Business Wire | Nov 4, 2021 04:07PM EDT

Cognex Reports Record Quarterly Revenue

Nov. 04, 2021

NATICK, Mass.--(BUSINESS WIRE)--Nov. 04, 2021--Cognex Corporation (NASDAQ: CGNX) today reported financial results for the third quarter of 2021 which included record quarterly revenue. Table 1 below shows selected financial data for Q3-21 compared with Q3-20 and Q2-21, and for the nine months of 2021 compared with the same period in 2020.

Table 1(Dollars in thousands, except per share amounts)

Non-GAAP Net Net Income Income per per Net Diluted Diluted Revenue Income Share* Share

Quarterly Comparisons

Current quarter: Q3-21 $284,848 $78,900 $0.44 $0.40

Prior year's quarter: Q3-20 $251,073 $87,506 $0.49 $0.47

Change: Q3-20 to Q3-21 13% (10)% (10)% (15)%

Prior quarter: Q2-21 $269,158 $77,598 $0.43 $0.43

Change: Q2-21 to Q3-21 6% 2% 2% (7)%

Year-to-Date Comparisons

Nine months ended Oct. 3, 2021 $793,033 $226,346 $1.26 $1.20

Nine months ended Sept. 27, 2020 $587,405 $106,841 $0.61 $0.77

Change from first nine months of 2020 to 35% 112% 107% 56%first nine months of 2021

*Non-GAAP net income per diluted share excludes restructuring and other charges that occurred predominantly in Q2-20, and discrete tax adjustments. A reconciliation from GAAP to Non-GAAP is shown in Exhibit 2 of this news release.

"We are pleased to report the highest quarterly revenue in our company's 40-year history, surpassing the prior record set last quarter," said Robert J. Willett, Chief Executive Officer of Cognex. "We were also highly profitable and reported an operating margin of 31%, which is above our 30% long-term target. And we were able to accomplish these achievements while operating in a very challenging supply environment."

Mr. Willett continued, "In regard to supply, we believe we have been managing global chip shortages relatively well so far. However, the constraints are beginning to hold back revenue growth and drive cost increases more noticeably. Demand from customers is high and meeting their needs remains our top priority as we work through this situation."

Details of the Quarter

Statement of Operations Highlights - Third Quarter of 2021

* Cognex reported record revenue of $285 million for the third quarter, which represents an increase of 13% from Q3-20 and 6% from Q2-21. As expected, growth in logistics, automotive, and other markets on a year-on-year basis was substantially offset by lower revenue from customers in consumer electronics (Q3-20 included a heavy concentration of electronics revenue that drove substantial growth for the company overall in 2020). The increase in revenue on a sequential basis is due to higher sales to customers in logistics and the timing of revenue from consumer electronics.

* Gross margin was 70% for Q3-21, 76% for Q3-20, and 75% for Q2-21. The decrease in gross margin, both year-on-year and sequentially, was due to unfavorable revenue mix in Q3-21. In addition, supply chain costs were higher due to global component shortages.

* Research, Development, & Engineering (RD&E) expenses increased by 14% from Q3-20 and 10% from Q2-21. The increase in RD&E spending, both year-on-year and sequentially, was due to the company's investment in engineering resources.

* Selling, General & Administrative (SG&A) expenses increased by 20% from Q3-20 and remained flat with Q2-21. SG&A spending increased over Q3-20 due to higher personnel-related costs (including additional sales headcount), higher incentive compensation costs (including sales commissions and annual company bonus), and the impact of foreign currency exchange rate changes.

* The effective tax rate was 11% in Q3-21, 14% in Q3-20, and 17% in Q2-21. The effective tax rate was 18% in all periods presented excluding the discrete tax adjustments summarized in Exhibit 2.

