CGNX - Earnings call transcript Q4 2019

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Operator

Greetings. Welcome to the Cognex Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note, that this conference is being recorded.

I will now turn the conference over to our host Susan Conway, Senior Director of Investor Relations. Thank you.

begin. may You

Susan Conway

President good of and Chairman, I’m Conway, Stagno. Willett; Susan Bob and Laura Thank Treasurer, Cognex’s Relations. evening, With Director Chris Vice Rob CEO, Investor President Cognex’s Corporate us Senior Controller, Shillman; MacDonald; you, and everyone. and today Dr. are

our I’d detailed at XX-K results. and on are financial report like our that information www.cognex.com/investor. annual – Investor release point earnings out website Both available highly contain report about to Relations our quarterly on Form

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

items You GAAP of in to can non-GAAP release. X a see of certain from Exhibit earnings reconciliation the

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

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

With that, call turn to Dr. to now I’d over like Bob. the

Bob Shillman

in the due both those income income serve. sequentially that hello and items, there XXXX earnings I net to were that $XX achieved this But call. net and our in everyone. fourth QX in markets income item year-end to and quarter say number decreased report ongoing because of quarter them, EPS without discrete year-on-year EPS benefit was combined, QX only industrial earnings Normally, of I’d record a discrete to all substantial and share. by we tax per Welcome conference pleased of of to million. fourth many Sue income Thanks, net time Unfortunately, are weaknesses net a records revenue

will yours. Willett results. I’ll my the and microphone Rob, the is now on who Cognex’s CEO, over XXXX call details provide partner turn Rob to our

Rob Willett

everyone. good Dr. you, evening Thank and Bob

our markets declined automotive, a together by or electronics spending largest two revenue XX% Annual XXXX. at in revenue. approximately represented due of million to and in consumer our reduction customers simultaneous back Looking half $XX approximately which by

on included automation XXXX, primarily smartphone previous vision, deferred consumer related in large that manufacturing. projects investments and calls discussed we on machine As to customers electronics during reduced

significant or way factors the In particular, no form major smartphones market entered technology XXXX. new for any in in

manufacturers of by As automotive to year-on-year. sales roadmaps. three contracted forces; confidence capital lack revenue changes response a from revenue off by and in delayed cost in particularly impacted cooling XX% product Automotive electronics and about was trade approximately evolving market by result, In consumer in a related scaled also consumer China. the from spending trends, declined XXXX. In business to XX% back this uncertainty, of

high products, growth in XXXX. newer Despite margin We with XXXX potential remained lower including revenue, gross reported was at which third markets our in for logistics, Cognex XX%. consistent largest market

We in medical-related in saw year-on-year. doubled our growth deep utilize technology beverage. nearly a Revenue food from also that and applications learning applications and

to contributor the represents major learning believe in today, growth be we While, small deep revenue future. to a it of has potential the percentage a

wait meaningfully Consumer Consumer as electronics vehicles. see electric will electronics when we are shifts. major engines that between aren’t they XG the machine from Manufacturers technology capacity increase. markets markets the and are believe for to expand in for is combustion that changes. resume however, their It’s these and growth large unclear, from to to XG we transitioning automotive future. expected vision These automotive will

be applied is quality. moving and will believe markets, of quickly. and both the can from the increase expected more it consumer many we two Of productivity market from both technology faster of Revenue to across the building for markets. electronics Cognex’s is new in lines upgrading product recover existing Cognex lines order sales and and force the

shopping. We by to the undergoing a of vision, are which major a online that’s logistics, including market rise transformation due prioritizing new frontiers machine is

now Traditional early revenue of brick that are and e-commerce retailers in were logistics, growing our from vision. reducing adopters the mortar companies machine fastest segment the Cognex concentration of for

is also broadening we’re base from into companies beginning orders package is from And larger several revenue Asia. customer inspection. to Our geographically, receiving diversify applications, including more logistics and in dimensioning

logistics. some to Now I give want you about details

We and target a logistics over to have long-term ambitious do at gross plans to so the high of grow margins. XX% revenue rate at from

over volatile be can growth shorter However, periods.

focusing in logistics larger growth new in customer upgrades where adequate role. only by XX% revenue orders delayed the year then of building on The a build-outs, XXXX. the at logistics grew rate for delivery new we sites more customer in For our end. After large XXXX capacity, slower facility then example, on a of major this was result play

