plans, turn that, I buybacks call to and growth stock have and sufficient our for support capital returning the back investors to Rob. to M&A will

Robert Willett

you, Thank John.

which between expect Looking ahead of at be year-on-year. to and QX we the million XX% represents $XXX growth million midpoint revenue $XXX

electronics, slower XXXX. consumer year trends will in to that experienced market last the Regarding lead segment believe revenue decline unusual growth to we from that us compared

the be Gross period for to is with three the in As same a revenue XXXX. will in result, Cognex's be total flat margin range. next revenue the relatively mid-XX% over quarters in expected

essentially We a expenses expect be flat to on basis. operating sequential

to rate a softness good in expected had electronics the year. the be In to effective we tax start summary, discrete consumer excluding despite tax items. XX% Lastly, is

is business we and are for long-term. the overall and positioned solid Our near-term well both the

call open questions. please now will to the ahead. Operator, We go

Operator

Instructions] with with Our question proceed Richard Baird. [Operator is first Eastman Robert Please with your W. question.

Richard Eastman

traditional more how about looked that the is of A in automotive automotive on that EV a the it couple growth the - is then also or can side, the year-over-year I out is particular of maybe is just growth category from side of automotive perspective. things, what in And it business the - coming ask gain the automotive?

Robert Willett

to automotive know another all part an a were XX% significantly we of long-term see above important regions deliver growth and in had outperformed you readily We strong in we expected quarter so growth rate rate. QX. As automotive and our Cognex or our is expectation pleased

to So, automotive continues very look strong.

fastest by the automotive the quicker our major Americas the increased Europe in over dollars. the In largest and look long-term absolute rate the expect contribution grew at would regions. of you we provided China, If geographic region, than for industry

all components hybrid number increasing factors. electric Moving for growth driving asked to you SUVs I the our and Model The your other know of you changes of driving one things and stated a form are and part question, systems, and different growth. towards industry. electronic about engines,

Richard Eastman

a suggestive to then any decline do might maybe for order And on down revenue little the side full down be. have that and Again the consumer a bit consumer on backstops would be Do be maybe CE I'm visibility being and the the the trying that fourth visibility second business. be electronics that question electronics kind know XX% magnitude what third quarters what your the to up or Maybe like on might would flat math you be follow just just of wise. that. as something to you around curious XX%ish of backlog would the year

Robert Willett

year. and talk It invite Yes, part a revenue and I’ll of largest raised. roughly the in about the is then business these year last year see represent as to investments percentage XX% portion business it we’ll of our a you last a represented half context lower I'll appears of electronics Maybe vertical this overall. smartphone that little our from consumer of large electronics that dozen out OLED manufacturing start about our customers John significant and customers bit

the question terms XX typically we consumer into electronics implement customers months visibility to us. have would around In nine in of with your projects to that large visibility, like

as the starting we get to visibility more clarity would orders we’re when in this going say so overall But substantially quarter point the into. limited on they which actually we’re that to I is fall to this So receive visibility. at have year

the decline, comment. you of magnitude Now as of John want to the sort to

John Curran

think don’t a with say come of I percentage the that's we but hard would ballpark. I directionally kind will back in

Richard Eastman

around what out And little bit that so of automotive. is falls a

So the the other total of piece revenue. big

so is again know than seen the this out here lower that visibility? you slightly same have growth automotive what first the And we track quarter, don’t I in rate

Robert Willett

full generally particularly high and guidance But We growth. I year strong Rick all think encourage to give growth seeing I of don't course is verticals say that would by about not at logistics would which very you certainly discussed industry. we

in that So decline that seeing of for consumer covering the electronics. certainly some we’re

Operator

Our Joe proceed Please next question. and with Cowen Company. your with is question Giordano with

Joe Giordano

I know on year of math an is starting year. this lot electronics, explosive just consumer just last after obviously So a

we’re changes the of into are you if turned equipment, activity? are are more of any demand use So seeing structural investment you where can market that that changes or you in seeing slight like a seeing for you of some over same the given anything that kind being lines consider quickly devices, in kind you slower

