Cognex (CGNX) 29 Apr 192019 Q1 Earnings call transcript

Company Profile

Participants

Rob Willett	President and CEO
John Curran	CFO
Dr. Bob Shillman	Chairman
Joe Ritchie	Goldman Sachs
Josh Pokrzywinski	Morgan Stanley
Richard Eastman	Robert W. Baird
Jim Ricchiuti	Needham & Company
Joe Giordano	Cowen and Company
Andrew Buscaglia	Berenberg
Karen Lau	Gordon Haskett
Paul Chung	JP Morgan
Drew Haroldson	D.A. Davidson

Call transcript

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Operator

Greetings, and welcome to Cognex First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Cognex CFO, John Curran. you. Thank

begin. may You

John Curran

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

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

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

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

Dr. Bob Shillman

John, and you, Thank welcome, everyone.

San headquarters. reflecting Right and line our growth guidance; were As would've our that's news call with shown the in for the fact, else QX end The QX slower earlier news. with year-over-year today's a our now, Diego record than of growth in Natick expectations on Well, everyone liked, bad today, at the news good results release issued Cognex near lower the revenue. and top is our environment. was I'm set revenue in in that, we is

Cognex's my Rob, So, to details, the away. take it for CEO, partner, call over on Willett. I'm and President pass further to going Rob

Rob Willett

Good Bob. everyone. evening, you, Thank Dr.

spending just grew of in market automotive growth revenue discussed that China strong Dr., achieved logistics. QX that in we our As X% customers most QX in sector Americas conditions Lower to and year-on-year said, in offset the Bob by February. in due the in in we the call

and electronics, our now will visibility we conditions we slightly these the expect in consumer shrink overall into have Given revenue greater XXXX.

a take automation electronics, in and happening. at closer now customers look in Let's to particularly smartphone what's vision, we investments In manufacturing. machine expect defer consumer

decline of second year a marking As we from by expect XXXX, down result, consumer will our one-third business. consecutive that piece major this the in revenue electronics approximately to

in three of element vision that witnessed electronics volatility there’s and confident share the electronics, the in losing long-term quality productivity market Cognex we’ve Considering that inherent as market over largest remain this consumer past is plan, a that in machine end consumer both are XXXX. new believe products While to years, we we realize not gains. manufacturers’ decline to for will and automotive we expected and to market bring significant our be key

to lower purchases, consumer as anticipating roadmaps. evolving of due to automotive revenue declining unit from in Manufacturers projects sales we relatively is in are and years responses scaling However, sales, automotive change China well. delaying growth, Americas. strong back large market product After in and in the are challenges and the automation flat three

the electric machine require of and of facilities, and use increased more On mainstream long term, the positive trends a automakers, over benefit including side, by that will electronics in relocation the vehicle there production reading. which manufacturing vision Cognex of barcode shaping in automobiles, automotive are will sophisticated ramp-up all the

e-retail that broad and many Turning driven well-known includes base of to to continued names. I'm QX, logistics. year-on-year pleased growth retail report a in customers strong by

strongly Cognex vision delivery, serve industries Many the automation need of to technologies and of the as reading turning improve other centers. easy market to high and key barcode for in Cognex and opportunity accuracy the to are become potential to recognizing reallocate we and speed as existing continued areas market an slowdowns to also as our the customers. resources e-commerce our always to distribution team products grows, sector grow business has use viewed As in they forward-thinking share. reaches our more to enabling take sales customers their of are order

life address Our as long-term time approach logistics, includes significant revenue deep areas terminals, bring over learning, that mobile such developing and fast-growing technology sciences. to XD, can

challenging the recently Turning readers, introduced series and readers general at to fast inside positioned accurate such packages for XXX as high-volume if simultaneously tunnels. twice codes the customers. XD sized, reads as scanning XD DataMan even We of varied manufacturing distances fixed-mount angles from and as and on logistics XXX new are and logistics different DataMan products. reader, the codes competitive barcode More the

John for smaller We than small accurate the quarter. XD XD-AXXXX breakthrough precise Advancing Cognex’s our very on details cloud market. With also verification, a microphone data vision financial a previewed PatMax as measurement powerful assembly faster tool is details into over its line was and vision precise where XD and introduced fine recently that measurement, tradeshows, than powerful is in what’s generated XX today at for outperform combined entire and ideal substantial DSMax sensor of several vision systems traveling million interest. guidance to XD of images major the I’ll when XD highly times range. polybags, parts highest displacement components Marking speeds current XD, entry high logistics electronic Cognex point precise methods. delivers dimensioning, locating world’s conveyer XD robotics at first our envelopes XD product for available and on part the the in resolution toolset points, two with XD dime. XD X.X highly measurement XD-AXXXX products from from such in factories the that, tools, fastest boxes, performs pass

these to administration two organization. him take X. especially years, development opportunity this thank finance as his work his and new want and for earlier As systems ERP John we I best. implementing Cognex’s We leaving John on be month, wish the further Cognex for this of announced will to the our past all CFO our May contributions