We of we those hand and have this in summer. to deliver most them orders expect

grew Excluding year-on-year, approximately logistics our that major target. by XX% from customer, revenue which long-term is

application talk see October software strong to the I’m learning report pleased of about going let’s that deep deep in We to Korea-based learning-based well. acquired integration Sualab, the we the Now is about automation. potential in that deep learning. company

revenue While Cognex applications. to team size to the and dedicated technology XXXX small, contribution the developing in was applying deep industrial of it’s the acquisition learning tripled

learning. product convolutional to This we reviewed application vision deep and I to address of brings Sualab neural machine plans higher and progress areas us advantage market. the our two the our team allows the that accelerate ago, combine in learning our joined new weeks enable Seoul us will The technology classification formalized of to for solve precision deep roadmaps to industrial and to applications. networks where

of assumptions Sualab’s we the business. the we when acquired three first validating made together that months Cognex work the Our in embracing and teams of culture the

additional are engineering with technology expected and we with to combination. a Cognex tools is relationships be powerful acquired Sualab and the customers

we to already through of implement engineering evaluate to technology We’ve manufacturing can plans on process implementation. the the in from how technology combined We’re technology. multiple improve introducing leading Sualab customers that their companies are and Sualab’s working process world and its hosted demonstrating teams Cognex Cognex

manufacturing, market, in for products, XXXX, new breakthrough in fixed-mount XD-AXXXX tool new readers XD-AXXXX planned XD with the Cognex and we high-volume inside range. and scanning two introductions XD, a line for XXX the and the vision a XD tunnels. Moving logistics high-performance significant entire of platforms And months. sensing other product part-locating DataMan on coming Dimensioner on XXXX also vision reading snapshot different in among general Well, packages we for for PatMax barcode introduced codes our with challenging sized products, the have to logistics

Todgham from the the Cognex pass report join to quarter, I details announced tonight. the microphone update new that’s will on is will Company, Paul of & was be he like Strauss calls. the CFO March. will Levi pleased partner to Senior Vice Laura, Paul joining fourth Before great our I’d where be early you I’m President me on future to from a that in and joining us Finance. He

on I thank as Accounting want Financial Officer to serving this Principal for Laura our interim to and take an basis. opportunity

as yours. Paul’s she’ll Vice onboarding, Corporate Following and President the continue microphone our is Controller. Laura,

Laura MacDonald

everyone. Rob, QX you, of which million, top and Thank $XXX the end is in was our hello above Revenue guidance. October

revenue revenue XXXX. margin declined XXXX due industry. volume and with electronics of consumer due lower expected, logistics to XX% and was The and QX gross on from decline orders electronics. lower automotive Despite large over timing the in is QX delivery As timing of from seasonal revenue, consistent the in of sequential consumer customers increased year-on-year, the to slightly

increased by expenses XX% Operating year-on-year.

revenue added acquisition. sales. engineering Cognoids were Over expenses related we Sualab for to to incentive related plan. the options stock in QX, year, past to as related That other performance. and well and also our included we expenses resulting to better our employee reported QX recurring higher compensation have guidance than They costs sales commissions incremental the expected the expenses as Compared from

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

tax of discrete benefit the net $XX provision, equivalent share quarter, we two major of which the the Regarding per elements. million recorded of consisted or in fourth $X.XX a

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

For million. of net $XX that we recorded a benefit

to $XX relates additional That million of move with our to expense. our of second technology corporate tax acquired decision to out Sualab structure. The in resulted item tax Korea align

tax QX. expenses non-deductible rate items, XXXX, XX% in in The QX to XXXX. was discrete in Excluding tax QX increase XX% to due the incurred tax compared was

that Looking from at a from the single the QX in In rest some geographic from mid-single Asia were digits Europe region. our revenue digits, QX Revenue Americas, electronics, revenue revenue previously digits, logistics XXXX, in primarily over by perspective, grew high-single consumer mid consumer because increased to delayed of of discussed. year-on-year previously China and for also shipments electronics. by the due to of declined reported change which was due

roughly of this where was electronics automotive revenue from impact quarters consumer lower most Europe, in noticeable by contribution and year-on-year. XX% declined The

for not decline the to less Europe. have China customer mentioned, revenue that certain would if in shifted purchases from Europe from extreme been As

ended debt. we Turning quarter to Sualab. million sheet, in no cash cash in of approximately Even the with $XXX million payments with and acquire QX our to $XXX investments balance and

growth dividends. and to capital with We support have enough buybacks and share shareholders our stock ongoing our objectives through to success our

to turn I’ll back the call Now Rob.

