Cognex (CGNX) 14 Feb 192018 Q4 Earnings call transcript

Company Profile

Participants

John Curran	CFO
Bob Shillman	Chairman
Rob Willett	President and CEO
Josh Pokrzywinski	Morgan Stanley
Richard Eastman	Robert W. Baird & Company
Joe Ritchie	Goldman Sachs
Jim Ricchiuti	Needham & Company
Paul Coster	JP Morgan
Joe Giordano	Cowen and Company
Matt Summerville	DA Davidson
Andrew Buscaglia	Berenberg Capital Markets
Ben Rose	Battle Road Research
Jairam Nathan	Daiwa Asset Management
Bobby Eubank	Chevy Chase Trust

Call transcript

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Operator

Greetings, and welcome to the Cognex Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Curran, Chief Financial Officer. Please, go ahead.

John Curran

evening, good and you, everyone. Thank Cognex's I'm welcome I'd to and to John our Curran, you call. fourth 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 the our earnings Form available www.cognex.com. Please note Cognex release at that website XX-K and are on Both contain our financial detailed results. information about

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

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

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

Bob Shillman

we slow into XXXX rate that is spending Rob to Willett, about the call And the much results. on for I us. immediately everyone. Valentine's turn hear But joining acceptable anyone, Rob, you by that to for China. to hope who that you Day. I John. more Hello, offended still yours. call. in partner a did Thanks, microphone say it's of responsibility later at particularly Thank you'll Happy take And if culturally I'll my will reported and issue for XXXX continuing the detail as and operations now last in per reported the and will net growth our earnings record of customers, for income, call, Tonight, provide our dramatic detail expected end a full-year over because apology. And we slower share. revenue, our more quarter fourth results from and for

Rob Willett

evening Bob, Thank you, good Dr. everyone. and

machine of year a smartphone follows We customers record that scaled display large XXXX. consecutive their in investments spectacular ninth XXXX substantial our reported for when we included faced to a in achievement and revenue. XXXX, purchases XXXX few For vision customers OLED This comparisons our tough back manufacturing. by

by As over a only X% grew XXXX. revenue annual result,

exclude increase substantial from logistics notably, automotive. the the was Cognex you number markets; those business. if end of well However, our customers, reflecting in contributions XX%, rest performed of a and

leader strong. digits widely grew market, business. of In rapidly the has XX% on XXXX. vision machine long-term this it part growth grew technology for in Our and year by revenue share. annual business recognized With revenues meaningful that of outlook become short by logistics annual high-single The our XX% just are more our gaining expectation for year, than surpassing we as now market. $XXX automotive, Cognex a market is logistics remains growth over for million,

the now advances to the as of two in see million Following platform. on technology RD&E products the is VisionPro trends acquired second years the engineering Despite years, learning in growth integrates slow in believe that term customers We for in technology automation. Cognex the technology. growth, vision. engineering; launched growth. changes this $XXX the ninth our of the In market significant in XXXX. our in several most consecutive potential XX% we high-performing industry-leading tools. keep ViDi in techniques industry began market, power vision the long viewed technology applying learning faster leader sophisticated recent our the as Deep XXXX. new one our VisionPro vision regard, of and XX for with that leading It's during in year XXXX, past a marking exciting of is drive industrial Cognex will investing consecutive record Cognex Cognex to XXXX or invested revenue in we in half in deep of learning this the of softness medium use recent to automotive easier edge as into industry In and we of deep machine the

deep learning a rule Cognex, image of Our opens vision traditional based apply. new analysis based range our where software for applications doesn't

we market. in provides of to greater added system implemented our Most broadens platform well worldwide. hired within of ultra-high resource rapidly Our to business extended potential six as DataMan has XX enabling employees more capability quick were sales clarity high range Cognoids The machine camera position history XXX industry-leading we as adopted from general ER in near as in improves QX, scale the XXX mobile mobile we terminal can and This In XXXX, approach terms Also as that most annual of X months. launch reading. which resolution In a SAP the codes than these as planning XXXX as in operations product. reader in in inches introduced smart the MX-XXXX in barcode our series successful to In-Sight an product a note, our of our MX-XXXX sales successfully in enterprise include industry easy use with family revenue. manufacturing. succession read been reader performance far new was in our logistics Cognex’s generated new Vision-enabled we $X first high engineering. to understand billion The vision as the our in and terminal ER the feet,

