CGNX - Earnings call transcript Q3 2019

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Operator

Greetings, and welcome to the Cognex's Third Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Susan Conway, Senior Director of Investor Relations. Thank you. Please begin.

Susan Conway

you. Thank everyone. evening, Good are Corporate and Cognex's Controller, Stagno. today Vice Treasurer Rob President and Laura Cognex's us CEO, President Willett; Chris With McDonald; and like Investor Relations release at investor.cognex.com. our Form I'd are website out report XX-Q our quarterly on earnings on available point to and that Both detailed our information financial contain highly about results.

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

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

filings, for these most to You our recent including refer factors. XX-K Form risk our should of list SEC detailed

With that, Rob turn over now call to Willett. I'd like to CEO, the

Robert Willett

Thanks Hello us today. joining for everyone.

commitment. evening regards of you to know to on unable hearing Bob Dr. to Chairman, call. Bob to used us with call. welcoming are and participants join he this I looks Cognex's Shillman our prior is his to a earnings you He talking most sends Dr. due forward our next

approximately entirely was roughly of consumer said, result in revenue can with which the a almost XX% attributed top at ongoing our slowdown QX our both end sequentially, revenue million, by QX XXXX. July electronics, The delivered manufacturing expectations, line from our guidance. in to decline the decreased Cognex That with results, year-on-year be $XX of of investment. as down and

continued Europe industrial China. persistent, and sectors due in and uncertainty to automotive to The and trade conflicts, particularly broader weaken the economic global also

deterioration XX% by which was approximately partially growth year-on-year. by that offset logistics, increased in Now

long over that confidence strategy continue in term. and logistics at believe rate we grow have XX% to the can We our we

In in e-commerce are compete starting to effectively. Cognex's are supply retailers heavily orders with strategy logistics, their They to well-known their and competitors. changing they invest to implement to their automation cost reliably looking fulfill effectively rapidly, to products and industry-leading logistics are traditional help them brick-and-mortar automation more chain

Near-term long-term vision is potential a market conditions, for notwithstanding Cognex, machine and for unchanged.

operating long-term and target margin XX% - intact model XX% annual remains Our growth, and margin. of gross with operating compound mid-XX%s a

done inspectors. Now, few to engineering learning technology a to to outstanding like major deep acquisition about believe Sualab that recent a in company tasks of I'd say automate on It the words Cognex growth Sualab, years for software and like few is great this type deep expand we will visual is our by specializing human are currently excellent of in inspection be do. acquisition that an has cultural fit. a moments, the driver ahead. I'll technology in an a We team, learning that also

inspection thousands tasks work visual on time, manufacture. cosmetic during vision that who's to first performance defects to it reaching of and level identify humans to a the For products globally, highly perform is replace of tens it is machine of allows flaws repetitive, their

positioned. that rapidly, and The fastest $XXX per Asia, human replacement products, market at revenue segment of million estimated market particularly of where inspectors well machine vision today, learning XX% the in components is automation, finished and is The largest factory using in year. is we serve Sualab electronic deep for growing annual believe for is growing and we of by

technology and team inspection deep dedicated not to applying only deep The learning the learning of to it application, inspection capabilities Sualab the extend size of our for more tasks. tripled developing industrial acquisition than Cognex

engineering process. vision, the the tasks deep departments ambitious learning share and manufacturing contemporary our are Upon highly in inspection in applying passion are smart employees new of energetic in closing, XXX machine and to skilled and we welcomed for programming to whom both approximately techniques majority

Reto Sualab Led led in will Massachusetts, Kiyoung, our team continue closely by Systems, by and Wyss, its acquired the The team headquarters the Co-Founder downtown work is learning in Cambridge, Song will with which from engineering based to Seoul. They area deep our to-date. established for ViDi operate this reason which Co-founder in acquisition we development of in XXXX. our efforts, ViDi is success

price are was on $XXX deferred until in closing. that of date. I'd Payment We share paid a you. The the a details acquisition like few million cash $XXX million remaining more later Here at to with is million. the $XX purchase

revenue by team, engineering experience Sualab's developed value of its six over and of years, large applying the justified the is at price technology Asia. is last its core technology substantial high very that in the companies Although modest, company's the

We expect two model. be fit accretive technology to and Sualab years looks like within acquisitions that within it will

the next to topic. on Moving

We published of have an served updated view our market.

find Relations website can on Investor You it at investor.cognex.com. our

billion. Cognex's $X.X of market machine for estimates vision served totaled Our new is

narrow our what a can serve are current of This in a now with addressable of new previous than product is products. result growth XX% both underlying that estimate, opportunities the with is Cognex estimate This and as definition offering. our we higher market

the and a Despite served expect technology to market our our customer grow outperform of result teens strength relationships. to we market the as our of long growth, superior will conditions, term. near-term And in challenging the continue market believe over low we