Rob Willett

Thank you, Laura.

for our and guidance, market will range weakness led quarter factory of and and cautious. $XXX by first to the products, both next sequentially decline represents in to for continued deep Outside new logistics, Moving revenue is other due we the learning, million between our $XXX year-on-year markets expect automation This be a million. automotive. broad outlook

what’s in the around happening about We are China coronavirus outbreak. concerned

an estimated $XX million includes Our impact. QX guidance revenue

also our account this the widened uncertainty. We closely. range for We’ll monitor continue to situation to

of flat similar XXXX. is year-on-year in QX approximately We the expenses QX. the over believe Visible company of margin be reset reported QX be QX will for annual The expenses, expected in XX% XXXX will an range, for XXXX bonus compensation expect to XXXX. result in the plan. approximately QX will we to mid-XX% be and is for increased and gross increase higher operating QX margin incentive Gross by other the operating with

compensation impact added we Higher Cognoids and year of acquisition. will and in increase. the The expenses sales the engineering stock-based Sualab contribute the past to to over also the

compensation reset the in planned. that operating and results a million For incentive assuming year expenses as our are for the to year XXXX, of add financial we the costs full incremental owning approximately will $XX related year, estimate of of Sualab

that will in rate excluding to changes in effective in items. corporate profits due structure expectation be of increase XX% XXXX the and the expected and is XX% company’s tax The higher-tax is to from discrete taxed The earned jurisdictions. be tax more our tax

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

Operator

Josh conducting question-and-answer first session. Thank will from this question. Stanley. question comes Our [Operator Please you. we Instructions] At a time, Pokrzywinski your with Morgan be state

Josh Pokrzywinski

Hi. Good all. evening,

are you First XXXX XXXX. into question mind Should will Or it logistics you XX% kind of XX% growth comfortable business, a level setting XXXX a have term, that that Rob, growth shifting expect with long see and of there’s year plus we some over just on from starting so more transferred? we’ll you wouldn’t XX% the out? looks rate, how kind if given revenue like the the of just plays some then revenue kind

Rob Willett

the thing is, annual think some add think we don’t to to guidance about color me let Well, point all our business I specific first of give we out help segments. on But logistics us and do kind guidance by it. don’t

So logistics and the market that to adopting early And prospects. seen machine great of is we’ve stages vision. see in we in continue growth great

We have the grow right. XX% long the revenue to ambitious over plans term, at

from that after work we prepared of orders of XXXX, from discussed a did And to some the less delayed half for business expect right. But in we’ve customer achieving we on that backlog of major implementations. about of Most at as the them think in meaningful I large on new us about by them think deliver I nevertheless, with going grew I my summer, changes sites them represented customer they in results Cognex. side, revenue than place overall look in end improvements logistics excluding at A logistics what’s business delayed but from have we substantial for are lot year-on-year. orders the done the and our of XX% major earlier orders remarks, this XXXX. of major

point in this would good and is revenue market to between out large there’s report. of can But $XX and what million can can customer be deliver specific It So of be lots growth think customers underlying volatile. I I quarter. a in specific $XX growth deployments million

commit as it’s kind guidance us the months on quite six give of sometimes longer solid or from So revenue over – periods. of hard to timing seen last the you over to you’ve

Josh Pokrzywinski

of we Got be us And it. through That’s needs reported. context. those just helpful little the a for to picked bit, guess the I as no follow-up, have material a have I who longer that customer XX-K noticed

that If product exceeding product cycles anything getting Is million because revenues there else of kind of one changing? as want dropped peak that come larger the there. I of I that cycles what’s customer So you Or to you would could cycle? of comment of function of or or an the your a with guess anything impediment happened think back to to to you some with from over be in perspective radar share customers prior we’ve off on getting happened the electronics $XXX with or revenue preventing from see, Thanks. anything that the economy? time? what’s back anything off

Rob Willett

the made Holmes. out reminded year, XXXX no report customer XXXX of accounted I’m But was your and absolutely think bark. come featuring reminded of And very than I’m started story information But to to I amazed, didn’t level, year. more on about speed Cognex’s that XX-K. and Well, electronics And last might customer both how there you seem that so made lot be for logistics of guys No I’m in I candidates, of many there it the able that. quickly. dog XX% dissect that particular that reading Sherlock have were our above we annual right. the revenue as a you’re that

around see may large those So think past see year. right. specific of kinds electronics things and customers. segments have really, drive investments in opportunities And would or changes plans we’ve big areas they really in of big those with different and investments large potential the market And had in growth things like that large of delivery logistics technology growth would be distribution things for particularly going a the and And of technology implementations, to drive individual I delivery, in those you’re on outperform with forward. tremendous – are plans, that number to market. that to million we had I $XXX and kind particularly one the same of And revenue so the the right, think customer customers I momentum in in in geographies and day different and a compete e-commerce in that’s

other certainly how large not they or think saying see I’m sizable grow, And there grow quickly we really but the area, And in for I to customers come potential that. big how again where be are very electronics could and new different And course, of possibly screen our foldable it’s becoming the more reality technology area technology, of electronics. specifically implementations augmented than of in technologies in of becoming other of other XX% screens and revenue, things. that XG, type and

would of were going going potential I come new think really to rollout certainly technology the very see together if when that. kind with XG and those those and are changes things know to and to do if has big difficult technology one. are hit. it’s to that But be a But come

has back that I a growth lot think potential the drive business. more momentum electronics our to and consumer into