half worthwhile to winning of is growing leading to be in our fast help to consider as financial expected XXXX. running. and our of first introducing dilutive to required metrics. range and overall the our support Turning market has margin to for expected to margin within key XXXX. was support continue been in up slightly success in and gross share edge This the now But cost get it our customers logistics has a products We this large, to logistics customers near-term Gross market. engineering the

we factory of as automation the through margin back in used the XX developing the market year. this Our years strategy this gross similar move nearly our on pressure The for half we downward market successfully is ago. should to one overall ease

on margin. Moving operating to

on the to long-term reduced over growth XXXX. levels will quarter. focus from long overall margin be believe our fourth our financial leadership will in that Cognex’s and the details during a growth the Our we John lead operating saw result turn I that investments of year call exceptional We a salesforce. for the XXXX in continued below larger the slower technology now to term

John Curran

did retroactive gross did margin one let Thanks standard historical the by gross rates lower took Those margin materially dollars new Rob. outset, of percentage that revenue in XXXX. not me the impact remind two but percentage At points. that the the reflect changes our adoption results to everyone from effect

Rob end guidance. reported for fourth good and Bob the of the As $XXX million, was above we results the Dr. quarter. our slightly for quarter top which mentioned, Revenue was

to expected consumer QX due the associated from over Revenue grew declined ‘XX. seasonality ‘XX, electronic. As in QX revenue X% with QX by

reflect Our level for in uncertainty our the results customer of business. certain increasing of quarter areas an

lower revenue at in in and consumer display expected Looking from to industry, manufacturing. by smartphone OLED electronics revenue as QX customers large declined due

‘XX all roughly logistics, XXXX. of customers, QX ‘XX, which revenue the of QX over was to year grew in high-single by flat revenue year mid-teens the in led on performance strong nearly Excluding growth those doubled. for compared Automotive in impact large digit

at the than continued other a combined The serve to in earlier was but rate grow we that slower year. industries

hires million Turning Operating X% and year on from sequentially. OpEx QX, year gross key percentage sales, we by areas due such in The see deep learning up The logistics, QX in new expenses higher as QX flat margin. increase coming logistics from $XX to in and three-point business and mostly higher driven growth was to specific where XD. solutions potential total of and ‘XX ’XX. for was decline a revenue in application customers

to long-term down on While in discretionary down continue are we uncertainty to recent We market prudent we months. in observed we productivity and the XX%, coming with in invest Operating of the in margin months. QX XX% regard QX intend remain for mindful of was improvements to growth, from in focus spending shift from will continued OpEx and have benefited This million. lower approximately the XX% jurisdictions. to mix to by due quarter was effective support revenue income of to items, our The higher shift our rate tax $X XXXX, both discrete investments tax from a reflecting rate XX% of before the growth. forecasted

we earnings $X.XX tax reported compared for per QX of adjustments, all $X.XX discrete share to Excluding XXXX.

revenue experienced areas third Greater trends our the across otherwise also in customers customers. In by The the logistics QX decline both a QX. The to continued contribution flat rate market. sell Looking modest other led machine OLED in QX, perspective, at markets our was in year The from market because dollars who from flat. well among weigh growth on because year Asia we to in slowed the we in absolute on the the Chinese performed growth and higher line ‘XX largest down year into revenue geographic smartphone was China, on region expectations. was other the but Revenue in with conditions revenue was was Europe of in our of quarter relatively in substantially consumer year terms. on in softer headwind. has growth from the saw That in end expected but electronics, China builder from of growth Revenue growth Americas as were delivered percentage QX.

in million and lastly, now to our as investment, expected. at cash Looking $XXX will $XX Rob. I with the inventory nearly we no from decreased And sheet, balance million call QX back ’XX debt. with turn

Rob Willett

Thanks, John.

quarter is the at $XXX which flat Turning for and to year. to million, $XXX on the revenue be midpoint million between guidance, first is expected year

and is rate mid to We and basis. to items. outlook uneven current us. a conditions. QX margin regions. up slightly Logistics, learning, growth QX. XX% we to similar given to across near-term expense markets represent we performing expect end The Also, effective tax expect discrete remains drivers gross the tax summarize, well Cognex gross Operating in is for XD reported sequential the be geographic all for for deep on expected range, be To market excluding the margin be XX%

our market. customers on OEMs, continue from rely Demand products export who outperformance other to China many Cognex of and to China. softness new affecting electronics, is to reach quarters also We and new and is bring customers after to soft broaden that

our automotive seeing American we're delayed project customers the by addition, market. spending in pushouts In on

potential to should call. we ahead. to be go large questions. will electronics, now QX in open consumer the for Operator, With that, orders discuss XXXX we prepared the for As please our call