I The for Now, call turn will the yours. financial over details microphone third is Laura? the quarter. Laura from to

Laura MacDonald

hello everyone. Rob, you, Thank and

manufacturing. automotive high also particularly QX factory range. from offsetting automation was 'XX. was QX in growth broader Revenue the market logistics. $XXX consumer end lower expected the year-on-year at in declined declined of Revenue Revenue Partially our XX% million, shortfall and electronics, to in from due the a smartphone sales

was prior both 'XX QX for from XX% compensation revenue. slightly incentive 'XX plans. and down from margin Gross expenses Operating QX and with reflecting of lower consistent expenses reduced the quarter, 'XX declined QX despite

the We product prudent with continue development to be spending changing without discretionary plans.

both decline revenue representing year-on-year a XX%, to and was QX sequentially, in the lower due margin Operating environment.

with $X.XX compared 'XX $X.XX were 'XX earnings QX QX and Excluding per $X.XX tax discrete in 'XX. in items, in QX share

Looking to logistics. a strong quarter's due from was increasing Americas lower in year-on-year noticable revenue in mid-teens most The electronics geographic from this Europe, than year-on-year revenue more at year-on-year. XX% impact perspective, declined substantially of growth contribution where consumer the growth region the by was best-performing

purchases made certain from changes revenue the in continue China Rest Customers to capital have defer procurement in their our by for flat Greater would This Europe, plans, in 'XX. to relatively QX low-double from Asia, consumer China Europe. shifting If less spending with China greater China resulting electronics in Greater extreme not their year-on-year. of In decline revenue in customers decline digit been and was

organic strong the by with after to growth of with no our cash and is all to quarter in purchasing Board Directors plans million ended and cash sheet. our ongoing the shareholders have dividend regard, XX and investments objectives November to balance sharing we through $XXX We our increased record stock support buybacks capital and dividends. Sualab, our on enough Turning to debt. for M&A per In has November success dividend Even share. quarterly and shareholders The $X.XXX of XX% that XX on our payable

back to the turn call I'll Rob. Now

Robert Willett

you, Thank Laura.

guidance. to next Moving

$XXX contraction significantly and reported $XXX quarter will that revenue China. the expect million, pronounced particularly fourth for of revenue million QX United automotive. of quarter markets this be is in to with continued outside We generating revenue most XXXX it making million lowest relates States, and to are $XXX today between Compared deteriorate in the year. business and industrial weaker of The led by the

is in XX% growth Unlike QX, year-on-year result large delivery revenue the though Even don't the by year-on-year offset approximately major This shortfall of expect we grew to a new revenue it sites. overall decrease expect customer orders from QX, for logistics, logistics to QX. QX. of in in delaying we

points gross be consistent XXXX. for team, expected mid-XX% aware and QX. like to be to Operating Gross in Sualab a of expenses by expenses sequential tax I'd in high-single the to basis, expected costs is recorded digits X margin XX%, for expected for estimated margin approximately excluding with the attributable rate are is tax QX tax you the discrete The incremental associated increase to to make items. acquisition. on mid the range, percentage to items with amortization discrete to two be of effective expected intangibles are

came corporate legislation European by which changes passed the our item because The structure, to in of first both Union. tax about

So excluding discrete rate, tax million of $XXX benefit a and $XXX effective discrete going a XX% we and that million forward. tax between our events expect slight one, increase to

tax second time. to be to because not is more expense align million The structure. discrete decision to between of move detail result items of million. of this evaluated is item our acquired that technology These Korea have we do $XX tax at $XX Sualab continue and with a expected in to corporate out This our

ahead. for call questions. With we that, open Operator, go will please the

Operator

Giordano with Joe the [Operator proceed. first question from and Instructions] comes line Please of Our Company. Cowen

Joe Giordano

you something. that and ? thing that in in Rob, out Is it could just or is gets visibility trying few was you to fixed is a just order after you logistics something delivering big something that size pushed one-off that or see into just quarter environment the it of have found late general, indicative that recently, the kind how is just I'm of a weeks this it

Robert Willett

Yes.

of order, substantial let a you give a it's color it So . bit me pretty on

to but QX this customer So a take revenue in new delaying same last of delivery year. expect major logistics overall deliveries of did lower in the we And strong customer logistics from and orders result large as QX, growing, substantial formally year-on-year sites. of

So some but earlier. visibility in of some for situation awaiting is many us, result integrators QX, of year these probably revenue run-off that major quite and books may to in next delivery, which that of that specific have not expect had now are orders see more we understanding we recent our

growing strength now XXXX. confidence broad business, run, we grow customers but don't base over So to grow confident in the a for we to at that very, the that - we of And among logistics long full very we see our can remain who well expect rate particularly in year it are continue XX% just indeed.