Balance Sheet Highlights - October 3, 2021

* Cognex's financial position as of October 3, 2021 continued to bestrong, with $985 million in cash and investments and no debt. In the first nine months of 2021, Cognex generated $259 million in cash from operations and $59 million in net proceeds from the exercise of stock options. In addition, the company spent $48 million to repurchase its common stock and paid $32 million in dividends to shareholders. Cognex intends to continue to repurchase shares of its common stock pursuant to its existing stock repurchase program, subject to market conditions and other relevant factors.

* Inventories at October 3, 2021 increased by $20 million, or 33%, from the end of 2020. Cognex added component inventory to support customer orders and replenished some strategic inventory balances, the cost of which was noticeably higher than in prior periods.

Financial Outlook - Q4 2021

* Cognex believes revenue in Q4-21 will be between $210 million and $230 million, which is roughly flat at the mid-point compared with a high-growth quarter reported in Q4-20. The company expects to experience a lingering headwind from last year's high concentration of consumer electronics revenue in the second half of 2020, delayed product sales in Q4-21 because of supply-chain constraints, and low growth in logistics due to the timing of revenue.

* Gross margin for Q4-21 is expected to be in the low-70% range and below the company's mid-70% long-term target because of elevated costs, particularly for components and freight.

* Operating expenses are expected to increase by mid-single digits from Q3-21 due to investments around the company's growth plans, including additional resources, new product development, and sales and marketing activities.

* The effective tax rate is expected to be 18%, excluding discrete tax items.

Non-GAAP Financial Measures

* Exhibit 2 of this news release includes a reconciliation of certain financial measures from GAAP to non-GAAP. Cognex believes these non-GAAP financial measures are helpful because they allow investors to more accurately compare Cognex results over multiple periods using the same methodology that management employs in its budgeting process and in its review of Cognex's operating results. Non-GAAP presentations exclude certain one-time discrete events, such as discrete tax adjustments (because these costs are outside of Cognex's normal business operations and not used by management to assess Cognex's operating results). Additionally, the company excludes restructuring charges, intangible asset impairment charges, and excess and obsolete inventory charges because these charges result from discrete activities, such as specific restructuring actions or acquisitions, that management frequently excludes in evaluating Cognex's operating results. Cognex does not intend for non-GAAP financial measures to be considered in isolation, or as a substitute for financial information provided in accordance with GAAP.

* We estimate the tax effect of items identified in the reconciliation by applying the effective tax rate to the pre-tax amount. However, if a specific tax rate or tax treatment is required because of the nature of the item and/or the tax jurisdiction where the item was recorded, we estimate the tax effect by applying the relevant specific tax rate or tax treatment, rather than the effective tax rate.

Analyst Conference Call and Simultaneous Webcast

* Cognex will host a conference call today at 5:00 p.m. Eastern Daylight Time (EDT). The telephone number is (877) 704-4573 (or (201) 389-0911 if outside the United States). A replay will begin at 8:00 p.m. EDT today and will be available until 11:59 p.m. EDT on Sunday, November 7, 2021. The telephone number for the replay is (877) 660-6853 (or (201) 612-7415 if outside the United States). The access code for both the live call and the replay is 13722693.

* A real-time audio broadcast of the conference call or an archived recording will be accessible on the Events & Presentations page of the Cognex Investor website: https://www.cognex.com/Investor.

About Cognex Corporation

Cognex Corporation designs, develops, manufactures, and markets a wide range of image-based products, all of which use artificial intelligence (AI) techniques that give them the human-like ability to make decisions on what they see. Cognex products include machine vision systems, machine vision sensors, and barcode readers that are used in factories and distribution centers around the world where they eliminate production and shipping errors.

Cognex is the world's leader in the machine vision industry, having shipped more than 3 million image-based products, representing over $8 billion in cumulative revenue, since the company's founding in 1981. Headquartered in Natick, Massachusetts, USA, Cognex has offices and distributors located throughout the Americas, Europe, and Asia. For details, visit Cognex online at www.cognex.com.