Operator

proceed the Stanley. [Operator your line from please first Pokrzywinski comes Instructions] Morgan with Our with Pokrzywinski, your with question. of proceed question Josh question. Josh Please

Josh Pokrzywinski

A Hey, can Josh. you - guys we hear Yes, Rob can. Willett me? Hi,

Josh Pokrzywinski

Hi.

that. about Sorry

things bad, know, to several growth years the good, or competition, of guess indifferent, kind out update we last growth and anything the had of I first, customer then seen play. within base Any the wanted of growth you've geographically? on new existing aware clearly on that should you and there an you've Just be logistics, customer new versus new awesome of pretty some get state different

Rob Willett

Okay.

So, of yeah, logistics Cognex. market sort developing your about how for question and the is is

we've I logistics our XX%. a than in than rate was few seen from grew the in million, So, And very would rapid logistics more revenue growth say, more last years. $XXX business

more automation I companies, start with And major has e-commerce, that we broadly are and it's investments we're and themselves to generally adopt very companies more what's them. much automation automation Cognex business and happening quick out supply more advantages started to supply Our differentiate do regular certainly chain reinventing sophisticated -- and really technology that. think under vision more seeing and of the by very can bring very -- are in e-commerce, the I grown seeing pressure much but adopt retail benefits from think and in

our certainly reputation seeing build. we're So,

certainly is Our that business in as expect largest seeing Europe term packages. systems really Other is growth some accounts XD things reading but more And today and the vision, best -- more then providing integrated like applications, courier market develops. yet, picking we're is type in boxes, postal that and future. lot we looking I customers I or and say, but I an serve up at and Other labels beginning a for parcel up have more how serve barcode solutions, more where are Asia or where legs not IoT already America, sometimes to do XD them we're see we good well longer package industrial market, some and bigger with but to to that doing space doing as the Vision parcel reputation positioned and those in business and markets into business things, and and our spread damage think do business good potential broaden readers, as and is information primarily a referred we there but come from to so would which more into in variously to a and to are say as more more to rapid we're I also into well, us, like dimensioning hazardous very we'll term things has broaden even information where provide think be Cognex would the trend connect industry such has X.X. of vision, as things things we in broader, area longer

Josh Pokrzywinski

have it’s I the more end very CapEx of all at understand end broader expect of a electronics that's in how all and time, I leverage one And the, over of you existing detail, of for peers in you think color. about definition it, row, helpful is kind large? tough years multiple of business consumer just tooling. don't come still on down comp of other the and that be but go and think I’ll electronics space the versus cited just but budgets do Cognex one Got growthier as my markets seen in as me. But tooling. some that on consumer being in in on necessarily then lot decline wouldn't let oftentimes we a easy business to from I a call that industry through getting

Rob Willett

Yes.

or better adopted generally, there's is be was in have being things months up of of with one, a features we've I OLED always over space, year. give smartphones, new they be at there's new of and going had we in back under And position technology clarity mean, for different if a to to industry we'll think, within get what shaping for general, big the see of technologies many you this sense that couple year in I of in Josh, the analyzed the would QX. on is but being adoption we a how look and you business do considered And, time consideration course, in years So, in new ways. implementation that to a more that lot next going. actually major

certainly that's so productivity. of a the course, And And case. improve then, there's need to

automate. still they as customers degree labor huge to of ambitions that what from have So, remove to amounts is process what look to

I a automation way So, can what long and for do think machine to that vision space in there's run.

I give probably think something your to good question how gets versus this for now a and you we're to it year. right not insight look does ready

Operator

Our next Company. Baird Robert question proceed Richard Please comes with your from & a question. W. line Eastman with of

Richard Eastman

‘XX? for some a big in Do in just really you business of with have best it better perhaps regions -- grow you Was auto in a can little little And us it bit walk think. did would of where three half visibility comparisons all a I the you should soft bit business? be think Could automotive You there you through it auto. or soften assume kind stay first the in would quarter? the to have