Joe Giordano

is just I get one that order you right? this is thought order you order appear, Can an might an thing received, have you so have This not though? didn't an is that clarify this already you that there,

Robert Willett

that's have have coming We very of it, it. all pieces, order right. in it's So we don't many it's much many, of substantial, but

Joe Giordano

guess please. my follow-up. And ahead I go Okay. Yes, then

Robert Willett

and the sort rate going revenue moving year that it's out just that about I our this down timing to plans, for of overall their which and customer and really to growth plans was full with is say year us do in their QX logistics. changes of I the slowing unfortunately for the think of for

Joe Giordano

My that a war weakness this of around does if stuff anything to X of be you and X change out, like, around there guys, what trade do of specifically follow-up kind might and of - you like near much lot that do? is talk ground deal Phase does any like, agreement anytime of do sort think of on the some on How Phase the the China, attribute would X term? obviously, coming you for

Robert Willett

customers but difficult region I for growth It's delay that's our China have capital expenditures, wait mindset, to us, orders, real call, they're at there slow see place after your and so years seeing. I say, softness of to to and And real they've so the the moment. yeah, for a and many we're mean have yes. in and to engine being what continued a is very certainly, reduce

previously out pointed benefited that have when in and our purchase Laura electronic started revenue to QX purchases from customers I in them from out consumer they products think Europe. China also China, of And Fed bought the from

on So really the is. that better also China making it numbers look than be in situation that's may China

Yes.

the how happen And no that before. and do business whether come don't a a a back is that very if general that long-term see think return, way confidence could quick to I've we if this will can we've things gauging of will seen recovery, unlike direction. could momentum that I in business on different I our turnaround quickly. We just do when know of seen my really situation of on what come other But have see experience when experience the but So, my with China, and occasions. in is quickly change number with I

Operator

from question comes next with & Baird Robert proceed. Our Co. Richard Eastman W Please

Richard Eastman

expectations how piloting a the it They deployed maybe Rob, is And all on Is me modest have you quickly website. a a revenue consumer electronics in phase at impressive And kind their application? side location? can color just - pretty around presently curious and put inflate still little Sualab, how the on kind very is customer was a list the their itself it we with could when Or big product equipment a deployed of just it majors the appears. of bit? I'm or or through revenue central it deployed. looked little at the walk that, given

Robert Willett

so strong SuaKIT, vision who a has application Sualab customers they machine like So, And team deep business ViDi, sell software. they engineers of right. apply learning it, so model sophisticated right, help have very

So - trailing that, to the vast over business today, is majority that the related the majority XX of right. months,

But to to our deploy what and I five I and the the this scale think over it think years through help last it more on they're see machine already is have in so. way the we to excitingly, technology we business that builders or take potential much in that consumer electronics working

very their And be that integrators in they help market. great machine have builders we, a powerful then application-specific speed products pipeline who nice in of And of and course, think very this network we that have some will can up. changing them related

base of to to interesting coming I with strength and help application-specific in business a that and apply years opportunities are relative should like a form describe to builders well the very is very very and technology then through that there differences them. we be compared positioned machine would where scalable in kind more good more much some So some very ViDi, products

Richard Eastman

I issue And predicated raised purchased a electronics it the purchased What China occurring, there be that follow-up why in that shift then Is versus presume and - was Europe. the on same it out application? a there - purchases of is was purchasing are will you just switch? it product a for a for this where currency issue or China, about prior customer consumer

Robert Willett

subsidiary things, limited perhaps seeing in consequences due of I what certainly the change from we're the want us to you internal But sort business, tax on some Europe. nor of - they different. up change the just in decided rather I'm can speaking. show specifically doesn't we is work trading about than China It purchase that have in would in and locally really they mean regions of into to Yes. of other - profitability large nature do, out it really it the our see in a does generally does I say, the situations customers. of and workings it - case, they where But our they've think

Richard Eastman

Okay. And now it started this quarter?

Robert Willett

Laura?

Laura MacDonald

this quarter. materially Yes, Yes.

Operator

with Please Morgan comes proceed. line of from the question Josh Our next Pokrzywinski Stanley.