Robert Willett

not, And but introduction. investment. I planned customers capital would number of OLED structure of then among implementing features say new hasn't changed terms displays overall industry I products of slowdown particularly of are our certainly the in displays been what has a helping the and and has think the our changed, manufacture the for there

just our I phenomenal don’t in So might being have this the now business means coming such do that we diminishes a that later. displays see smartphones unfortunately overall or we come electronics think the we after with optimism year. is year But to a last major players. slower about consumer the timing in expected quickly year can that And and

Joe Giordano

the average So on you or as growth that your to categorize topline would for capable above XX% right at be still longer-term being company? business estimate full

Robert Willett

would. I Yes,

Joe Giordano

comfortable going broadly more In rate regards directionality like we with line OpEx, are should levels with the them a as move of revenue? like not you’re you of that something a there speaking they are to in flex down than give kind they further - to but of run I where the kind spending are - is XQ, that able know or expect or of with

Robert Willett

mentioned typically of Well, a revenue we my and I as in comments percentage expenses revenue in as high QX. I think see relatively lower

roughly So I said you - be know in flat also to sequentially and expect QX. expenses I

to So thing that's kind keep one in of mind.

I long-term. thing mind really keep that the running another for to is the business think in we’re

implementing we're three years that in growth regularly we are So see. on and product duration roadmaps long-term are large opportunities based that

those So be see in a moment and killing be we’re we - or the we playing don't substantially long-term wouldn't reason changing at any that to gain those respect.

been of that and it's It it the XX% of was of is we was XX% in last spend RD&E and I on really on a revenue that. quarter function substantial around higher year part and range, first recent end between in revenue certainly, Now overall. years the XX% high annual as think

that's know this just you long company going something the run a to quarter's obviously to around margin. cutting ranges, we’re over that's not operating - is those So within a that long-term programs be managing addressing but

Joe Giordano

quarter? you quarter, but anything like in than surprising that or probably Did your there from thought, maybe for probably a mean midpoint point me, there expecting was come deteriorating came little said early in else that anything not right the anything guidance on. of electronics just I upset you to little consumer initially certainly the is a Maybe through in would guys that's were was you’re not. you Yes, the generally was conversations last you it you internal more at

Robert Willett

especially of business larger ours logistics, you’re in be that pieces and can the No, shift among I mean so of tend timing but I certain out end quarter customers wouldn’t can the to say electronics coming notable. up particularly nothing can consumer of to of there which be

Operator

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

Bobby Burleson

year implications year? how product this margins curious the this with consumer think any we Just electronics for implications declining about any margins and gross for should there for mix gross

Robert Willett

don't give the we for Again guidance full year.

what is of the So of margin result target versus number of would from volume including mid-XX% be and pricing change, volume products range. Movement does that the for percentage is everything services, in gross can say a revenue I our high factors customers. the

to we're balances when less And there of would established kind percentage prices customers apply that moving certain or have is checks we where apply very in large So, to technically higher customers, revenue. in challenging we getting parts of very there I in a few right. know and would a higher then buy for obviously pay tend also service general consumer logistics have electronics, industries

recognition the you've what from offset see the change new logistics. the I light that a growth in So any of partly by revenue caveat explained, I so of expect the in less the forward same. we on and significant constant don't that of bracketed much can Obviously going decline the overall that think consumer roles basis to electronics revenue past. we in see in that seen by us of of some But John

Bobby Burleson

that And you that of taking in you those XD then the of came to sounds addressed, of that view? updating and big the you’re one terms it just up that from which TAM a logistics contributor markets, wondering addressable was lot like guys that total from

Robert Willett

it's up there. and airport but which that XX taken by use that to similar put handling to the should separately we’ve market out such I a to we've now is of point you logistics our back, business we it to look in of I baggage if decided Well $XXX report moving logistics million, million

is it I up XXX. million done would $XXX double to XD up and actually XXX net So really from be more guess

exceptional enthusiastic and are we us before a think application much answer high then in is question And competitor products to that that launched now better, and a really businesses the we really is that’s we’ve about weren’t object admitting in market really is and of a see really market. very we a our acquisitions is But just the a player seeing well a market which picture to taking more before. to and static is and very see XD simpler market opportunities. On segment our growth growth we I that opportunities profiling and function notably in which than space also biggest the couple a the a that's has two weren’t rather last into the expansion line. exceptional of where the we've your So years seeing in served outlook. of definition us the EnShape size very take And we we of the being over market acquired sensing understanding Technologies made where in of position Chiaro snapshot