Rob Willett

is say the I’d seeing that word right. would we're a at uncertainty, what describe moment

well that in I diesel appeared think projects at delaying at and we're performing we that the Americans that's February. worked delayed around in but year they more What Europe region. kind there's of of delay now market had in standards not what And through large in saw engines January know, but middle the to And the I’ll Capital challenges a the we contrast, tick seeing vehicles you more and in that it automation. and automation recently So if in in broad the back a many Europe, is investments issues see planful of in see to to and We scaling and and be of I are of first expenditure some the particularly emission regions. around starting we is China. relatively it's, complex buoyant have that technologies growing. concerted market customers and around think saw certainly part and the quite significant and more electric caused being around we see our is uncertainty moment, the future something where in industries, December automotive through across require cases softness moment. automotive. the last new seems

year, expect So it That's be, that normal to to in larger a again, particularly of many seems I at space, in more the seeing, moment. we guess, seen uncertainty would among those projects. and breaking loose we're where capital have

be So, tentativeness that. to there seems about

into But on automotive it's how view positive say and related uncertainty and anxiety, other and we going think about particularly shorter-term talks a long hard visibility America. in the those seeing things mostly going would to trade I for that you Chinese the customers it's long-term give are plans. continue is some certainly I China longer on. clear have So, to not given that good that views market it's and term in we're plans much to And how

So, discuss better we but a it as more can through it's to hard sense you XXXX, of we the year. certainly move give

Richard Eastman

was, your revenue down for noticed XX% then to largest your that the And have quarter? suggest fourth the year in a customer was customer you the thought. quarter Did was about one I number K, might particular than Or in XXXX, bigger largest over revenue up? that fourth of was know, year, customer that in we your you in works which was it

Rob Willett

can a in very large would more we smartphone can revenue question any I wonder I talk your the frame if about I our And not perhaps help talking so and you maybe I certainly in you quarter Well, just few, we John? broadly I specifics unfortunately, we that say electronics think and few and know, about think customers context. think -- one. OLED, to I consumer don't [indiscernible] if in we that mentioned by really perhaps related help customers’ a

John Curran

Yeah, Rick? I Is think of a quarter. large what customers million to in we referring you number that did kind a roughly of headwind discuss the $XX across were

Richard Eastman

$XX million headwind you're the a there's quarter in Well, fourth suggesting ‘XX? of

John Curran

to ‘XX Yes, fourth fourth quarter to compared ‘XX. quarter

Richard Eastman

sure I that, I right. do All will best. I'm -- to my Okay. but interpret not will how

Rob Willett

let's Well, again. try

we Let's see can if clarify.

we is, large saw OLED what ’XX customers headwind few million in we're of $XX to we've and and saying referred that compared think that to a ‘XX. I QX smartphone, QX -- in in of a area

Richard Eastman

last about that this pre VisionPro think you that curious orders What I spoke early is there any, that deep one ViDi to, where product? market know, or some targeted that for that -- there and market is the the kind tool question -- Just first And at that learning I'm you have. was in adopters. of you is

Rob Willett

Yes, markets overall, address we quite to similar mix. addresses overall ViDi broad technology so that our

automotive, So, early kinds in [indiscernible] and too. we have but markets customers certainly, in electronics see we actually significant and all adopters of

Operator

line from question please Joe proceed Our with next comes the Ritchie with Sachs, your of question. Goldman

Joe Ritchie

Happy Thanks. Day Dr. Good everyone. And Bob. Valentine's afternoon,

on your you of America, North just for is businesses us what starting percentage maybe just Rob, auto? in second. So, remind auto a can North America

Rob Willett

disclose. Yeah, little I'm than less something we sure say, not half. roughly I would that a But half,

about our know, overall automotive told global over think we've said, business you we've of the years, basis. is I we a you said on a quarter that

Joe Ritchie

kind called any million to $XX sense. questioning When forecast quarter. you'd headwinds else in around, falling makes you related on for And revenue like the or then guys that kind call last like of to your you out? of out maybe there that know, headwind OLED That you that anything line did specific Are first just of XQ.

John Curran

in quarter, effect first quarter in there's No, the -- no consumer first no of material the electronics. there's

Joe Ritchie

bit going follow is, profit time these half. the little then as pace. through you gross that you first is -- And maybe to improving a that partly perspective, fast guess, guess such about about know, are I just you're to going that you're I investments quickly the for year headwinds to market growing talked some And year, we given it a that is a bit then more occurring progress progressed, Fair mix assume talk to just the you the rate on fair some those enough. a have as the given little due probably in investments? growing? to Is at logistics how Can from

Rob Willett

factors revenue would we normally of there Joe, business a and much play mix other is, as flowing a kind we here. more in the are consumer of through move at P&L. expect would number different One the with electronics through year,

in of or to of keep and beginning So adopt that's have address to I the in vision. Cognex on we they're experienced them, new going some think, Vision, what's this logistics, customers, significant Machine one in machine mind. sophisticated of size uses thing to But not necessarily most issue

for large It's we're adopt only and customers something engineering general. more them help we in the doing work So to and applications technology. in do important use them for