Josh Pokrzywinski

to a comment. follow you more I just want the on, some I lumpiness some there. follow-up of logistics through perspective It to side - like first sounds of your where cadence? color there, want analogous kind lumpiness really this there going just concentration all, on guess, the Maybe the in but that from large electronic kind about customer just case? of can to talk pushed, us driving related that was kind is be order customer do of to something with customer to we quarter-to-quarter got the one see large of one the

Robert Willett

okay. Yes,

and logistics and have us logistics how customer in orders amount of, in terms order in often lumpiness them your potential today, would on they in of million can our quarter. automation million a customers, the mix see $XX those the of who we not important of question business. And a out, how large right, be business out. $XX their play of how out in ordering terms unusual that's are them right. to I plans from does we of be playing a In sort kind is handful think, necessarily based in So roll that It

probably forward. is reality - our quarters, revenue in a probably logistics potential the does business of I that out So think think of and I to and going that's have become of kind that move

overall overall, many, is business amounts, our to customers have actually we very smaller looks business. business is it, look up And dollars. small faster few who growing at be base that then, buying might we consistent than a And when that much million that many this good of and is, it more

becomes integrate network to go widely, we accepted, our known and probably We own technology and expect as deliver capability a easier develop integrate it. as that our to and on quite more to

customers, our have think referenced today question I your name, handful answering one - by we of here, I and kind as but quarters in be think lumpy in give will certainly others, you may plays we the a But try not a we we'll revenue and of that coming out mean heads that. it up and can of in to just logistics, to

is We're on in really all in strategy XX% this and term for that. long-term the going around based we growth a big see change long our

is, but you think I are sometimes that see need we it that and as we doing can So to really are we change, we as with fact to now it, and comfortable relatively as the move. may explain we

Josh Pokrzywinski

taking folks been general see comp equipment, green in better. Obviously, coming years will then, XXXX a from off weakness back supplying. Cognex definition off maybe we step a different come perpetuated the is some that has of the lot electronics, in are the in of your indicators for And the starting ago, of the a will capital XXXX. weakness kind of rollouts select obviously industry shoots early that just to what be reasons. some electronics broader But there from from - of of But couple kind products then and tough a consumer OLED couple

that guess any on I either with things now that of easy have shifts would maybe XXXX, starting couple years to help of of understanding that important build out kind you guys a more your color XQ from comp of kind you there, until roadmaps, out? that define technology you you Yes, for there see anything to watch don't but of us perspective, share timeframe, can a kind of the get lot product is

Robert Willett

Yes.

Josh. Okay,

point view just a really of QX, reporting what are we electronics business said QX reprising things, really in few I our think get a are to year. better I've consumer but before. next these We when I'll

Always, think the there's would this I that read have a how some stage, a up. electronics in that's say lot visibility on. real we on shaping will consumer at we when stuff interesting have it's I of pipeline

of, is how really for to a obvious the question implemented The as could overall. tailwind and it's be of and able business be help that kind that get and funded things into the we well year,

degree XG its year, around obvious challenges to there new a is very Next technical and always what implemented one, implementing if is are that features.

coming on in, of market. line a have sight in electronics the We

in really year. can ones that again, So make it which drive, interesting each see it's to but

you it you then can screens, - would high-end see OLED reading lot And has add. to of headwinds a et mentioned, the there's And then I Cognex but technology as life and with rollout remain. - some phones, of that as in definitely that I specifically foldable by it think - as cetera, relates think value the paper, then where can that then,

world Those to. is, still largest in companies the we is there one - one - the of can't now a smartphone sell

that that's So situation for I'd potential would an and problem they, a us. certainly like moment, to I is and headwind, that at so but ongoing the change think

Josh Pokrzywinski

I'd company doing that of you just I'll one, that there? before, and business What was any size, kind there way squeeze what opportunity with And it can't, there. to are to one leave missed final like in and now is you

Robert Willett

you assume. customers really world. I by talk don't vision mean, we like in manufacturer think the the I about machine we leading Yes, are can specifically, we - name to but

be - and with doing manufacturing any Cognex be a So or would electronics company is certainly more to discrete a you likely us. few doing million advanced performing a expect that's customer, big dollars company

Operator

question next Goldman Please with of Ritchie from Sachs. proceed. the Our Joseph comes line

Joseph Ritchie

like year visibility quick - much up ones. as on question and by will just that So Will electronics the Maybe in think Rob, few visibility to that you sense year a you just on and progresses of kind just will visibility. timing be? timing have it I'm do XQ? early be what trying the get a visibility just next How of XG. for following

Robert Willett

- end you in visibility QX results. April. in have of April. And a as we'll we'll our that clear that's is of view may have think we that a report Yeah. we probably end we have Yeah, to I earlier a position I give past Yes, that. when years, guess, than be of

experience but the my now reality, of until cycles the of of through the funnel, think of time gets the stuff been kind I in doesn't a frame. rolled that having market of number in overall there view a crystallize - out there lot what kind is, of really is

different We industry. - probably other to markets. liken it's that's our sometimes And that airplane they're as it the down building going in than the runway