John Curran

service guys growth digits for market your includes just the single clarification growth growing high And consumer in that that or the outlook for market you electronics? available if faster

Robert Willett

Yes over do the what we electronics, logistics you. cetera. is it’s long-term look long-term would that's Thank we the that a with it’s how about will think a think everything consumer over we I and market et three-year serve think that so period

Operator

Our Karen proceed next question Deutsche Please is question. with your Bank. with with Lau

Karen Lau

this to the imply your deeper months pipeline take embedded CE. or or no I according CE. is their at and be project mind Is there loaded outlook in bit outlook or firm are Just few your that to point? want to how customer customers a still lock that Rob next little for into movements change guess still confidence can going

Robert Willett

for of timing it's that But the the not you market sensible have technologies year. the think measured or this we of do things can I solid we but products way Karen come now of I’d look without it’s a know feel say what we for is about all pretty through pretty and the we not on about variability. based know sized or rest it launches Cognex can so not happen data

Karen Lau

on just in And outlook longer-term growth. for take the CE want then to context comments I little bit deeper of the XX% a your of

you based the still CE like is that so if a be where that XX% expect I'm smartphone obviously mentioned devices like mean as from biggest asking you or growth are that additive is give that sales term will where see more of average that you're just with because products for per I can the from I'm going customer that are the XX% that seeing curious You to and bit category. the within beyond on year CE just automation that of need to invest plus just is coming over categories maybe maturing smartphone color growth you the coming do it pipeline is ongoing you outlook? longer-term like on to us longer a

Robert Willett

and in coming So I think three business many can there is or are grow over consumer years which Cognex to our electronics in the ways expected so.

in So of to them smartphone talked will they we with that such product there in that more intensive. of suggest in years the recent support products do develop the more certainly seen a as manufacturing to to our terms would addition us which that of be certainly to about with and functionality customers features we've are want roadmaps technology to number technology

of you can back that’s look us drives a lot and if for see growth So happened that certainly potential. you

the with different Nokia. that's huge share share birth the smartphone is of thing the Cognex since been mobile we we case have had phone for with Second manufacturers different

large and we mention player have we large that If way another share by name. back go with you don’t

it beginning OLED plenty growth seems to think the is ability a out which has area And other the in that think displays room of even the year with outside bit offers. to future. think way that or we may ahead that in displays market's AMOLED the like still long I although course other for Cognex last players is the run cycle is around buildings. and what saw of there we would of in among even smartphones have third say for technology capacity absorb offers this investments of still Now of and I technology also Then big early year us terms automotive it we in in markets with still got what a that

So technologies market then we’re to we're we’re and also optimistic that new still about about the bringing to areas. that address optimistic those

learning of opportunity and whether that it’s new in us So for to area lots We X-D, whether it's space. terms performance. have in features whether the instance, own our deep to of manufacturing in customers bringing we in new for even be certainly other of developments in benefits it's that see

what among we committed the cycle cycle high So be last will we up year year. very offsetting and about remain a optimistic space customers by undeterred this and those down a think

Karen Lau

full from ramp be looks just XQ. If one the slightly higher looks to like And your contain your from you despite me, revenues it could year more flat sequentially. to comment sales into managed XQ a be or then backed rest I like OpEx in slight it there sequentially to year of still

you think Is OpEx the OpEx I increase of the assumption kind be sequentially sequential XQ. to contain past into well. as of do in able half with have so from projects associated OpEx second or XQ a flat to kind you to in to be to that tend still there will expect right the

Robert Willett

and for smart general outlook beyond But We don’t probably increase see changing OpEx think QX think good a QX give your normal and OpEx. wouldn’t the that the is to that of on on pattern containing I if investing based about general Cognex pretty the we and tends we quarter. would see the expect current business for and that I Cognex assumptions don't significant growth in this history for year. between long-term are generally We say wouldn’t be to

Operator

Nathan question Please with Daiwa is with Jairam Management. Asset question. proceed your with next Our

Jairam Nathan

seen share? market you Firstly size you're maybe how you vision yeah you increase structure have do you competitive dynamics quite directly market not and don't an the compete not I sure to Cognex, just seen given seeing have maybe companies with the lose make a if wanted but few and the a additional competitive growing or understand any in competition