John Curran

you, Rob. wish a and and the a continued the It to strong and I its group exciting of miss all financially help working and dedicated of be foundation Thank company for will Cognex experience been such lay talented growth. best. rewarding an such I to has a with at Cognoids, everyone part

details of now Turning to quarter. the

Also, during in decline. XX% expenses was automotive X% $X.X negative as item Dr. margin of million, Gross ‘XX margin the previously with as XX% The was strong XXXX the X% in our primarily from the China to Revenue of slight due The margin compared QX Americas. this of a and for increase continued to were stock benefited XX% dip exercise unfavorable the we XXXX. QX a impact. growth operating XX% was in QX quarter. with FX. sector in for year-on-year in overhead QX discussed, excluding but gross contributor we had $XXX.X was QX compared experienced decline million show growth in Bob of representing Logistics As options costs. We to expected. largest a of ‘XX. the weakness absorption the tax Operating broadly QX from of the across said, Greater XX% results year-on-year in when discrete manufacturing and was

with a $X.XX share a ago. discrete per items, QX $X.XX in ‘XX earnings tax of were share all year Excluding compared

both Growth revenue impact absolute logistics largest at than higher X-point conditions perspective. revenue Greater Looking was exchange led by double are QX spending. in in partially capital from negative Americas else, contribution products. delivered line consumer digits revenue spending customers by geographic growth, automotive grew customers grew was Growth led percentage our currency by from as logistics customers, generally with from from by substantially China, deferring dollars when industries rate. so we low-double market deferring Overall plans. of by more low In offset came and see several the and were a anywhere lower their in Europe a also our and expectations. in from was digits. which terms and year-on-year excluding

Revenue lower resulted semiconductor exchange The contributed in demand manufacturers. solid. the equipment underlying to revenue remained lower negative region the of region decline. and due spending across impact percentage capital consumer other declined weakness X Continued the Otherwise, from by year-on-year. rates points electronics to in currency Asia,

in Looking sheet. Cognex balance and $X by at investments, million to decreased no Inventory our of the cash and continues debt. X% $XXX end have from strong position XXXX. or with a million

sheet back over accounting up gross turn of to adopted we balance Lastly, that, at in standard, the $XX Rob. a end the QX. which I'll call prospectively the million With new resulted lease

Rob Willett

Thank you, John.

Turning between $XXX to the be is quarter expected for Revenue and million. $XXX million second guidance. to

I have we will of ‘XX XXXX represents QX practice it revenue full-year we've not the to increase say decline than believe range somewhere for reasons year-on-year the it's XXXX. discussed. we for an this of be of that is will Furthermore, all QX provide guidance, reported right slightly While between levels and our ‘XX, and lower while over XXXX,

basis. ahead. range, to gross a QX. that, tax Operating the expect XX% single for the discrete effective With is tax go We line be mid-XX% we've XX% sequential for rate Operator, in in the expected to margin on excluding will call to reported The are open margin with please will we gross questions. low digits QX increase expenses expected be by items.

Operator

with Please Thank proceed. from you. Goldman Ritchie [Operator Instructions] is Our first question Joe Sachs.

Joe Ritchie

Hi. Good everyone. afternoon,

Rob Willett

Hey, Joe.

Joe Ritchie

in production are on effect, China a of I for of you’re a orders Are that that I the up at throughout the like weakness China It you’re up know your mid-teens business? tool are kind shoots saw throughout the a machine touch So, calling green Q lows, of auto you basically that seems in But bit. second. Rob, look bit let’s there little was electronics little pick quarter. year. expecting any XH. seeing the in maybe in rest down all-time to starting and

helpful. around that Just color any would be

Rob Willett

So, China it’s confidence so in else. pointed is market be of years, and term, will be we than for as capital see rightly anywhere broadly among growth more the great lack And many it soft expenditures causing the other believe has issues Cognex term. out, delayed. you is for a long to near But we to continue what been

a turning quite your if to change that’s going to is not happen things comes And of likely currently. would does has around what turn, in suddenly quickly, what to China it say, my to a speak think experience question So quickly is that’s specifically, we’re or that but market back as when I I habit assuming around. confidence

modernizing are softer. and machines coming electronics and up investing. end the performed China much smaller that the can largest as there’s so just in say, better we by stages be tasks is manual forward, also and still in curve, basic both are logistics infrastructure notably and labor manufacturers Our performing and markets automotive would China look I the of

bode the So, I those question the how to in and you, we’ve quickly is in words soon. will think of longer all around, term, for well not our assumed turn Cognex it

Joe Ritchie

we’ve Fair in increasing. is XD seems I the one noticed like of of the vision products it and enough. guess, been things logistics to, And tradeshows piece that on the we’ve competition some

additional that given you’ve over investment to XD market know anything has increased the new I competition, launched for vision? relates how guess several penetrating you on I that you’re of to recently. look, it from last rate basis to do Now go-forward maybe us growth about specifically any products as But, do an perspective? years, talk guys the incredible been seeing you are need you

Rob Willett

Yes.