So we really as visibility final to it makes do have into build. late what quite

Joseph Ritchie

been And bit new maybe sites. customer delaying the call know then a there about a topic the on on orders I we've a bit deferral? large color we've already, you this us on little - just, talking little but Can give to been the decision why was of

Robert Willett

delays do plans into and with to related and to related our plans more has - where specifically have can't not their vision to right. Cognex changing that those company to But not and - meet to are do automation finding - delays that their are And that roll issues. that is that get It their automation demand. plans what are ability out and those customer not to I - that

Joseph Ritchie

just perspective no get I liquidity to a from and having was a a like customer much guess was managing whether just this it out? capacity was I too sense for or it whether issue trying all

Robert Willett

more is to to and are fulfill very, really and than our very to to those ability have automation product plan do This that books on about much anything anything with on our substantial It's complete with do Cognex's a engineering rollout and books rather we No. orders company. or soon. expecting financial

Joseph Ritchie

financial a for I may you earlier, missed quick on year? And within perspective but two then, the mentioned expectation then Sualab it What's one accretion years. the next one, from

Robert Willett

we've I the - year not next full policy accept the to of forecast generally, have about talking you year. - for think a for don't

would them. us disclosing So But And said it that. currently from for I've looking we're dilutive significant growth we're be some year. obviously, based next obviously, what not to on

Joseph Ritchie

you. Thank Gotcha. Okay.

Robert Willett

be in give still when to a in It's that year think the report as more we'll well. accretive detail acquisition And you better a and I recent two us. we full for relatively Yes. on position years,

Operator

the Our Coster Paul next question line Please of comes proceed. from with JPMorgan.

Paul Chung

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

So, vision acquisition. could just you this or for incremental demand it's just offerings base? if of your the this on capturing cross-selling existing verticals? of and And also about benefits on of here their talk have kind part consumer another follow-up now Why some Sualab a I is customer-driven your the across follow-up. with

Robert Willett

we mean Sure. talked right deal a automation having great spend I time technology Yeah. we I a ourselves tipping at Cognex, - a is the we've view logistics pride think it the that's the to we studying has changing. and point of how applications on for then hit of vision. see way where those about deep kind And tip and understanding about the is machine a need hitting for

tipping space. going another in technology world it's it its the development the and huge has and is There machine technology deep on vision in on of to point that currently and going progress with learning do

electronics. they're point very And of the A really see really Asia. a the provides visual to the is to to - And technology few that attractive it whom potential opportunity now and a in large and interested customers very us. getting work where it's replace market with human inspectors thousands of tens

vision has the XX.X% very around might inspection their to They in effective, be lot to capability while human machine a faced not visual staff effective be human finding XX% inspector being of work visual and catching challenges effective. people feedbacks

us good to return I in the to big is electronics clear we see a and customers on think pretty investment Asia. this So that very

so that's So happening it. I is positive reason we are why this think about the now why and

X.X but also I made engineers market them through and potential chance really think we've in the capability see also and we're ago Asia the more that where to reach potential, really more realize this needed in us we is. needed fortunate had we owning engineering we DVT years that that seeing acquired and

So know worked is it. realized of We got them. There as in at to Sualab that that on we of that. all right looked the really sweet we really spot and we

which we've acquisitions. we respect we Cognex think another of a mutual see don't is of - pleased developed cultural and important fantastic so for buy I one we to because really lot for a fit, were us like to

to that have us that excitement great is with we've the acquisitions of done like that would us in Chiaro ViDi and over and buy creates in We potential them that and made well did growth other for engineers works amount the very something companies great and with and years. and that we've we

we this more we the user got where working what the us justify minds customers each talk than what making the and Sualab drilled, this in more and excited to So more pretty is in we the for we acquisition. know large other, we so market space but understood to the was got our to substantial

Paul Chung

working earnings. free switching benefits year kind you some going cap and of despite and how this months? there nature or things then next material more the temporary this And working your driving gears, about just and revenues cap lower cash see trends structural you six relative last. on is Can talk the puts on takes conversion what's Is in Thanks. to over of

Robert Willett

more Do can Yes. Laura we need that. to ask answer And clarification. you

Laura MacDonald

can as opportunities end work have the recently with and products. delivered year. the nicely appropriate enough now balance I of see, we introduced we inventory you to know balance, sheet level. is from --let me you more clarification. believe, noticeable QX come give that the in we an inventory for let client But our one which of balance our me if shipped Well, in on And has new in our large changes down We

in answer was a noticeable working that change does that capital. one your - It So does question

Paul Chung

Yes, somewhat. Thank you.