Robert Willett

in see technology share continue market investment our based you I share on been I our we industry and make given gaining we not impression I hope that the to expect in and that we in the and I've would you and position we a is relationships change to dynamics we've general not the that gain think we’re the customer say and have. leadership quality an do reputation

into ourselves There gaining but very that dynamic share. them. similarly in leaders but we competitors strong with would of market the Japanese market lot past careful competitor view and are market. currently I the competitive them we underperforming crowded a I press, what of and we them having are in as of eye in is are continuing. see or point say don't see carefully, think respect keep that certainly entrants say see in a we've to that that share other one still over the couple players continues compete company would the quite Chinese seen those We there getting watch the on space, I sales new our impact with KEYENCE much very the I I So, very from the it with competitors their field making is terms

Jairam Nathan

with you have thinking of with out I market will kind logistic seems at that - addressable was it logistics look that - mobile competition when to piece. finally come like from they coming look seems that it to all products present there there and Honeywell. above companies much seem are just and legacy again to be regard like is of And And it bigger so

the low the there to the opportunity? to dynamics market seems the and addressable does compared what's So

Robert Willett

so So I about the going of reading of really barcode. think start Cognex talking business for in fundamentals I’m logistics when line we majority we’re is to the that talk from today

that production down or the that line technology. you named space. using specialize company reading amount barcode serving of we thought don’t past performing that moving space barcodes. are that at And with and other also high compete moving of be products in a we we we vision readers and have then warehouse and more in in So fixed can long-term player a sort in all then And really handheld readers although there very that that are

for market things strong So very a is us very that's annually small our plus that at today, we exciting terms very, we’re performance that of we’re still and rate to been include kind and we've growing but quickly in XX% play do market of vision. in other growing seeing of broadening revenue what so

other then as the of packages, So and future things picking. applying do also vision of robot identity applications other looking production dimensioning moving even such line been and type doing potentially X-D the integrity and also at down applications to in packages, applications

So automation in to replace opportunities. people warehouses with are and robotics those so working

product Now the area about I thinking that’s at off or to business about mobile $XXX for products where possible terminals are our our the company helps significant if and terminals two in to a space. range you're in we that size strong XXXX that’s million we round map the out you We to our in player call served gray sense terminal one expect which called from that are negligible. very the today question But opportunity ER investing sales see because your got far very named market. as us mobile mobile the strong take the right a you is talked launched is players growth and a look the our market we I

we operations, that's product warehouse very of basic to smartphone of not logistics improved our big barcodes today now business. but enabled, high-performance on to improve terminal, reading ruggedized part vision the and use of a from all performance optics a ruggedized a So smartphone range end, basically and have high technology all very which of full to

Operator

question. next is proceed Our question with with Ethan your Potasnick & Needham Please Company. with

Ethan Potasnick

targeting? its something some productivity sales of which you in are filling of quarter, the company of like of this made - then Can or from Ethan of the was This could I kind whether well verticals geographies more of Ricchiuti. it Jim are as levels is hires Potasnick year. and last the as on back past And you the sounds remind would force half is comment wondering anticipate and sales additions bulk force reasonable us second this you seeing in new the you these so additions significant half the year. to

Robert Willett

Cognex quarter. that And out So these on opportunities and right. sales year last the in factories some calling into investing to majority And the our them. and been they has first of the are investment significantly is field force logistics salespeople are on warehouse automation based degree gone over factory

of the hiring And the in they're been electronics. general we’ve hiring productivity. and consumer but well when to strong base that in strip in up in I we’re of development rate seeing growth out speed, quantities I large We’re of doing think they’re coming terms and business their training reflected we think that's them

opportunity productivity growth management So better we good to their XX% hit that and with would in increases certainly I I your of we've base there's and with and we’re tools, one that time front better improve of rate and developments think but in in doing increase can territory to we customers. when training, think also and with they��re and I tools management QX consumer we a reported achieve So And sales IT out made able higher our we’re netted the on if the force, impact question electronics. be think the is

Ethan Potasnick

is any details share currently? M&A And or how your active can pipeline you tell then us