as years, at been for with potential talked In years, of So it growth vision in X% the XX% and I’ve now Cognex a year. few about vision grow we very the to area see around being us. has business for previous a business XD a XD our high

we the that and of dynamic have run, was XD for based Growth view. market. consumer on think year, I I last long expect see still the this a us stifled electronics, vision we’ll that by for in year similar softness

in and on However, or for various your Cognex think reading, We more symbols today like and most And we’re packages. the of inspecting logistics. to is looking significant. potential is I XD looking letters packages and vision such relates barcode packages packages our for numbers primarily into -- logistics very hazardous as business and symbols question damaged on expand it for or tasks at seeing logistics

starting last up to XD So, is it’s expanding vision really doing year. into into now, in we really logistics, vision. And we're something move until weren't which then,

the are dimensioning. size where superior LogiMAT for grow potential of charged customers to of and two a industry has over was more which preview trade shows significantly, product and something technology our year, that's increasingly did logistics the that at there’s just XD-AXXXX, this so, is time and logistics vision for flight XD the lot largest the in The being we ProMAT system laser-based packages, a often for weight. happens dimensioning And the that not

we technology, than a laser cleaner moves technology image and it which market, So, products. much gives being manage integrate down as production have studied and growth also great a of line, easier much this and to is it's much based to a time-of-flight that's advantaged what's easier the

we vision-enabled think technology relatively think show great is us in perhaps then seen before at in So, Then, is kind robot of in of would bin in second shorter-term of of space, you the lot another lot that infancy. a see market, picking kind have many that probably driver as creating see We we companies it's and of and spending that some I but logistics. the think we on still still technology for we the think that And But, of random on call the growth humans there space. the a excitement during of have to and doing is think its replacing I see I lot XD time we and a you trade today. went lot money logistics companies in tasks. Chicago half a

So.

that finally think is this going working for we in venture. of before profitable lot are on. because looking lost think that I to turns a it market into positioned, some a But market get really long the in When realize space is time are what's I a leaders well money I it still quite that very going come, way off. think does at we with we

it. So, approaching we're being thoughtful how we're about

Joe Ritchie

Rob. I just can one clarification. Thanks, If ask quick

auto You Is is electronics? that large, largest perspective. earlier be year market logistics to be mentioned going not your revenue this larger to as from end going if a than

Rob Willett

Joe. give on point, going I don't this that input think specific at we're to

Joe Ritchie

Thank Okay. you.

Operator

Pokrzywinski Morgan Our Stanley. next is from question with Josh Please proceed.

Josh Pokrzywinski

and some near-term take weakness of maybe in the a to further Just auto bit electronics up.

couple a of those last of of I years, clearly, in been automation think, there China. has both in particularly over the technologies big accumulation industries,

if over growth installations I below work look decade, far the think, too at rates. robot own you past were probably don't to your they

off being do You question, still way much there, reset of XX%? we're of I think are to a and markets? for Do we manual of could tasks there a a lot races? growth but you now. that to know, a that mentioned lot us automated. stick it's runway of kind of the deceleration those kind of along just the how long think the penetration period of year automation a there's versus trying are of coming think or halfway of that with off while tough you and But, some How this of of is in far a into quarter back

Rob Willett

Okay.

to has question think way less XX% today, market, no call the we [ph] is in think terms that of as ultimate industries has where by away an more passed people about wonder slowing I’d closest products, are full talked China people that better I very that a semiconductor automation in gives assembling boundaries I our more automotive. being And their processes, say some learning today is from far and if market production. it example technologies as I but would the really serve. replace would in can do end certainly electronics And use, of but are a be and this around the millions And we’re robotics the very, most kind getting technology we so and the will which does expensive. do that basic in automation perhaps to do, to that electronics you and industries than a near in deep lights-out Other wanted us give we possibly and I market that the So, difficult company, penetrated run vision to products literally an look closer we’re consumer manufacturing. in how in we of of about inspection that we’ve perhaps new more I I to of see still less point. run. what more way to number approach job growth, sense easier long we of in example example, long say, see the allow of that to what in replaced which vision what’s manufacturing, I And really the think me new best technology to integrate, consistently a bringing so our course, a the it’s powerful, And easier market visual expand

are was automation, perspective markets expanding but for of underpenetrated we vision are which what and only continuing us to we years And few which applies. non-automation also example other see see share a boundaries robotics now from we to then, fast not ago, food as a automation gaining very So, many market to automation adopt the will being it an from do. that markets and we’re there growing new

viewing this automation slowdown a move I’m lot markets. of phenomenon temporary So, a of of in as the into a

Josh Pokrzywinski

Because that obviously application the Got run within that as positive, mean the mix? you kind buyers, two application follow-up, large it. the negative, And will this it mix what mix does and markets Is the around auto, my I of some guess, application? that the maybe of for from type is does beyond to is broadening traditional matter? kind electronics change set guys, applications you given of and -- Thanks. of

Rob Willett

mean presumably say profitability? the mix, you When you Josh,

Josh Pokrzywinski

of kind want mix gross product whatever you, most to the ASP, think and margins makes if to contextualize. you or could in about Yes, we sense

Rob Willett

components to revenue. smaller to us who to generalities, service Yes. their support customers think have tend require don’t much I from generally mean, in I I low speak think

so having business partners, put through then overall technologies, system for they and insight we often often see So, higher we the like discrete margins use them instance. vision

We margin industries So, customers to from accretive that complex, overall. us. adoption see us is certain where and be large can requiring more tend for are support

smartphone we need very, us. have some and market very the that from we So, in particularly potential application see support customers logistics market who currently more engineering where the and large customers

that’s the our that we've in impact already year-on-year, is you. at margin gross I think which So, dilutive, and about spoken that with see an to moment, we logistics and