Operator

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

Matt Summerville

questions. quick two just Maybe

across of I to Americas, there? what detail seeing respect you're in terms more you granular logistics, with bit would it, terms provide mentioned more be helpful? in the You color can any First, markets have could different little of missed you're the end a just what seeing there but

Robert Willett

Matt. Hi, Yeah. Sure.

we I'm It's market we're much I region stable. of our automotive, not regions, think that to declining And a all rates, the So lot region more helped look and would in year, is as pretty seeing - and we're us seeing end - I I we relative we're at particularly seeing but early saw of say, but other like think this The Americas a delay. overall, elsewhere. it's now not soft, uncertainty

And budget end a is at anywhere that we anticipating a not of really Americas. Americas in biggest we're might the would or of And year. the expect automotive flush our sort significant in market

in have it's in else. weight profile strongly. of very, baked as of more growing mean, higher a than The kind And anywhere that relatively logistics. we a a but that's So guidance. elsewhere, is Americas relatively in home I logistics very business result than better has our that's also where business growth market, a

that's also in helping our this So region. results

Other industries that interest and that and Americas, industries packaging. market business, food just up beverage out well in the other holding medical-related of are

do logistics they they're Now conditions, despite suddenly I will difficult more but challenging currently There okay. and is automotive growing then the much market well, is all think - it, overall growing but

Matt Summerville

been changed being maybe to And that call what geographic, just have that instead would then being 'XXs, instead had down down been down what customer Europe down are able of strategy revenue didn't that you happen? changed mid looked the not low-teens, have between that trying have year-over-year out what would bridge I'll if that procurement maybe parse of to China changes it would like

Robert Willett

lot of a end quite as Still quarter. the come Yes. parts we of moving through the

Laurie, want - some So if try to do add going I think to you per to that, we're don't se.

Laura MacDonald

Yes.

that haven't we disclose. kind I prepared to forma of think pro and information that's

Robert Willett

Yes.

on give yet. really a So read we're that ready not to you

Operator

of the Karen comes Gordon Haskett. Our proceed. question with Lau next from line Please

Karen Lau

OpEx. on one quick a Just

amortization mentioned next we you of to think how to what continue I shouldn't as X much is say there that some wanted there. sequential sort is increase mentioned you that how into base one-time much project about year I of put we due you just and of clarify Sualab, but also the really the in points really forward? is should number

Laura MacDonald

I So answer can that Karen.

purchase percentage the process of X the addition but still operating ongoing the allocation. points to we're intangibles, represents Sualab amortization of So the and of estimate an in price team expenses finalizing

goodwill. be will to you we we tell expect of those will be, to I that allocate So numbers exactly can't $XXX million don't the what know that majority but assigned

small the goodwill. a would would of X% most will expect recurring. X% price say to I I X% be again, the was And there be non-recurring, purchase is that X% most percent, say of that the we would of allocated like, So

Karen Lau

So your points. would the in quarter bit your uptick spending the the looks maybe that? parsing positioning noticed increase versus third remaining core should in little you X terms guide, into points pent-up I Sualab, a some the out read is related X it in or that for think we to of we understand a back? you sequential sequential the core more Or the that projects timing year, of be should like issue some coming OpEx, is that investment more about how maybe OpEx spending next of the as

Laura MacDonald

think in to related what Yes, to the I guidance our QX us primarily you compensation saw compared a to little plans. adjustments understanding incentive

Karen Lau

more I into Rob. you. guess guess year, Thank it - okay. then taking And just next I broadly

doing I to - is to imagine Let's would say good for spending you've have electronics that cutting next have unquote been might doing at whatever been the pent-up come reason in stabilization also point. consumer some job guys back quote you crap. some probably whether But there or year, turn start

to market of So type their margins year year, sense would the trying things be because have that have get a let's year to incremental needs say, of a been you is investment normal so you this spending wise get realized? of environments. more turn Or delayed There sort sort start and that of think given kind do to of expect you expect? the many things start next to would spending been incremental if just better? to happen that catch-up of next I'm

Robert Willett

Yes.

sort talk are obviously think to our we very run year. about Okay. the but on here's expecting year, next kind we're our important not recover not the strongly things to that to cutting I what three-year next I Cognex that to going of strategies. back long-term, can interesting so Karen. But say, markets essential into growth of At It's it's and too question I'm really moment, an it's early

is products plans In a lower rate we - in to our much on our keep essential. been go that able through intact. of And increase consider on spending. fact new and things we track - in I what those think We've investing obviously

big about in of I'm that's in then recovery talking I By growth pull So XX%. or a The the years we times back And look and a is go XXXX, our I'd had now. excess have case when years say seen those like right. we step XXXX, growth. at up incremental in XXXX, in markets where big through awesome,

incremental What that. growth related a margins, to gross need great in there expense are like isn't of kind - to our given additional and add

and markets on if So back revenue. very, we they our good pull had when very should and we I see if recover incremental strongly expect, would as come through