Robert Willett

we active off. the taking have as really our gas like the on see always foot time, significant it And but not So selective. gas we mentioned all M&A war it John when deploy, got the the very We’ve opportunities. putting chest cash to is acquisition we’re on or pipeline we’re it's

good they fit. within opportunities, we So we markets make the great actionability when really to those when technology, offer really at markets. great that look rates, strong growth we see like we see are need then And cultural companies that engineers, sure of targets we

we and we whether like currently them. move do on can question feels a we’re what can companies working we or we find fruition on when with discovered So of have a come seller reach deal the on them and to based always through process it's the we not what and those we they

Operator

Please with with Ben question Rose proceed question. with is Our next Road your Research. Battle

Ben Rose

get first the product the others there quarter, throughout discuss To new of are there XXXX. the MX the but as in the that to start the pace introductions you mentioned you speak year? of I we areas Rob course DataMan are could or off into in rest know of you can expected

Robert Willett

the Ben for you thank Well question.

spent made new engineers, great So about $XXX year. got and generally a products than a more acquisitions We year some we almost R&D market, great about talk to pipeline but million we little on we last phenomenal coming ago. don't

I of can pipeline sort coming you months know and or think exciting full So over a to next XX expect you the market pretty so. very

Ben Rose

in think on over been a most follow as last of with M&A Is companies say year stage larger of forth? in fact it to your development be things and twist so I on fair of and terms forth. potential acquisitions have might a the in little so are size that companies, some revenue list And up and of acquisitions different smaller all sort the the that the question generation of

Robert Willett

which culture And say Cognex. that trying this So I do to that’s well is into are I Cognoids the bought to that you teams really into our very at we acquisitions think the Cognex. fit we're really well cases in productive. would are important you're point we way well, like know phenomenally real companies great engineering at gone at have integrated, because what they and happy And those have all they’re small right us that we’ve very deliberate and and fits as they’re made people

are do. and well works for that So the us to acquisitions like we most those

been that However, and are have to for asking. on much a require there you not we entered are actionable investment, much very larger they the long our our like lack but were of certainly through companies at would lists that time not shopping targets list shopping acquire would

companies and something break things if for there but with bolt-on again to I've those companies loose, which have sake They don't intend technology. bolt-on idea way are the quality certainly when would revenue we no - are revenue that who not of do. So are great the is exceptional

Ben Rose

rollout it's and I for us your to whether going according an may one And if you update the just SAP give quickly expectations? John on could

John Curran

The next are expect this track quarter. well on project candle going and light is to we we

Operator

Our proceed Sachs. with Joe Goldman with with next Ritchie question your is Please question.

Joe Ritchie

we year say the to your we a guys think bad let’s of about fully program flex that But know should and why. in in was how said were So investing you second wasn’t you part year will I slower that slow but you just scenario structure growth t maybe wouldn’t maybe growth for Rob this cost how if where I little it like long-term is next understand in through structure about a stop what cost guess thinking know of you type the started environment?

Robert Willett

of at the you managing certainly in Cognex out. we've XXXX/XXXX the able to over over if lot did take we the of So we’re capable I long-term demonstrated so we what of downturn history a costs very were look think in cost

programs limit very culture limit business. at something that. costs. like We add under and the the items don't not way have we more choose we and the that certainly is matter Those others grow really them. we line of over can the the certain pursuing of which a is on we those And excitement can scenarios engineering we did doing of can of what heads can want our the we're would of and of we here to number But number feel are of slowly quality strongly that projects which life sales course guard of prioritizing own all to we working we damage

think the you is the I growth for So and but they ready really artificial machine we’re been the things some capability but investing plenty to I the when business seasoned managers as vision the I and to don't technology that for happen. always currently, very do those wherein there down, likely that intelligence think we of think application of automation think is prospects in. longer-term event scenario to of where should and we've slowing see about

Joe Ritchie

if maybe cause specifically can you tell to comments your you was I revenue rest year. revenues are kind levels the about then extent you weighted your XXXX? it size of smartphone of OLED we Maybe the in what for the and have talked just OLED talk was in of base us inventory talking could - call customers a saying really what OLED the prepared bit about being that both demands half CE And possibly just flat the little information. bit about you And if back a little your more about

Robert Willett

ask inventory machine OLED you are know me you inventory say vision inventories of Joe levels clarification, perhaps levels Let or when for referring you to you their of material? meaning

Joe Ritchie

the influences more whether Yes, CapEx that and decisions for the latter former?