Josh Pokrzywinski

the for Thanks it. Rob. Got color,

Operator

Eastman, your Our question. Richard Please Eastman Company. your next is W. question line & comes from Baird with Richard state Robert open.

Richard Eastman

the reused expectation? four in time, on the to there Rob, the given themselves in a at of Or that Cognex’s for XG maybe the So position a be when you follow-up can big in for if be How throughput. production quick long you saw A order driving would feel anniversary still – capacity driver, the the we lines the system of recall past, potential that business? in you. would look for and that is year be I be timing Thank lead months, that that that do about customer, is itself? be that, a instance

Rob Willett

customer’s the is of about Rick, Or the it to clarify and of kind the timeline deployment? market and about requirements the Cognex? it how question is

Richard Eastman

that a supply play timing just play position supply really you vantage would to obviously there you – where in what It’s for question, of relative in that chain, if macro is – you but from shipments the will, production when given But the content the or components. Yes. of orders your point, be there chain? ecosystem and

Rob Willett

I a it in really in quite be years that Yes, together And of call on big you think market, plus position late. players will better does electronics give pick, with those experience, I April get is from visibility conference in five our And now come to we revenue working shaping you the how year’s Cognex. you’re or maybe four before a we consumer our then major market find right, we hits read for five can up possibly P&L. months think,

plans to is that. impacts I call think I and customers may China, coronavirus the something, have probably who of where going particularly up working in conference during about the in talking But Asia that’s think we be the to with challenge and we’re end deploy. the

those plans within they we as engineers quickly need – to problems to But plan. now, or implement problem move on ramp-up features working solving solve right an as customers’ forward need a need can’t to are because we

not and the is So to it to going next it’s deployment pushed what Is this this going be. Those to plans are mean for right? kind features certain Is impact I to year. going everything seeing that to get think that clear occur don’t the push year? to I’m out and just of me wildcards of extra year that

what technology In out just addition plans that look in at new that rolling we every year market. to features are we as different confront the

Richard Eastman

SAAR EVs, market Okay. States. in that here CAFE But question of And EVs just the as of and count shift vehicles. of Europe, between with side pause even as on adopted the shifting traditional spend the in going there in that the stays and both assembly hydrocarbon in auto auto They’ve on battery curious, to vehicles. towards the accelerate there quick a opposed fairly I’m lots dynamic in market, standards Is the spending have activity can there, kind same then some and just is weak, the a EVs of we if around of XXXX, the the kind kind investment place. in mandates

Rob Willett

that is, is investment, nice a other think part features overall. our relatively to electric business no in up certainly, still sure a to certainly little relates But ways coming. good, pick good it’s that really our manufacturer business We issue of models the are I see relate think and battery I growth small and for new that with major EV off. of vehicles

with to and plans. we So all manufacturers battery think vehicle in touch manufacturers major their we electric continue. definitely expect on do that working the And I are like, and the with

I think.

kind a and for long to journey expect So I of that good be Cognex.

the Now wind is really in situation the if that. on has are market, you and of in what but users countervailing of like. And automotive that have challenges big kind legacy general see I automotive do Tier X kind customers facing end is,

I So optimism that feel spend one kind think about certainly the on might of near vehicles. term electric offsets in any

think I on And parts rebound prospect new if back I that a Chinese recovery, that sound to puts but being into term consumer of quite negative, kind manufacturers next And were and and and in the thought cars now I market see any on I buying think and to out pushing think added probably get come in year. able later possibly an longer we’re the year. makes automotive going don’t we kind with think to the to of I we automotive think challenge into afford I the entered the year, expecting might wish as to overly we coronavirus, the our that

Richard Eastman

thoughts. the Okay, Thank Thanks you. very good. for

Operator

with Joe state Giordano your comes question. Please question next Cowen. Our from

Joe Giordano

good Yes, evening.

to scaled us, CE? of kind for you you to give and minus logistics said a scale XX% auto similar willing year. you Just Are the in moved start, for Rob,

Rob Willett

in we XX% year, right? to be so the So just logistics Yes. grew clear, said

your Sorry, question. just I from sure wasn’t

You made to sense me.