Another a configure, been long laser based factor readers. a the logistics market, time and of based lot that hard long market. setup, been there it's Very laser is, around have into sold to systems barcode

and And the coming companies in doing installation themselves. suppliers actually become and used has industry to that so

based Often, share technology configure. think less leader much the would to or a set system Right. reading of takes logistics to in than it distribution this time vision line easier it a laser scan barcode, up the to that center, set in system tunnel sells. Our as is market up Cognex XX% we

we but more business in make a to get and we're get sure little -- engineering. of applications order that customers going, doing So kind

on of customers that we percentage that. of type in Now, P&L expect business improvements come our to expect that that see lessen in kind not the benefits to of or of we to some to see help and some later year. logistics our overall the products we That's to in view and introduce

Joe Ritchie

could the Or you you the are year? to given I us a about guidance more, the electronics the Are on If thinking how in an quarter. like guidance, the the year year first full planning just and year? sneak guys mentioned, for Rob. for last give you in did update one helpful, That's outlook you

Rob Willett

for guidance, in case, our that we’d practice so year but material to facing. headwind a and understood tool give not obviously it it's was we full but the that anything, were general, In

we so XX with on at share weeks to this able you from of year, view term you address and give point to to And but we’ll we electronics better be commit of for sort whether a now. will in longer were consumer positioned not the that willing

Operator

comes next Joe of the Company. Needham line from Ricchiuti with question Our &

Jim Ricchiuti

I think it's Jim.

So decline question more large you decline decline the saw that is to have consistent in like the worse? business, I market? overall revenues saw the you was respect year or was consumer your electronics worse just that with Rob related that last broadly from Sounds with customer, it the that with in other consumer electronics was

Rob Willett

Yeah, probably of here. But some was looking we're say John's would sort at data similar. thinking. it I

takeaway in we electronics obvious an overall one space, saw of that in is, saw to material impact and we customers, that terms your few smartphone think that more consumer we a have is on industry. select the a similar few -- a in I what OLED than And is have decline. question

John Curran

the saw, So, we down, we a we customers the of few actually declines had from the Jim, during if grew remainder break while business what year. it large

saw our remainder net-net, the you industry of a the that mix couple in large overall customers quite electronics of decline So business, when overall an look -- at different but was we consumer group. that versus

Jim Ricchiuti

that in that year, half it? logistics ease that sounds that the in margins, going business, gross working to some that's second some you're to respect is customers of with suggesting a of correct on you've closely the headwinds seen the And like resulting with way characterize to the somewhat logistics from

John Curran

to Yes, about we’re high it's it adopt well margin. and easy very is, Jim and that's great gross technology that

in unless So, we where being of term, lot see in reason. a logistics we end do that's for to good good up very to don't as in as, we gross the really terms intend but look And margin. of a engineering, to short applications very thing doing be it it's market, not

Jim Ricchiuti

Got XX% Rob, the you logistics that growth? anticipate XXXX type year it. of just at having business, related would in saw last you kind then growth the profile And same that to that,

Rob Willett

What Yeah. XX% we growing that foreseeable said see at the we’ve annually is business for future.

Operator

JP of Paul Morgan. question next Our from comes with line Coster

Paul Coster

Can us what visibility please. looks risen bit about you can, you to tell the you how more than the tell which there I would and that us got. about but the year-on-year And the trends composition much love much little mentioned backlog, be your seeing? to extent it's you're not might a quarter, thoughts have the

John Curran

Yeah.

So don’t backlog, with clear it’s get out. in Things of it's we six get. the board but to more other terms our into really we get consistent visibility our the months of details usually three closer board in obviously visibility, periods,

Paul Coster

So just now the business the seen in to mix we've the mix that advice? similar is which assume previously, that

John Curran

I Yeah. grows, as mean, mix would the mix obviously, backlog would, logistics of backlog the grow. our of would as logistics percentage a

Paul Coster

is you the second sounds get like starts easy in space will productize second goes make comments specific that temporarily actually margins. I’d that's Maybe actually made you've on it cutter Do go made or the a to and cookie you -- logistics back Okay. that? reason has the it of Why the by about It easier there to Rob that then other just the why just year. application developments half work is to some that been sort of playing half? in the done use,

Rob Willett

to letting with get application I think all roadmap. have things but then technology that's with there's and that much is, it. a I we them engineering, do not teaching certainly So about customers reasons. reason of on one we're number technology other so to one of don't reasons, to for need do certainly our competitive Right? apply to which want we're But talk

Paul Coster

this vertical for customers Okay. is smaller it My last specific the and verticals? question is is, on have you the seen large is Or any we've the In other customers words, night, and across in this difference between we're large last hesitancy seeing sort of those customers? any call in the behavior heard to same hesitancy both?