Robert Willett

would not it’s future any think among customers I’m on their it those is so what driven demand authority more expected than I on inventory. I of more from subject Yes, customers but its level that on observe is

to out have clean is as have manual So I capacity sometimes think they but new it’s capacity. capacity super to the stuff and you in too customers utilized interaction with very often think What they as in it slowdown costly environment much may how potentially want seen the OEMs last going this is a opportunity and there they’re a their they’re and on and which of of environment, functionality still where quarter improve equipment have still we capital lines being deployed, Cognex do when I how do customers built a year those of human first is manual is there. as lines observed into What I number I that. much cycles our the is inspection, visit a that been to seeing for consider clean have a I supplying new their who among of is were lot

that see definitely particularly for some to of plenty opportunity basis. So on line new seeing making build cost course on and LED going basis still Cognex, performance capital technology a out market that there’re of space higher perhaps competitive in other on that think I'm the for volume. the of are and improvements going we’re is not its probably going certainly the the I but a some we’re thing little more of

So customers dollars seeing companies. technologies sophisticated brighter, looking lower for business actual spent some process in much that OLED is we’re than is a little the of with and much the less with those space but kind

Joe Ritchie

And makes terms then the revenue base quantifying last just of That sense. in year?

Robert Willett

going we’re no. doing sure be probably that not I’m to something

Operator

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

Paul Chung

taking my for Thanks Chung for on This questions. Coster. Paul is

your Just Europe in to of up competitor, seems of and Asian it it Greater on kind rates China segments. you're the regional growth your light other main and seems follow gaining above in share breakout with though revenues, Americas like

would some you Chinese Thank increasing helpful. you. competition the mentioned seeing the you be in you are so competitors Asian entering So know markets? there mix, mention I anything can

Robert Willett

is picture. you really as broad-based seeing the that, we're distorting And electronics what's regional our think growth look is, try across rate the to consumer through I growth business.

significant the and general, competitive well, very going the So one Asia that's the the there strong Korea, due includes in few technology on. by India in displaying our tax we in last incentives automotive with driven the base about. it's that to decline, years, investments saw growth over on cuts America other quarter, the force effect going of in good and and growing and you wouldn't a the Elsewhere, we're seeing first we've as region is growth this strong but which probably macro as Japan. the market, in capital sales a consumer made and talking pretty dynamic there very electronics very well overall investments our see business ASEAN, is And very reported space, much we're

businesses. But say players those to a of guess, losing share account that, if very we're intimate sophisticated think or a had share at So I'd would consumer lot driving gaining listeners that that's will holding is, those really We've see see us those less with so, exclude I say in be exposure, would other similar I My is and half had drove Europe, sophisticated less don't own on all that bigger last this our going really of year. to of due we're growth that. so I say but I we've markets. I or you so, five the year dozen to any view relationships markets electronics. or interested

companies willingness stay benefits the have phenomenon. market one perhaps or really to And we're offer and financially So their plans our course. out view this the the I them into It's like as competitors some investing might any be not our of willing as to we places. I these not well-managed view where suddenly to with of stay at a less of think key on those to longer-term keep

was at obviously that all, year by what growth is of the back in a wish deterred result. we the not not it I'm although three as quarters So this

Operator

next with Our Please & Joe is Company. question Cowen Giordano question. your with proceed with

Joe Giordano

some third-party some for see larger, that you to run these that and them. are a to don't tradeshows and the When have intelligence entering but vision like go some did the onboard lot follow-up. things need software big, the the smaller, Thanks in space, of applications you on generally pop-ups

we of like like to of what happen Cognex against happen to So what's applications force defense and able competitors? those that or products long-term compete need in kind those more versus or are the what types like for to supply won’t mechanism why KEYENCE

Robert Willett

the cutting kind want growth. but we those make over shared of of as get see do of things even customers want their they over where particularly they at machine kind exists I quality I would that the other huge would is more to where labor is that's advance technology manufacturers - much edge situation value then so industry businesses our growth, less companies make say say the business a applications is in - technology, other the kind of vision or there much end that cost where general adding high-end around driving applications. or the intelligence is at with then in time. the you know market Inevitably ability to to we less important it's our lower a time. in or growing are low And whether been dynamic it's more so of market and And onto

if dynamic I but specific you we would I that's have say mind, what we something in to see. speak So I the that’s overall that think could see.