So, we see some that. of

sort a say under technology that are periods, the think let's the for to adopt potential of smaller that's themselves. adopting I So, longer stay revenue our customers XX% will of that

We [ph] technologies, in I easy-to-use, easy-to-adopt well our have think very industry, I'd for and easiest pretty say the that the margins. bodes

we’ve one that's as DataMan few our thing it can have the our were added bear the XXXX, would we grows. kind our in plans XXX long-term over as to to just on globally we develop, be we lot than these last have, quickly, so the reason means going Another a we for business expense carrying just relatively close we that mind bets few need to salespeople as to a the industries. business plans more new certainly the that just margins great But of launched, upon years is as serving such more were right That's call now, it that. do extend reach, if industry on call means In-Sight coverage noise of means broaden. and and develop And that customers sales a products more we to lot as those

Operator

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

Richard Eastman

or you. auto Robert, in about of if But, just could the that you near industry, business you comp perhaps what just from Thank big think you do as talk you you of a a last thinking, I'm comps the might year. quarter sequentially, second the out that curious you perspective, think auto come And two another have bottom when business? dollars playing of dollar see a the business how from aside? for second think Yes. we or or I'm year the are

Rob Willett

Yes. Rick. Okay,

various going on depends happen what's that to markets. think in I

on you some of kind color give to that. try I'll overview So, an and put

market capital the So, other issues is The production relatively was, manufacturers and to they us, so back anywhere, Europe solid automation, be the noticeably more slower delayed. market reducing projects automation then, expense is performing be brand the Asia, this Europe as coming it among China is new than seem rates. electric is year, optimistic scaling better has or than broadly are in in the causing uncertainty for more more around focus soft large owners automotive American been on growth And of the automotive into delivering technologies vehicles. well particularly year. rest to and business

kind how So, a limited Cognex I as as I the growth we plays think that for on say, stronger growth sequential would backdrop, see of very some whether with on depends the I move do year through or growth what But that’s automotive. of out. uncertainty some

consumer-driven shifts automotive, lot I last of did plants on limited cases, automotive where in that’s I going and China issue. if trade, free America and stimulus. some to companies uncertainty of year should investments think would their too degree and through states suppliers. Japanese China I the example. and an automotive I their growth is very than down I There suppliers break the producing in two as notably more see going of year-on-year. that Tier in think shift I three are growth uncertainty is potentially we'll as among is loosens add then an go big to some just And hanging I better the spent we're the a to saw quite capital slowing of so America see uncertainty and And month from in some some visiting and we suppliers, see substantial Europe think terms X up, time see stagnation. over for rather that southern we

phenomenon. that’s think a don’t I So, long-term

phenomenon sort growth. stagnant of will we’re how changes about to to it quickly I returning determine or temporary answer the question a rather your think it’s and whether

Richard Eastman

live to then Okay. a All if he’s I follow-up just Rob actually, And the Thank want on you. question off my Dr. right. call? to

Rob Willett

you are want, perhaps? Bob, Dr.

Dr. Bob Shillman

fully here. I mute. Thank mute. and back Exactly, I was am now you. I on was on

Richard Eastman

have early pieces, is around towards bin the market the And and automating of the seems if around robotic around movement and path the two is the is guidance in was we question curious arm. it picking. And here like the this I'm kind of itself kind market, pick one of other vision tasks seems in some can Bob? do up that one, that to it the both Am somewhat the bit of might maybe and because situation commoditized me movement software a I just end right, software thoughts about that, Dr. point. on your where that’s we pick itself be at XD thinking My of movement

Dr. Bob Shillman

general time, a Okay. as bin to was has that pretty find And years problems there place not solve much solvable. around to But in array, that. rack random been that is top. bin, I was The solve problem difficult a on XX some that fact. student is bin graduate picking laboratory numerous on I there’s of in a all the contains a the in parts since But a is want the a even, identical customers understand bit the it today ago. quite and presented that to of and goal want not was was customers than one it lying at necessarily floor; matter any more items The is same as the space problem, tub a

drop that this and in find they’re that. moving been calculators XX have whatever, enough, by if hand looking, having it, grasp your pen they years field them you the even over or I'm for and a what his human and in hand do, human, them the appropriately bin to head, can won’t a ask Now And and to of grasp if even out low so impressed humans can your everyday the things, packets ability pen, packages their now, human. The it even they the into do if in a quickly. hard without it, more instead pick more of which they it grasp

out the that the we’re somewhere in out a as well in and today of are pick So, is to orientation are bin and bin, as there the which things facing problems calculators. various contains there there’s mix calculator goal parts other that

does are, do the even how it sense up. of goes do there up robot of it picks if the it look to weigh, as measuring arm the pick they it's say wood then Because from and a if point piece more the a up it feel a picks let's by let's long, foot and it Now say, there end hard beam, in the time the end, to out, it they it the by the problem, quickly move back dropped to to problem thing the have can today part locate how that into this shipping carton, try a humans to system. in have things the the will that's into first hand though moves to machine it put justify to requires because robots turns find what the by understanding importantly, or touch look like be much solved, the to and it require form vision automation importantly, to how beam, and entire

up, but complex. complex, does where is where to vision pick So, the it part to not determine only it also very vision is then the the supposed problem up, very that's have to pick

and into bin, a is that in it kind What arm path it pick such are get is won't gripper there put not drop quickly, move be there knock ones, so kinds Well, of the way a there in the to the up bin, hit robotic of the they they to is bin the the Next, ones, suction the pick up do part, Then, retrieve how other hard used and to variety on problem. when compute the staging there move part. problem, grippers, and to the to different and of are they not the gripper is and mechanics gripper box. it, then you it mechanical problem. the squeeze going back that how which is harder a very holding

problem. very solution. yet And I'm So, a put we've that a been difficult puzzle, afraid of entire, a beyond for and try it's the cars, don't say, of that, we with to And will have problem. I this the equivalent to pieces is again almost I self-driving But to very, is has pieces that would is which companies although so believe together this very anyone variety difficult into it all those problem. technological years. state-of-the-art few remain solve working a