Rob Willett

geographic your discuss in areas. two question I'll

large it seem automation up. $XXX,XXX notably scope, projects it projects capital projects China, we’re in loose, America fewer the small be So matched getting customers. in which large is seeing specific to breaking The more in that's versus where large all is might you consider doesn't more area over when where notable

any We’re a rate deferred than in seeing at larger those they much being were period. recent

Operator

Our Joe of comes Company. the Cowen with next from question and Giordano line

Joe Giordano

time talked I clarify margin lower anything product install? you vertical into to the of just there spending guys that's that on or sold about dilution you something, impact is margin the being a bit specifically want from this the solely here. the logistics Is to

Bob Shillman

into themselves on In we which sell gross sometimes them, great as general, logistics efficient, of margins. much is factory products field it's gross are of technology learning or up, the is see deploy optics, that is in sell lower service particularly are margin. in and them requires but have different, do becoming logistics applying mirrors, same What very ID similar the margin in view right. as products the we the as use we which gross to and more and automation the And P&L that service, expense, margin which we -- these, expanders, setting more to more we're they

going the So sort that's dynamic that's on. of

Joe Giordano

several about it of the here used more last you years, be? is structurally say that over to When development R&D, I incremental would the from think amount innovation than given expensive

Bob Shillman

No, wouldn't. I

are aspects, that that scale newer. complex with in But I there think and go economies technologies much of other more what definitely do. we there's are

where particularly we're provision. think and a frontier it's XD, deep I in and learning a investing new

XX been can -- these level years. and don't new into But them. can be I applying of scale. the have areas overall, that it's of get into doing we're some we're same getting it that very changing, benefiting things we profile higher from spend as We're for doing So see the a good we've

Joe Giordano

of trying I'm one but back in If through to just And coming US talk, about given on some major more. and specifically, moving your companies. high if geopolitical I can in not of level production that's sneak just anyone if to curious lot talk discussions tensions about potentially basis it's you for or perhaps a the the There's even topic guys. any thoughts just

Bob Shillman

Yeah.

in the world. with and the So, most we manufacturers the most sophisticated work in manufacturers them, world sophisticated contract

cases, growth about more manufacturers the investment in from markets seeing some where And I they with contract other in I of and they're of strategy their has into been – relate be certain heard might met And In So an manufacturer few talking contract certainly, America, in production for moving us some major just recently to the have discussions electronics large plans. certainly talking I some see, others. more in a technology and in plans, due India last in clearly markets certain about cases, those that opportunities think I'm example. I to have that. weeks and the to who are plans

seen last is XX So, in over of industry. would there say years my than discussion I months that this in definitely I've more the six

Operator

Our DA next of with comes Davidson. line from Matt the question Summerville

Matt Summerville

two Just questions.

you're of food, outside First, be more the up the some general slowing of markets, piece the XX% sort or hasn't Cognex so based CE you et beverage, Can industrial, been logistics, remainder broad auto semiconductor, those end whether talked other and talk you whether they seeing about cetera. can company, or about? of frame that pharma, in of

Bob Shillman

Sure. Matt. Hi, Yeah.

-- goes some see going in in security be we projects on product very that content period I on they going those underneath go going large obscure reason less growth consumer can what's over use products on those products markets deployment getting high a to in do broad have tobacco like be – this on. we mean, and or of the by volatile, some in to what's markets based, rates. our big easier is when sometimes, that the to is deployments easier integrate. And quite But certain growth on are which expensive, is to longer that it areas smaller can So, in

And we grow need coming can the reason lot who regular our really more salesforce vision all apply can our a so customers. distribution we focused that. that on those of manufacturers so It's and new within and machine to the we're network, reach we now reach

So that's going well.

Matt Summerville

guidance housekeeping you a revenue disclose in a provided? just have follow-up, potentially headwinds fourth could been and the Lastly, anticipating FX may of in QX headwind the what quarter terms you're to in what as you item, in

John Curran

quarter, about X%. fourth material not the first impact And it’s in the we're anticipating In a quarter.