Operator

your Deutsche of Please question. question next with Karen Bank. proceed with Our is Lau

Karen Lau

you sanctions follow-up. taking like any my to guys where equipment supply well. tariffs, as you was I you just of wondering those impact on for make comment telco smartphone Thanks know if don’t much and on some can I

front, I you any wondering the from So, you on I see was know Asia. tariffs have impact if also and manufacturing contract some

China? to do expect the buying extent impact any that maybe So you components you're from

Robert Willett

real our our supply tariffs to in any inbound sourced our business. of not our of activity China. out in Ireland. is Europe, our plant expecting heavily impact in from plants chain not exposed is on And We're Asia Majority

Karen Lau

then piece And equipment make also the players that where some the like telco sanctions smartphones, looks any of impact there?

Robert Willett

front. expect on we that any don’t impact No,

Operator

question Please is next Robert with Baird. with your Eastman W. Our Richard proceed with question.

Richard Eastman

I you will thank go quickly again. really

is sequentially so from to be our you I more question QX to we is commissions when have a OpEx presume anticipated sales expense the R&D, headcount, flat expense up. talk that declines. it John, quick sequential And offset SG&A Just would I'm options declines being in guide Does will about that QX? be that million dollars, up so options interpreting the there

John Curran

a option expense QX some to to from reduction QX expense is QX. QX, from on in There pickup

Richard Eastman

very OLED just today you traction markets, in the of curious battle year exposure share manufacturers? Chinese year, Koreans the includes the the last manufacturing I it your if for did that market. very Cognex was Chinese exposure the on a Chinese - OLED kind am between the the out as OLED curious I'm the And in and Rob quickly through success last was market for as business built your the the early capacity exposure year, back but the in penetrating Korean half have good. then was and of year Presumably towards you any unfolded

Robert Willett

in as we Korean certainly I with and who we are all player think part space. did we’re had well if Chinese equipment in you are But that as success see you less also that significant players used success of well positioned players. peel addition Rick very so have think some building penetration builders OEM machine but of with Japanese those Yes, with that significant can the we being

Operator

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

Bobby Eubank

you smaller and are products. consumer, some for the bit x healthcare XD the but products Rob markets Those opportunity those can longer-term? Thanks. logistics about in you markets in you maybe can paint food little and of markets, talk

Robert Willett

consumer being downturn those on a on. lot that electronics, nice logistics, consumer our users is also over fair are in think big we growth see that it’s a a what's QX is automotive, use, despite industries. electronics. and we really so becoming the our time and have of going technologies what dynamic integrate and driving in sophisticated And we that about hence of very of Cognex easier by you markets. talk part so and adopted less technology. We that's about about It's reported program rates And more I today going But to and statement to the kind talk semiconductor expensive, say

medical - quarter if markets So, our markets of we’re like I look product in products, devices, in look year-on-year I including including excess in and the across as in - security. excess consumer look XX% rates things first seeing I sciences, well life growth

kind are of newer these say are seeing would a lot smaller and really us. So but of for vision adopters of I machine growth

we we to why reason force another really expanding cool that’s on needed have So have those customers. can been sales successful in our so

Bobby Eubank

the price you And running little about buyback been the market than you’re buyback. John putting very just with have you’ve long-term work higher quickly week. the mention QX it share in decline like Thanks could into still the seems and the optimistic some a a cash and just great given opportunity to if stepped I

John Curran

available under about to us QX. in million and in we to the or buyback Yes, our bought expect be still We continue we million market were $X $X QX, X.X got active million. $XXX million just in the back have market to in shares do to

Operator

the turn Willett remarks. closing the reached Rob would end have for to to call of call. over like And the back We I

Robert Willett

And evening. you to with speaking look you you. thank We for night. Good forward this Thank joining quarter. us next

Operator

This teleconference. concludes tonight

participation. your you disconnect time. may your You lines for Thank this at

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