in said full yes, then – general me a and I we’ve think, think XX% So in that pass, frank electronics here. just give second a think, I I

our XX% roughly of So revenue. XX% our about it last total and consumer electronics last for really revenue And year. represents about total XX% automotive then accounts year of declined

Joe Giordano

coronavirus, $XX Then of out called you on the XQ. to million Perfect. impact

the Is chances is calculated thought Just kind into that. being mostly that’s weigh past of that kind your XQ bleeding already how the of you in of year, curious about that and how process? and impacted do you it in later auto

Rob Willett

a long situation, going Well, I’d knows how the say, right? severe give to like it’s developing answer to a I And think you to it. become. little color I’d it’s But and on how nobody

an the due also million a currently estimated for you reduction seeing. And pointed to I we from $XX we out as we’ve in products our So out have that there the that vast pretty we wider QX, us revenue. think market. Cognoids within who range market have the in good guidance given visibility And and supply put what reflects we’re of customers China, suppliers with do things of number

to Cognoids break is are for safe of let travel China our are asked it employees home. you. it from So very we’ve currently China supposed kind postpone of say me down working Cognoids But our me for importantly to And from now. outside and China most to of for that, and to

So to say. that’s the thing first

back cetera. to challenge. technology sold. demonstrated think things calls this explained But team not that electronic, that of China Cognoids obviously, an it’s to most right? impact a year. right and will working media, seeing be level, up or is from are What we’re certainly dealing revenue needs terms from this at how home, that engineering think Machine get sales et work customers time, us in running, this of often impacts customers. they’re At with line be So is visits really for it will needs I is, a a how of and take in making quickly vision and I sales revenue, production

So certainly that’s the challenge.

inside of a able to sold be some afford China. the comp we’re talked challenge serve important. supply concerned us think automotive of as companies, in as customers also for I and And consumers But they our supplier just Rick that new I earlier. still sure case making obviously, that outside well going to to those we likely to be who both about them with China cars, of is and issues right? Whether in out liquidity then are face issues, buying And there’ll then

Okay.

revenue and quarter. is moved down I of about So there, talking to about guidance said think I’m I our kind probably think revenue we’ve by $XX took size related I we We and specifically that through million. the

about is aspect of me think talk does set I tool that the chain, the Let kind us. which other impact supply on

consent suppliers our delivery China day. see pushing to have out we So

much we that, manufactured seen of Now products haven’t Indonesia. are chain. in evidence a our delays production but supply constrain contract manufacturer-based by Cognex

So of electronic not affected various mechanical by course, and come, but currently, components components custom China. this from electrode, and

Our And the Province concentrated some at supply in large. is Wuhan, located the center cities. the mostly in the Guangdong in the Province other of are a none with but Hubei

from manufacturers companies to too. they’re a going lot us to and open Monday and of last think So customers top think and contract we’re Monday. supply open comfort I But all we’re the then see supply going on and and feeling currently. specific said, observe, that seeing But they from we relative accept, is, this challenges we both announcements what saying, where we – them not I were

It also and crew that doesn’t out When people when they to scaling they’re are be going necessarily going It we shifting a just there. up. that who may see be it we’re there. open, small in mean may be concerned do

they So through more or production week stop go can so they later. quarantine a

probably. into And scoped they mean watching I will think carefully this quarter we bleed and we quarter, So it second correctly. is third and quite the were I thought think the the answer we

Operator

you. Thank

from line Please Ricchiuti, open. comes Company. & question. Ricchiuti state Jim is Needham your your with Jim question next Our

Jim Ricchiuti

Sorry. hear now? you Can me sorry. I’m

Rob Willett

you. can We hear Jim. Hi,

Jim Ricchiuti

maybe XXXX, a Hi, little are sounds out we that large Rob. summer and may efforts these it given about business the deployments China take shipments until larger If making some think logistics the the customer bit. of your in like pushed not with you fact the in get place

of given, enough China in I going momentum to reasonable help Is the you to part Just fruition brick-and-mortar near area level of term. come logistics in where early the applications growth the in are seeing business that assume there the growth show to of in some XXXX? that are not

Rob Willett

so think Jim. Yes, I

way most obviously, around of think, discussed our U.S., think issues really business right? is a just in I obviously from logistics I the China. we it’s in big the impacted not don’t

very that’s positive. think I So

saying lot more see logistics growth. increasingly, great also been by and of it business, in right has the we’re business, We barcodes seeing more continues strong applications start be and growing reading a a for vision should our to of more the us. and area. around I majority that’s a a But

of various mentioned, I markets some those a in products. having lot – success we’re those As of with