Richard Eastman

be problem, And the approaching identify more around is is vision seeing to it to you're is clear, the is it just that or how Cognex way currently XD? XD

Dr. Bob Shillman

most to going need have because the you're part which difficult because pick on you XD the top, to No. up. In case, determine that's is we one

using our But, to been technology be have major we people doing I be before the it's who it’s long time. design, re-purpose now long own layoff bin or some going a work So, can believe to own on snapshot picking, to advanced the of time are these going our this XD e-tailers sensors a problem.

Richard Eastman

you. the got explanation. you. Thanks I Thank for

Dr. Bob Shillman

You're welcome.

Operator

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

Jim Ricchiuti

may growth rate better, what the Hi. about Thank have I growth quarter it, or did I past missed this been for wondering you've rate? know you. I that a in logistics the afternoon. historically Good provide was business was growing the but but XX% quarter? you talking just it

Rob Willett

rate we market going Hi, in in quarter. I'm give that logistics growth say we to to we that on with serve. Jim. rates quarterly very happy not the are growth We're the any going achieved specific

Jim Ricchiuti

to a I Is business Rob, I'm anticipating perhaps ended that it significant look customers, times factories. of the customers might better more you’re the some some I'm Okay. potentially And to some about consumer trying larger kind now. understand Thank new market right of that know this a the a little investment it we of in could electronics if in just at all or also year. what to market the wonder of the dynamics new up I trying weakness happening the vision. repurposing and decline customers some Machine other your to be transition as sense these Vision. of as get being in existing companies, products, you. for

Rob Willett

Yes, Jim.

the a far most heavy to focused but what our you’ll from machine speaking, customers there in the expect in and customers region the about deferring of in in in of business decline electronics and making notably manufacturing. So, also lines, European some we because can are impact large they’re seeing a smartphone rest see particularly consumer and we capabilities see. purchases vision this by is new And and as number third investments year, we China, not large on strangely upgrading as year, investments Asia. we’re in said, this existing and us are as Broadly in their customers

electronics consumer So, vision Cognex, and companies plans remains opportunity for and have machine require that to a automation growth implement. the product

although lines being very we tested So, reality, wireless see newspapers charging, of technologies is we existing processes processes screens, improving in innovations the rolled certainly foldable today, those and hardware some in long require manufacturing retrofitting readout run. virtual various companies’ such not complex current this may still new are more products the any productivity. really they’re in all And And labor we’ll on as more year. and the intensive. focus rising still out and in massive sense wages, Certainly, that

being certainly being. built also And new those mean, is in electronics focus reduce seeing other the certainly start China read U.S. areas facilities on that’s but to diversify and are emerging from another in away investments here factor just so, markets manufacturers other going we as too, India about to we’re even I companies some certainly then to areas. And on cost.

it’s say lot there’s focus improving when So, than business where business. our features see very or exciting not it’s oriented its much one kind for new yet and brought implemented technology less lines new cost, to that’s But is is us I’d can impact and new retrofitting here as having year. are for the It’s of lines. on major certainly being growth a you market. transitional guidance, and from are of There our a where on being

Operator

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

Joe Giordano

the wondering it’s just update integration you if something capabilities an some working towards. deep-learning guys has into of it’s platform. was from had been know, your shows and In-Sight guide that trade I I you seems

competitors are I to to think some close of something similar launching your that.

there able onto a just So, update any that single being on technology put to platform? all

Rob Willett

or comment -- not about product or comment Generally, we may may we don't future give coming launches, be Cognex. from don't Joe, which

would we're of a some and very excellent It’s we I from think comment not something deep-learning excited of are we're technology view leading that's our on. point get an expect technology. product what in area more course and that accessible So, of and include. growth about to that one that Certainly, we business. seeing with use form going what to when launch we easier But, roadmap in technology making be specific would future would and to might not products in I'm

Joe Giordano

Okay. demand. When years, meet of I is you think to what couple about balance sheet crazy obviously -- were hiring and where last your you've over like done you’ve the

in should of a in terms perspective, hire this so buyback surprised do to a human are think and feel I positioned guys like capacity how capital you how of forward? capability? financial that to little going you no about now from quarter, your terms see So, we was

Rob Willett

the of buyback. about comment issue, the to I’ll on Joe, invite then Yes. I’ll talk capacity John sort

we’ve XX% you're year. capacity We potential sense phenomenal So, in been to very -- support growth the we in heavily exited and business. in a the growth XXXX. of we We in business. were business ongoing a the Obviously capacity saw right, some as phenomenal under we investing didn't level as the that

some ‘XX. we that then seeing hire, on So, to great that are going you're Cognoids and slowing develop. reallocating And business individuals have be what we’re train take with were now and talented we we’re significantly expense very capable down effort and resources, doing catch-up cultural we’re to and is in our fit hiring But, growth.

business high as great assets the process So, they're in going areas of to of for such towards that we're the growth us logistics. redeploying

certainly to been call. slowing think see, we’re discussing this on So, capacity want we going to on and us down we what hiring for expense gives based what in growth we've future, extra we do but and it

buyback to Now, John it on I'll QX in turn question.