Operator

Andrew Capital Buscaglia Markets. line question with from the next Our comes of Berenberg

Andrew Buscaglia

about year me, a of talk big spend? heels last bit too. that's or XXXX up year a and, I XXXX you on SG&A or little mean, in – XX% the Can was your so it excuse

don't also to you So do at is business as top spend is continue what could to this you on need be you expect you side of where spend more and of just point if rate? go your where if much out this kind spending into that needed at

Rob Willett

Yeah.

sales I in the call [ph] a up able number describing some to and quite building we customers, -- out we just as question. Matt’s of building network can, of to all last think in are we who sales So them, Andrew, last to those we were see, invested can year the noids we our lot reach kind

course we infrastructure system then of So, and an on whether ERP it's as obviously in invested projects, facilities, majorly but example. some

about some big we the behind will market. over all term of long believe So, those really picture that us growth would longer strongly I over the this like capital got the vision potential long a come period. of have I a the and prospects of machine into in P&L those think say term

make market we're serious very want to can position. markets we being to the see doing -- that sure grow gross those. making we growth about that share we're we to lots our high maintain see we and everything leader So and margin, getting and sure And of high we're

of thinking So thing, when things trimming long plan. not a hit to thinking so about we're think type quarter we about number we're about a much as this term

and can manage I to line, That that more will over channel expenses to at we products expenses our getting we it. of growth lots changes, outlook sort that, sales long the we're in go as make sold engineering are term, them. to sure investing growth changes, and as said, our from can benefit many opportunities of customers in integrate, great see to and to that as line certainly there's on top in that easy So a tapering accordingly. but you growth of you that's see we're and we sure see can make last think And how the look manage in quarters we're that sequential if you say, six the

Andrew Buscaglia

a a this focused XXXX, or region is in it And if on mainly that end continue? market with does you're there spend

Rob Willett

Well, I market. is certainly a logistics great mean,

the what the going I and call warrant we in terms that more other I So, operating in then areas, some also and discussed more would manage of us think we've really some perhaps new say to other see, areas in of established investment, we're regular earlier concerted company. like that see to obviously according where technologies a you would

Andrew Buscaglia

interesting on sense are And get to seeing through into you you you some from in just deals? Okay. us made where when developing Can picked hard you cycle XXXX, specific in the when products and them up expect acquisitions a one of new your you so then last your one it's business. in give I acquisitions your -- where of and a product terms guess more robust a of the of you are sense strategy flow do

Rob Willett

Yes.

tools, learning about suite and technology which being website. also two a talked So and about deep coming bought powerful seeing ViDi made ago around first be you six the acquisitions of ViDi. more itself and benefits into inside on lot those we've the about already certainly bought Good we read would market. and products into the can our techniques years VisionPro example we're the We up robust

inside is the down a years April so that's can the and acquisitions made that So Cognex week, make kind lots improve we a of and both worked vision exciting but to pull so was automotive that is that within earlier also for that's means want sensor road space, those standards of readers also the another Cognex and robust platform, you technology sales at their at was which of as [indiscernible] reading put we're in we've we’re so want in more acquisition and only An example accountable example and to, AQSense we pixels machine to gather XXXXV, quality to XX about our those and market business stuff of point the helping of one speed highest business over platform performance supplier two things. suppliers success reader from last with EnShape number technology, a verify for in the of Cognex we're and that but and to it we out to more we which and the barcode And technology barcodes from they and we're barcodes. terms the precise electronics, the very having and on ago XXXX, know, the that do acquired help can that not launch I'd well suppose, we’re And came it on resonating image about integrate the XD from technology more itself. hold that consumer be us of pleased the certainly help Webscan, handheld it the takes in that it's less about, help verification great read. and and formally the the with and quality very information year we barcodes them memory, launched called last reading verification barcode which did through as with the acquired it customers think three called think, of but which customer would them they other a months -- the that, product a is of a that coming. this the I meet the we of that also market puts can it the customers Then, industrial then product, say on in EnShape. of We allows supplier and I than leader XD-AXXXX, with I and

thing another that's us. for very successful So that's been

managed The we've was really industry. mature And an expectations at the those Cognex applier so of were very look technology, very missing able of used automotive I'm a an was our gone we against automotive, aggregate, lot we relatively a acquisition. how and contribution That on done well. think when a that. blocks well Yes. it's sophisticated very in to of already fast out to business vision that and software GVI get the I the for overall acquisitions

Operator

[Operator from Instructions] Our Battle of Rose Research. next the Road line with Ben comes question

Ben Rose

wondering, to question of this follow-up I more just market. about a and I’d sounded on ask next? kind Rob, mean, And I that are as I'm to If differ anything one near slower US. a Europe from the in market there US namely, down over in more, this growth the At you the opportunity that broad optimistic your might extending risk people a bit would there comments that's little in trouble of to course bit, opposed trends by I Europe drill bit the just year automotive the affecting structurally is opposed America. little the getting think going call of the term any on make as would

Rob Willett

Ben. Hi, Yeah.