So helping players. And we expect We e-commerce to dependent business that’s logistics becoming large on certainly, certainly really quarter. to in drive we’ve grow first growth. and the our yes, in And less do seeing we’re really investment investment the particularly of are lot and a but in – Europe, starting to America, also of retailers, well Asia, lot known in invest who more brick-and-mortar plans from large, some very in heavily.

and future. some larger orders near-term those see summer. see And drivers we do So very for teeing we us helping the the about confident yes, up do we’re

very can So about we be very, lumpy. see, what continue be positive it we to although

Jim Ricchiuti

efforts. And it. deep the on as Got follow-up learning just a question,

we wins us for progress Are you excited there that this about highlight the the types evaluate either to or obviously begin us help excited very understand making area? applications why of that maybe customer outside do You’re from How opportunities it? really you’re you’re in there. any maybe can about so the

Rob Willett

we’ve have the planning gave you we of to some that a a Well, what small the you launch thing growth the came team seen as certainly into Those certainly first technology. in I with seeing applying that market which phenomenal is, market we’re been I deep only for comments of we less that preview the made of technology showed products already who point in – market. to and we’re already than really you to years I out really applications think the we’re and our Day, think we’ve learning the that Investor some three and is, of

a And substantial seeing it’s the deep then, gives their us that of learning. there. certainly contribution we’re observed business confidence lot from we But to a what Sualab customers and with

to go electronics. and I are about application, replace applications mean, website it’s particularly learning applied And you I deep automotive, of applying of certainly life broad-based. human if technology sciences, where you course, in to Sualab’s can electronics. a how to terms to there’s examples see to material pretty In the inspection, visual that in where we’re think inspectors And

think, we market. more happening very you’ll report And point as in that future think view, So to it of from our we quarters. see see things in I positive I continue of

Jim Ricchiuti

still some be it that words, you’re business. regardless in the parts issues sounds growth of of other seeing the in And of pretty you’re year you the to expect of some other a good seeing like some In markets. of opportunity pressures this regardless this of the business

Rob Willett

do. we Yes,

Jim Ricchiuti

you. Thank Okay.

Operator

Thank you.

next comes state Lau from Gordon Our Haskett. Please question. Karen your question with

Karen Lau

Thank coronavirus. still the move the and potential back talk try on capacity? pass people about you do automotive, the these implementation time. I aside chain and bit will appreciate constraint lot What Because, afternoon, up see to maybe there industry your impact little supply people as engineering and whatnot like understand of to lost some of putting up ramping on on of you. everyone. to the point. all a towards around hopefully constraints want try Rob, But flip a hopefully, the there Good do it at impact color forward. XG consumer expect a projects to Is is make and or for hope some

labor along from with see given because what’s And for on the and So playing of actually see having you to also chain your supply bigger shortage or a constraints automation, vision the to ramp lines you the opportunity machine role this situation? uncertainty. going back. what Do those additional do standpoint

Rob Willett

was I’m speaking, sure, Karen, Rob. it’s who Yes. not but that

Let me speak.

got your question. I’ve think I

our activity of So basically, our I and think suppliers. now just right with lot customers is not at occurring a

the liquidity will come suffer that labor more the think, more more goes many cases. companies simple stress plan, on that a longer that under, So is delay I shortages, So problems, the think the right? the as from it’s challenges, in I

not of And way It’s about built thinks those works I extremely think time lot timetable, in I it’s market electronics that particularly this like one there. extra kind when the flat mean, intense. the of a

that’s think release. in how features year’s get delayed products will of and dimensionalize I the not kind either that be capabilities product So of or will issue. this I other But

a the a In terms quite policy of have inventory. component strategic inventory, supply we Cognex of in of lot carrying chain,

So the at from a point, to have way, go some we if to get too the components, the supplier. on out to the can’t prepared ramped we’re if feel to we us. unable in I get supply and customers a certain Chinese around short-term level supplying challenge where we manufacture them well think But are world companies a inventory very that’s up find to in suppliers

a a so. do challenge So, that’s of to lot

or only similar imagine I in But That’s the business supplier, automotive for large a they them. challenge a goes to longer Tier that face that with sophisticated can Cognex be problems. X like on going a

your I would third think that. long-term. So the I the And think then of part of was I deserve question sort

free of a optimism, to human make I’m think to what does vision and So I machine if and the constraints. automation machine really to is It’s very of vision from replace automation geographical robotics like, it human draw obviously situation. bad potential to underscore

robots don’t get So certainly and systems a machine coronavirus. vision

not tariffs – I’ve had necessarily. always So think we’ve of all and back situations chain they on that’s coming lots and on companies I shore about where been pretty their that the about skeptical think supply trade lost manufacturing

to I is vision the that do But for starting think to more And machine that these the for where automation really possible of and point to better and to potential I get more more economically. is things think and happen much much happen. of raise kinds automation

but even makes about lot short-term, optimistic vision, me of to advanced it machine overcome. So long-term challenges more and automation