John Curran

we Last we as we Joe, our mentioned, the far in year, in So, got QX. got dilution. market pretty ahead purchases, our you of weren’t

end paused quarter. the So, of in a the be into had market We’ve plan we kind we grant at buyback in the during QX. significant of on last the year QX. But and to

the we'll So, market. in back be

we Board. as the million $XXX Just authorized data by about a have point,

ready to go. we're So,

Joe Giordano

math quick a one on, just sneak could I If clarification.

Just in I your down year. has dollars maybe parts a consumer been on effectively think other basis full electronics last business, you be mentioned down you a similar going amount third how that a above business made versus to or base will just year, of frame and much so by was it Can XXXX business gone revenue XXXX? be is because in this

Rob Willett

Yes.

year. that the was I $XX revenue million in market down last directionally, think about

I to similar so I we think going to in might the would do that third little may expect think ‘XX this The down. later see was was you and a we And but we is question it generally. question it amount down work had answer struggle answer and about it in what what offline little year, a a call…

Joe Giordano

Fair enough. you. Thank

Rob Willett

try We’ll to aggressive.

Operator

Buscaglia with from proceed. Andrew Please is question Berenberg. next Our

Andrew Buscaglia

[Indiscernible] quick A up question year single your of customers. vision main XXXX. in guys. to flattish Hey, calling peers, a some mid machine some on digit for

you mentioned differently, you think share. different the you can -- from why moving what’s on maybe comment publicly triangulate that Is in delta niches playing how do they’re but don’t peers? they’re it So, you’re traded the your commentary what’s there? But -- out you keep going

Rob Willett

really peers publicly aren’t traded think of Cognex. like-for-like Andrew, Yes. there any I

And other publicly different our than deals is really phenomenon publicly smaller very well specifically competitor larger are traded is different markets. Certainly, with to data deal much traded and they course the think markets see none ours. more diverse them or that much may map points be may And is. exposure of companies there companies, do, their I business electronics largest but we there similar what and other then market their companies, of think Cognex may KEYENCE. be I to in from but

you see affected different may ways. them in So,

So, I Bear that the world. think is vision the automation about most when that think respected Cognex serve. share, largest about the we and mind provider in we in we machine talk accounts

vision Cognex and it do biggest So, part certainly, what’s or their gaining whether might good where But feel pretty about business we we on going much be depend. the have all and of a share. plans not of their we have with the may major use losing or companies that use machine very if

consumer we penetrated business obviously have specifically I think, some very, certain electronics very the and related businesses deeply my large accounts. where comment to vertical

losing per se. although is down, our So, certainly account severely share confidence our share business market that’s in that driving that not or we’re

Andrew Buscaglia

of are M&A comment, you’re things could still Will if valuations you maybe kind more a you free And you strong, you looking seeing comment at, but a cash are year. lot flow you harder inorganic of on like are looking it. cash like what there? could consider, are opportunities. growth Got here, And down you getting is comfortable and

Rob Willett

for ongoing opportunities fast or our regardless this is acquisitions an growing on growing of at business moment. at look growth basis, the not really case whether we in So,

a learning and particularly through which XD. in of and deep small enter markets made structured a six at we good very engineering growth looks a corporate represents last markets the acquisitions really market that approach with and Generally, and what they've a not activity. like with what in acquisitions us technology smallish in existing a the opportunities maps driven acquisitions companies couple flow are we areas it’s that for really and -- own that’s so. team employees potential. great we talent number So, And We’ve markets, lot our growth adjacent of bolt-on we’ve have to might development a acquisitions. or lot, of years seen through been and our And

There we and as capital to we So, amounts that's opportunities a direct certainly list. of like. I perhaps more at larger have And question, I the to larger become to some your available, are, certainly what And acquisition companies refer there we’ll of type out acquire. would to shopping competitors, speak those that could think look then them. acquire take those as

to don't us on excellent at we acquire, underperforming our there or our culture. to business. to are millions is of factor are if companies bolt do do acquire because consume we become of that that's what dollars success want and we less cash like available, choose they believe of certainly certainly, when of hundreds a We But, But some and culture so. essential long-term selective as to look kind highly we in those. might so we would a that for to than big So, to Cognex and

Operator

proceed. Our Gordon next question Haskett. is with Please from Karen Lau

Karen Lau

Good Bob, China. with start out Hi. I it to everyone. afternoon, want

and vision in business in machine Can talk from how you business other are vision, machine robust China very for your oriented markets. big adopting longer towards electronics and benefits mentioned still you consumer like still about way? the any of industry is any adoption seeing Chinese term benefiting auto, You

Dr. Bob Shillman

Yes Karen.