I standards a industry a bit kind around think Right. I diesel and was automotive supply and through the chain. year last of emissions the in to thing to challenge I a new of that of European went some emission first alluded the think led lot dislocation

and where in in So look nicely now retrospect, and reduction that purchases from it's business in for point I growing that it as think again back a Cognex to saw we've sequentially the causing we Europe, automotive bounce we back, seen year-on-year.

to then going some grasp automotive the vehicle getting on. the little a going investments some I been going say in has technologies electric to that European been think the this have been that's But on on new question, that have of of your So I industry my that perspective be would on. would slow

which batteries, really think there that of Well, Japanese, technology, isn't of and lot very a is companies, are of you of the right? European Chinese vehicles my ion all space. a a lithium that I electric where to course, be major understanding, good Chinese would example manufacturer see heart in Koreans, at Americans,

European seriously the more but investing see one world. automotive, other with light the parts think that saw our automation plans more concerted suppliers, is seeing them and business starting I you're seeing in to be our and industry are tier a by of owners, happening on are both brand big than and would effort now, So, it working of we later much

one I So make. observation that's would

Operator

from Management. next Asset the Our question Daiwa of Nathan come Jairam with line

Jairam Nathan

Yeah. Thanks question. taking Securities. my for It’s Daiwa

there from back do you operating had as now ERP that some implementation -- You the just -- So an done see to longer this being benefit expense year, going the expect that to no it's expense? item?

John Curran

asset Yeah. it’s I productivity expect $XX from gains There's a I spending leveraging wasn't to forward. that. we asset generate some but this move from as year. benefit mean, huge it of do that we mean, about certainly our part we million created, obviously that

Jairam Nathan

place of respect XXXX kind kind term a do think long about from I that like long and a see in how XX.X%? the with I was think XX% you And of you about to kind term of current, still margins, mentioned is the progression target,

John Curran

has model and the XX% we XX% and greater years the seen we're our that we over looking mind for is what and term. think company Jairam, operating us with over served Yeah. long managed that revenue long margin growth over the well and operating term for it's long term many in the achievable

Jairam Nathan

about to back if there talk business XXX any mentioned quarters update any it. about is terminal a that great, would winning a wins, of mobile in the finally, a couple you company, Fortune that, could be And large side with recent you

Rob Willett

of yes, course. Hi, Yeah.

what in we our we our that and that and in mentioned products base million customer So first continue grow customer was $X to had that space space. launch

base. So small very good, but it's our good, numbers growth percentage on a look

market. that on update the that's So

Operator

from of Trust. Chevy Chase Bobby next question line Eubank the Our comes with

Bobby Eubank

years. night three the kind bigger failure? some and to over opportunities just it's at comments failure a next Yeah, What level, after? what of of and up as or two of what success you going kind high success you that are one on or constitute each or Maybe would guys one are keeps you the of those five

Rob Willett

growth would of rate say, to force that's I high about we're And, think, we're and you what innovation that. gross plan, long proud we and would question. term. do our over strategic engineers that to our above I technology do enabling That's or that it's expect, as I executing, and our growth a breakthrough -- able at getting very leading about. margin driving also sales market an our have bringing a company mean, all instant It’s with culture. we're But XX% the

ability culture motivate, attract, retain, by the also out the our in best Cognoids. So, success of we would measure the get to very business, our

that about of more, keeps that me think night driven we certainly kind to leads would me we maintaining up want grow, what we wonderful culture developing sure So innovative into we at we're your, have. be make growth that as entrepreneurial and that and that

the get gets And report, harder forward hitting is But expression that'll and as a focus culture. it look our you which think I seriously good on that So very to next of weeks. be few annual bigger. press showing would in the you we our always

Operator

will the end call. Shillman comments. I we it back gentlemen, the Dr. and turn closing have Ladies now over to for reached of

Bob Shillman

year even And of attending Cognex thank nobody very great And Well, news see to Day hope on you I'm to better objected covering to Happy I that and and calls. fourth for a to quarter. Valentine's and a the great greeting. the all report want happy the subsequent call you to for

keep guys we'll night. going So the road. Good to and talk you down

Operator

today's concludes This conference.

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

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