Karen Lau

Okay. I one in if can appreciate sneak Laura. I the color. And for then

much that expected to is for remind high And in realize driver? the core I better expected. versus Sualab of coming I sales than think up $XX what’s sequentially. was OpEx legacy increased us single it fourth can digits the the quarter up mid But and is for to the came be how expected primary XX% you then the of so that of just XXXX. much How operations? year-over-year million from OpEx,

Laura MacDonald

Sure.

expenses that said we last your expenses $X question related the amortization a Sualab I quarter about answer me quarter our items. of acquisition Let Because and and run think includes that second first. also operating million us

than performance. incentive you would was higher you on that additional related higher The options. yes, had our stock commissions also certain And your we $XX accelerated sales costs the compensation incentive QX hit also the related mentioned and than question, to guidance? Sualab. expected So a the why first So be development compensation to delta million some expenses products we And from efforts. better exercise related to resulting of then

Karen Lau

Thank you. Okay.

Operator

you. Thank

Our next question your question. comes from with Andrew state Buscaglia Please Berenberg.

Andrew Buscaglia

something. clear just Guys be want to on

QX, practice anticipate revenue in me. You any deferred mean, from I do logistics excuse order not that

Rob Willett

Hi, Andrew. Yes.

we from that so is, didn’t very occur small with we make that year orders year. But It’s in amount really and your mid expect significant large that So to customer our a a nothing have earlier. question had like last we interrelations compensation. possible

Andrew Buscaglia

Yes.

clear I that. to on want be Okay. just

But in sort comments Secondly, of a the semiconductors – we’re touched companies. Rick lot positive we’re seeing of question. of this out on his seeing

coming then you new some type being shoots, you You XG vehicles. other point are And you’re phone. seeing guys a out more seeing have this electronics mentioned auto factor at driver. with form And green Samsung a of of in trend

fair So like it one you telling are a definitely of But or a things there could other things way the year. bearish. bit swing amount seems of little this that are sounds sort

that? So shoots that some green of don’t think these is we’re you Why in seeing? participate you’d why

Rob Willett

And going have currently we guess, that it. on will reduce the automotive on. a technology, One China, is of go general reputation think also saying we’re is, to I it that delay build Cognex down. which electronics slow like concerned and seeing right. we’re Thanks. it of what recovery Two smartphone it in consumer I factors Yes. now the And that is around going right. business, particularly are the

that at would deep would that we’re there of you’re drivers Cognex lot include Those I learning of and I growth say to strong said I things say, hearing, logistics. and what trying the learning. if they deep probably communicate application are very that’s you include pull back, So a certainly here. and They

do we we this you electronics of like improvement other now beginning We spend. did in And there but consumer into companies year year, as of – see last read small. that in the there. very relatively use iron particularly and impact that. investment the related in that timing and to see lithium battery the rates do growth vehicles, about is percentage probably of that about, of and we concerned and of vision we large process manufacturing, came really we’re But through of that’s strong lots the machine electric end the We

or continue. slowness think triple where electronics consumer the year, automotive that even I for still a up to were it’s industry think that quadruple make It’s not and if challenge. to in going to this I

Andrew Buscaglia

electronics Would that of under for auto or application? be you more auto consumer electronics account would a

Rob Willett

Korean, is, battery Yes. to It’s lithium automotive When about where manufacture machines. it’s with Chinese the big ion I spend talk business. ion lithium Japanese referring batteries, I’m and particularly really, this that’s

Andrew Buscaglia

All right.

Okay. Thanks.

Operator

Thank you.

Asset from Securities]. comes next question. state question with Nathan Our your Daiwa Please Jairam [Daiwa Management

Jairam Nathan

Daiwa Hi. Thanks. It’s Securities.

what can than First for had expected question, you for this a I XQ? revenue of follow-up. kind the higher drove quarter tell us Then

Rob Willett

Yes.

see and saw some electronics. potential much, I as of discussing I in of were conditions bookings electronics out out other just that we some things think technology think we better you of related better new we some I to mentioned, earlier, the implementation and business saw electronics. Pretty think I manufactures semi of

contribution. one certainly was that So

don’t to we I know, think performed add America want that? I well. relatively Laura, anything business to in our

Laura MacDonald

I think the… the electronics was

Rob Willett

main the driver. That’s Yes.