Karen Lau

in of much year? no of what is there have kind catch-up, So spending be of end back to market that next come kind delay regardless how

Robert Willett

that certainly compensation point fiscal think much budget. our thing is incentive to compensation would we're achieving we're where that I paying out - so Well, incentive less . year be relate, not And the out

a then went we in it a be up a back that, will a be normal get up significant to if strong So that. in and step year, back to we'll step will year, it

Operator

comes question the Our Jim proceed. with of next from Please Ricchiuti Needham. line

Michael Cikos

Cikos Mike is for This Ricchiuti. Jim on

of a questions couple Just here.

first shipments range, $XX $XX the this higher you of contributing not end and being delayed sounds of assume wanted million back the for unusual. like, it get larger the of to to large this know million as $XX than as logistics in customer much I Fair coming your quarter at better The one sense customers scoped, to customers, this that boom. if to not the kind higher a that is coming per million customer

Robert Willett

much it I that and to of mean a particular magnitude the of a may multiply kind that X we of that not features line, not seeing plans it be much exactly cadence And order do of to depends as take and that range this a magnitude come right quarter. on get out this yeah, of we're any in particular orders, them order but all We're expect that they probably number of in the might be certain the on would might quarter. significance, that rolled want challenge it and customer, how it sure and if headwind and, of in more where in have by Customers size level south and clarify, for customer would perhaps quarterly a XX, take but revenue to of wouldn't in just

Michael Cikos

I year-on-year. based not you what end? And said guess, XX% have the this that XXXX would fast you see, currently if shift is okay. in How to and I is in expected it logistics on of business growing QX because grow

Robert Willett

at over. more. of are Yes. then We've said, but sort things to we the we've going number you that give play QX. might year a have how I'll disclose QX, we right. is That's a time, view see this out not to where going better we're you told when of And in

Michael Cikos

we that? I be gross in was versus how see, XX% may, is of to okay. on question, interested lower in shift mixed you this should are else it, guys maintain thinking there final front. base just hearing And is I one the margin on QX about if then able the gross or I anything mid margin call that part revenue

Laura MacDonald

in That quarter. was the of Yes. mix a the result revenue

Operator

Andrew Berenberg. Please Our the Buscaglia proceed. next of question comes from line with

Andrew Buscaglia

question. Quick

if consumer characterize that It you auto consumer how to comment electronics? you somewhat can but like So, worse QX. - get continued stabilized, would sounds is electronics, from you can

Robert Willett

would played we expected year we out I what of - based Well told you kind as this on electronics say, consumer has in April.

that at dry I'm kind customers back think out we where played eyes we that happy has at looking of discover had and I them electronics, and certainly, and point, if - very communicated and we we that expected. in at I consumer think, it on year were as think back I where that our to time we're

year. will of a most track in the manufacturing decline followed I and expected. particularly annual And in business of region European XXXX. this and by from is been rest that's Asia. the electronics as result consumer So of roughly But think by smartphone a and XX% we certainly see And revenue year our one-third is it's of on decline to you notable investment it China diminished as represented

Andrew Buscaglia

was And you that I just said in the year-over-year? you prepared XX% said think confirm, to down it, it remarks

Robert Willett

QX manufacturing. revenue declined to for XX% particularly due year-on-year, by smartphone in million So consumer approximately or $XX nearly electronics

Operator

line Our of next the with comes question Battle Road Rose from Please proceed. Ben Research.

Ben Rose

can Susan. logistics customer the the Yes. Rob, of Hi, you - identify logistics Robert product? for and the industry in

Robert Willett

a large e-commerce logistics, retail. you so assume in customer It's - can or repo bonds

Ben Rose

Okay. wanted sure I be to just that...