right we've terms in years, only in So, our years strong its of liable size. recent two automotive electronics, automotive, and in electronics over And business very, that markets in then, where very other it’s even widespread that China our in in growth solar seen you're in last the largest consumer three vertical and really are a very good and have other in lot for this numbers serve we medical up some like of as instance we pharmaceuticals, fast in so an markets adoption growth type environment. device, markets that, very just putting China, geographies we see of China in

opportunities So, small potential bases we’re big I'd that certainly sales those we a force the able be that off to growth customers. seeing see. it’s more those reason say, are build all to reach And

Karen Lau

seen going any has its dynamic cars, cutting on manufacturing cutting to of own be in So, in as there so much after past you seems CapEx, Chinese electronics, have out obviously in in Year? which like taxes. or parse investment or prices sort consumer Because sentiment New you stimulus months China, improvements the

it like of you're CE? guide, improvement from your seeing in seeing but sounds improvement all any you not outside are any So, stabilization, at China

Dr. Bob Shillman

yet. would I'm that market come not turn things say. what investment same the reading That's I'm on and seeing really the back No. the I

Karen Lau

automation, I broadly, electronics all? slower any I have of investing other guess, started any at the anywhere types far call Okay. out more like like hesitancy you auto, guys calling from Got detected verticals in business you guess, towards in and as customers it. But, conditions. in as

Dr. Bob Shillman

I’d would say, I refer a of mean, to. geographic is I what phenomenon more it's

sort a in XXXX. across general, I or did a look I not automation of would there's it's not right investment think, in that in say, year in ago Americas -- level our business, see, buoyant say now of back as we I

a that's So, you see that too. think case -- Europe, a and read the hesitancy in about we I Also market lot of lot see

in start than far the be than year, European financing little you Southern at to see has there, the by; stronger this trends some to global less customers even still year. think market, done global, Europe to is and think, in in a so are customers, are of or Germany terms we seeing builders about And I can that we're hesitancy, appreciate think Italy, machine or there are many business better bullish and come where we quite particularly may of some our another more I expected difficult expected particularly thing automation in I which bit very on of do certainly or then, Taiwan dependent southern the investment Korea, plans. maybe in there Japan us their big in China. But or

hurt So, their if at can it those companies or very back paring those investments waiting, customers distant books in geographies. order are of

Karen Lau

of losing one, last you're year. not way much sort to from shares, one one business pretty all? maybe towards just number that your at you're of some like XX% like some consumer makers, share, down one-third But, very can from that you compare, suffering has your some trade right? suppliers, not down talked like -- drastic in about like electronics their electronics. been U.S. think repercussions partners mentioned expecting as then, I to losing And any realize are that's change -- kind you quick curious, down temporary, consumer or business be of to what trend Chinese is this diving to but smartphone maybe quickly. impact the I’m but just I you're on any to And understand the I last peers earlier the not -- after market, that year, you question

Rob Willett

do to qualify account is is, share, I what any we're don't So, to want said I losing what think want I Karen I I overall. think

Although companies to exposure we may than other larger customers, some greater do. exposure have

I So, may be think this, confusion part in overall. of that the

different a and said we our the I and on, when CRM business than look all down the than have would the areas. accounts our rate seems at more the I on to exposed have is, think might some we're I in based as business more when that at back funnel year, we're businesses user we past. exposure So, a customers other more at may system, is and at seems to say, we on Japanese exposure and in But, working look where have I our third, and to certain business look we not other sales you end look and electronics that's our expect I losing find say customers, we're having, we're exposures done, -- the and and where less

that's case. the So, let me say that

maintained. our basis we dollar for dollar decrease may is the share overall share on on find while think I our market, account

Karen Lau

be on, consumer any China? I potential -- If electronics business trade repercussions any impacting your may in that move

Rob Willett

clear stimulus-led it's out what’s investment me but that's to parse hard -- not consumer-led, to led. obviously about very It's anxiety government

answer don't know. is I the just that think So, I to

Karen Lau

Okay, got it. Thank you.

Operator

proceed. next Our comes Paul Morgan. from Please with question Coster JP

Paul Chung

is my Paul Chung Thanks taking question. for on for This Hi. Coster.

So, the now for there line focus your you expending on kind here comments, how you is as some outsourcing doing slowed mentioned. costs? some mentioned second spend is XQ. and on something QX it’s bigger in that you're should of back, just It year? like in and Did notice has top full kind your going about pace looks cost, a But hiring like slowed the half of think on engineering we of

Rob Willett

to growth full-year, for earlier the as higher don’t we I So, are see guidance mentioned down into an expense resources expenses. but allocating give A, you we’re question, can we our areas. slowing And

reduction, towards kind cutting XXXX. environment, are. as this cost we areas. not of seen not higher where a That's might like It's a of think of think So, pivoting growth and we should I say we in have resources talent certainly a serious

them But the a bringing lot starting some to new focus to a productivity heading lot not can productivity areas. by we year a for up of which are board lot Cognoids We high our for And through allocating new on it's just on are resources for invested we to we invested driving business bunkers last speed, drive and a system us. in means. more growth and more getting the any bit ERP

So, pause I is rather and think a than reallocation it reduction. of as a

second half relatively any than of get us growth as modest. supporting quarter-on-quarter So, I be expenses wouldn't rates year the we think see I the to through will reduced expect

Paul Chung

had don't an years. And think lastly, then, you’ve I Analyst Understood. in Day

why and any on agenda? So, now the preview Thanks.