Jairam Nathan

resources engineering at guys higher I XXXX. has growing slower And last changed that it increasing significantly areas. think areas year In least mentioned mentioned guess from you in look growth I spend on situation you you to And past, doesn’t Okay. kind and like have the from sales. of shifting

what – investing terms increase? investing, of you where areas are was which headcount in engineering So you and are sales

Rob Willett

we’re think edge in taking certainly technology areas. about machine and we new it Well, new growth division we we’re when cutting run a how Cognex, applying to

we the certainly investing is to that area we’re area logistics the areas potential then certainly, market. talk that see, about leader And of technology of launch generally in major So a that we market. supply, where products to XD be the new strongly learning huge logistics. growth in see of course, and deep XD in

where spent. those all we’ve So areas increasing are been

Jairam Nathan

if finally, I one And could Okay. more. squeeze

a more gross application player margins? does logistics brick-and-mortar, the large change? than to engineering the shifting With you on impact it And Do to spend from need player? that large could with

Rob Willett

of where the to way really deploy vision I relate customer that they is coming similar. kind say, machine doesn’t It would from. is the

So, I very is out leading answer e-commerce of launching engineering – some consumer. though is in point companies and the often The kind no. capable would are savvy difference

companies companies being trying expertise. Some level don’t from of that bricks-and-mortar transition have to make engineering generally this that

we’re do help That’s to who a more the integrators or to business and few of So implement we a in years help network key able to this engineering scale last can of developing them to developing that last case lot a systems technology. application to we we’re be year, them over the over made progress long-term. may have plans our

Jairam Nathan

I all Thank Okay. you. That’s had.

Operator

Thank you.

question. Our from Giordano your with comes question Joe Cowen. next Please state

Joe Giordano

Hey guys, the real quick. thanks for taking follow-up

to more Rob, if and customers an is terminal update concentrated logistics? business? mobile you had brick-and-mortar that Just largely curious, focused on your the And

Rob Willett

Yes.

terminal So mobile business. our

who joined savvy. technically much more and think type think which who a an have who us. this I on logistics Analyst product a e-commerce little much relies and at integrated receptive talked companies of certainly the I to business more much about you Day, those on We’ve more we a smartphone bit focused now that

see. starting So that’s to where and we focused we’re

thought. customers to adopt $XXX at for in market think Some is But roll potential out. market the a for it think larger think that smaller we that million going We it’s is us. market than We originally XX%. that and us grow we

nice growth, or seeing as as We’re the material certainly but like to or not some logistics other learning deep it’s business areas XD.

Joe Giordano

enough. Fair Thanks.

Operator

Thank you.

Bobby state comes Eubank Chevy from Please your question. Chase question next with Trust. Our

Bobby Eubank

call. Thanks for guys. the Hi

maybe to you competitor Your Thanks that? clarify. about of market about business think a Eastman bit and was just that you asking do order is than feel electronics Can I kind in the talk share? Rich better want share much. trends major seeing I so guys. you earlier. consumer flow little about How

Rob Willett

Yes. This is Bobby.

that on, their think is thing public major So at I’d report they two broader. would keep out and you kind that I I talk about the both of competitor, Bobby, the first their an look companies results, it I a think OMRON. be – when results, point And KEYENCE certainly a that we eye much when other

machine play pure vision a company. We’re

sensors have PLCs, both when less So as such or order volatile. to business kind may back. as their more in right. on recording XX% of basic business electronics, other That results, more resilient perhaps But the read or their X% they microscopes they optical looked I of them seem in of certainly be to And Asia reported slower they recent. declines in businesses

we certainly That high whether area one are any to We compete said, when vision And think or we growing expectations who’s of backlog and with. factors, as ourselves gaining mix other the our invest with a other they all outgrow the So competitors. market or it’s I share. to have we other expectations company in are than considers R&D that in in Cognex. faster more

So now we’re say certainly looks to like, amount. I not happy it drawing. similar would suffering even right be everyone’s generally But

Bobby Eubank

Thanks.

Operator

Thank you.

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

Rob Willett

possibly mute? Bob, Yes. you are on Dr.

Bob Shillman

Yes. Thank you. I’m sorry.

for will vision call. on our on and us remain hoped still therefore the long-term we the we products manufacturing you XXXX for Thank at we look our in logistics, prospects that results for start joining We automation in in tonight have quarterly were While company. for based with forward very all the speaking our play confident the future to intelligence, and what role potential learning. based rolling that that next machine you not deep out, artificial clearly the of new on

Operator

Thank conference. Thank disconnect participation. all concludes all time. at you lines this you. your you your And may This today’s for

Cognex (CGNX) 13 Feb 202019 Q4 Earnings call transcript