Robert Willett

it can but handling see or baggage you which chunk - fall is. airport a the not from might large It's other be what of not the business, that's

Ben Rose

meaningful on the today outside they are manufacturers? product just the question Korean Sualab's. have penetration Are any primarily - Do Korea? thus OEM far - they penetration a of then their And customers for

Robert Willett

in electronics components Korea and Korean do manufacturers them, Chinese and are markets inspection. or China Vietnam main overall, and with Their Yes. and electronic really they're

- engineering them like we as senior high something engineers like with us And about they're is, they really level close those really relationships have companies.

performance really of not they're trying of out cost So product OEM many through and machine employing, user, the by though to move are pulled the visual business. are better them their see inspectors it's and who being not, to looking that thousands many end of it's aspect there, of that

Ben Rose

has inspector is that the inspectors or call, perhaps in of earlier - technology actually order final in validated visual of have or in visual one technology. the just the sorry, with of mentioned kind thousands you hundreds the have - I'm by company replaced reduction hundreds being the

Robert Willett

Absolutely, electronics very I before our met seeing and a interest as interested to them from have Yes, of done of with visual a on this think company, our been the lot inspectors previously replace we're customers and that yes. opportunities machine and diligence - for where would right result really vision are news. unable ourselves due those we have is Cognex so now, on don't had we acquired sure, Sualab we not we there

Operator

Our next with of Please Haskett. Lau line Karen question proceed. the comes from Gordon

Karen Lau

like companies There of the light if Thanks China. kind word know often right use, more electronics cut proofing supply blacklisting for that's off follow-up. don't taking maybe of stories chain, or curious has US broadly in my to or just Chinese they get suppliers. their Rob, on sort future of, in but I'm from their consumer I about been

any seeing you chips are in I you but that? in wasn't if of little participate sure that you in thing, areas I about think that China of that concentrated talk sentiment sort like is a kind maybe of can that more bit manufacturing

Robert Willett

do - much is The would didn't readily any that and one of technology us a to only answer that didn't it's for Karen. we're of Chinese I would And we customers. business company instance and and we're way. not really didn't was where components more reading want not about American, that and really Yes, widespread. I among I've concerned, I you we is, we're our think that's think it were not looking seeing can - in know what because chip company,

of per to owned customers. realize think basically, doesn't sold or US technology from in by the the important inside thing how the Right, terms is US recognized se. it we our other I are

for that might So would seen threat I what somewhat real unable we one think that of companies from that also larger with a insulates us. some clearly be largest on where to them become But we've a to sell big if this. the scale problem and that a us was

Karen Lau

that you're you suppliers far So away that companies nothing terms in beyond from sourcing geographies? concerns seeing from other Chinese of

Robert Willett

Correct.

Operator

Giordano question Cowen. of proceed. the line Joe with Please comes next from Our

Joe Giordano

globally On two geographic I or offering over the that's one you in products that capabilities. Sualab fundamentally may whenever is this it Is or is guys again understand presence different things? here. bring than or it one you engineering is kind this a that call time Thanks the for something integrated BD taking my thing like of follow-ups it as foresee

Robert Willett

we Hi, I'll Yes. I is And time Joe. it. should for I the gentlemen, that - this think question, say, have last answer

we the So, earlier, in customer we do big bring a a relationships a bring sales footprint market. do I Sualab, what I it you think the might question, of up is point what have lot to from and think, and asked

on that to together. side for synergies both So is this can again, point, of make companies. very growth I want related much question working - think for do to I'm this or is And repeat think the I the I that your what, sorry. us complementary just But you not both

Joe Giordano

product this two is one offer can and to? fundamental BD different like team, is fundamentally things one something ultimately these integrated are or that Sualab, that Like, Cognex

Robert Willett

yes. sorry, I'm Yes.

products. are they quite similar So

focused our markets So deep we've we've geographical And X and VD relates Sualab have relate learning, our that that and with functions assumptions developed automotive capabilities Asian so tools if to more do presence, to visual - particularly right. end on where some strong based and various I inspection. could been has really

So that And similar, that the then, a market, and that engineers would develops of I potential but have in in right. we we application they Asia. that. have a They because of in to unlock say ways, footprint engineers different lot didn't big ability see help have where capability.

a a applied of either they to capability, And sales they have we bring which where can big VD application engineering So a be unlock. could that or pent-up demand right. lot we network then have to Sualab help

So ViDi strengths a overlap, that's lot with key specific kind a complementary few similar. and SuaKIT quite another user element. interfaces quite of capabilities, where itself are but product quite go, the the There's complementary around and but of of business the tools, parts

Joe Giordano

you don't those at like we be medical expect this you want, a can two in the do - it talking a but to that one verticals And and mind, of food you and you words about, don't just up consumer spend time answer lot if year? beverage if

Robert Willett

Yes. do. We

Operator

Thank you.

of closing the back I Rob reached will remarks. have Mr. to over it end We Willett the call. for now turn

Robert Willett

Thank you.

call. the tonight. in quarter's Cognex. joining machine not are on luck. for long-term future results our Good look this and our speaking for hoped Thank confident to year, the the We you forward for well, we next for what with So in you at us of start prospects the vision a role,

Operator

conference. Thank today's concludes you. This

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

Cognex (CGNX) 28 Oct 192019 Q3 Earnings call transcript