Rob Willett

we that's the much years. an case I years. So, three And have Analyst for every think been Day maybe XX pretty

month. we're right it next to have So, on time,

into read there’s nothing so, you looking many to Natick. really that. -- bringing to But nothing read much we're forward of to very And to

so show You changes things we will you September. a lot have of in many see to exciting and

Paul Chung

Great. I appreciate it.

Operator

question Please is next proceed. Summerville Our with Davidson. from D.A. Matt

Drew Haroldson

on is questions. This have for afternoon. Summerville. a Good of Drew Haroldson Hey. Matt I just couple quick

general First, life industrial can you logistics, such sciences, outside regional about talk consumer-electronics, auto beverage, color? market and areas specific and end provides trends of food as

Rob Willett

question very broad. Your is

I'll some Cognex, about over end At So, term. really a on very can focus long highlights. machine markets value think we lot where are a add vision thoughtful I of

what vision. ID, it with they market with This machine we’re is a a pretty bring interest time sciences with that case. that. you where some basic at So, on that's companies make the pleased machines very has is fluids customers we've and market need a that from do human require ID focused low price seen more some Life is market And and point markets of pretty named, look market the products and and generally we're much blood analyze the that as investing such reagents, bodily And to the been more the on used certainly where generally some for lot to long progress space. making vision. and in machines machine actually we’ve

is focused measure and name would market a the been to wins you design to XX-year this to for of, while. vision. they millions success include we’ve that was So, do, X for specified Cognex potential many over a what each on machine by into machine And that we companies a We recognize tend see they of generate when design period. the and dollars large

the of material last the year, European for results we thousands of starting our dollars in that wins So, revenue contributor all company won we big new a last have periods. to not XXXX. few believe major machine revenue hundreds generate actually dollars design generate expect one million as in life or years. a it’s now of be so projects millions substantial we larger them one of as XX we year, the then, And per potential of to And with not OEM will per it year to but several but won of year sciences

in is So, in certainly. other be take want about that’s the about where it -- vision have I’d will example that we is pretty and recent but And Analyst in perhaps at my can entered comments I provide, view we Day anticipate we market calls something you we the front really on with a lot have benefits market and terminals. haven’t the a from one and would think logistics can an it machine in play product away where long-term talked capable that ago It’s or functions future, integrates mobile new machine of design market smartphones of the and three for about it’s powerful a interesting for very years Cognex and manufacturing. our those we into advantaged doing vision

highly a if it’s off of but whom those lot in in and we’re of expect fight investment counterfeiting is for kinds a of buoyant vertical machine seeing customers very we business, third that’s small in those to helping tobacco to market regulated Cognex lot of point and there in like where where a business and powerful of is going the seen growth to. this sees double I’d that that’s a So, a And and our want instance. base, lot a another year problems relatively market markets growth. a market of example good we’ve diversion. fight Maybe vision is

see potential, in each results to examples long-term investing seeing results that they we where we you growth even in we’re the that short-term, So good may published be visible will and the though be not we’re those and quarter.

Drew Haroldson

become are that as happen my part then, a mind, need for terminals in to second Cognex? what of your meaningful follow-up, And quick the question, mobile things a Thanks. to

Rob Willett

have experimenting of came numbers of seeing they seen bought can market resonated an what think, products we’ve and we been with innovative small do customers So, with with them. And that and with lot of concept. a kind is I what have to disruptive and them have

from us need players some So, is those might year and that to five customers they buy the X,XXX sure can bought convert market. what large they we users make large that because we that a into of do may from in

key our convert will to technology be our adopting the So, are to with those ability of some customers it. fully those experimenting from who

Operator

turn closing back for the Shillman over will of now I it reached have to the Dr. end call. comments. We

Dr. Bob Shillman

much. or even phones much very down slowing be is Thank cars news that seems of profitable very XXXX. be is, new the to it's sale to the of sale The Yes. you Look, seem growing obvious slowing, good going maybe first be slowing revenue things in does though our of of are still in whatever. in world down, manufacturing, that millennials we're all, and to

a and so. high or buy. The quality we expect is be very there of We And times have will low and want to cost, to world aside that, year in key to back buy role consumers highly the plays to from into products, things everything be automation. get needs in cash of that and way And virtually profitable Cognex positive good also flow. we confident more the you only automation a through are

making And sure from we the vision economy line they're when it's that a are and need or to lose machine thing customers manufacture expect not important Rob us back track any lost market but keep vision. track companies as the pointed our new to on not products That is manufacturers, up improves hopefully when customer. Cognex So, start machine Generally the haven't customers. when to stuff. when speaking, growth coming of get reused, we of are the repositioned, more opens vendors, and a things, and new manufacturing to very never that out, we that they generally products

ones, So, what have in of some that's seen customers, see in reflected what we our buying and considerably large comments particular is you course less, today.

coming you report Okay. bye. the to results better quarters that call. your Bye, to be time. take at the attending I questions and again to on Thank for in able hope

Operator

participation. gentlemen, today's conclude and for does you This teleconference. thank Ladies your

and your disconnect a wonderful may lines have You day.

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