Certain statements made in this news release, which do not relate solely to historical matters, are forward-looking statements. These statements can be identified by use of the words "expects," "anticipates," "estimates," "believes," "projects," "intends," "plans," "will," "may," "shall," "could," "should," and similar words and other statements of a similar sense. These statements are based on our current estimates and expectations as to prospective events and circumstances, which may or may not be in our control and as to which there can be no firm assurances given. These forward-looking statements, which include statements regarding business and market trends, future financial performance, the expected impact of the COVID-19 pandemic on our assets, business and results of operations, customer demand and order rates and timing of related revenue, managing supply shortages, future product mix, restructuring and other cost-savings initiatives, research and development activities, sales and marketing activities, new product offerings, capital expenditures, investments, liquidity, dividends and stock repurchases, strategic and growth plans, and estimated tax benefits and expenses and other tax matters, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) the impact, duration, and severity of the COVID-19 pandemic; (2) potential disruptions to our business due to restructuring activities; (3) the loss of, or curtailment of purchases by, large customers in the consumer electronics and logistics industries; (4) the reliance on revenue from the automotive industry; (5) the reliance on key suppliers to manufacture and deliver critical components for our products; (6) disruptions in the supply chain, which could impact timely delivery of customer orders, cause customer orders to decrease, or increase costs to fulfill orders, including costs for components or freight; (7) the failure to effectively manage product transitions or accurately forecast customer demand; (8) the inability to design and manufacture high-quality products; (9) the inability to attract and retain skilled employees and maintain our unique corporate culture; (10) the failure to effectively manage our growth; (11) the inability to achieve growth in revenue and profits from the logistics industry; (12) the technological obsolescence of current products and the inability to develop new products; (13) the failure to properly manage the distribution of products and services; (14) the impact of competitive pressures; (15) the challenges in integrating and achieving expected results from acquired businesses; (16) potential disruptions in our business systems; (17) information security breaches and cyber-attacks; (18) the inability to protect our proprietary technology and intellectual property; (19) potential impairment charges with respect to our investments or acquired intangible assets; (20) exposure to additional tax liabilities; (21) fluctuations in foreign currency exchange rates and the use of derivative instruments; (22) our involvement in time-consuming and costly litigation; (23) unfavorable global economic conditions; and (24) economic, political, and other risks associated with international sales and operations; and the other risks detailed in Cognex reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2020 and Form 10-Q for the fiscal quarter ended October 3, 2021. You should not place undue reliance upon any such forward-looking statements, which speak only as of the date made. Cognex disclaims any obligation to update forward-looking statements after the date of such statements.

Exhibit 1

COGNEX CORPORATIONStatements of Operations(Unaudited)Dollars in thousands, except per share amounts

Three-months Ended Nine-months Ended

Oct. 3, Jul. 4, Sept. 27, Oct. 3, Sept. 27, 2021 2021 2020 2021 2020

Revenue $ 284,848 $ 269,158 $ 251,073 $ 793,033 $ 587,405

Cost of revenue 85,712 68,432 59,741 208,189 151,261 (1)

Gross margin 199,136 200,726 191,332 584,844 436,144

Percentage of 70 % 75 % 76 % 74 % 74 %revenue

Research,development, and 34,476 31,302 30,240 99,883 96,583 engineeringexpenses (1)

Percentage of 12 % 12 % 12 % 13 % 16 %revenue

Selling, general,and 77,113 76,843 64,206 226,380 193,497 administrativeexpenses (1)

Percentage of 27 % 29 % 26 % 29 % 33 %revenue

Restructuring - - 251 - 15,049 charges

Intangible assetimpairment - - - - 19,571 charges

Operating income 87,547 92,581 96,635 258,581 111,444

Percentage of 31 % 34 % 38 % 33 % 19 %revenue

Foreign currency (586) (639) 2,357 (2,233) (310) gain (loss)

Investment and 1,623 1,596 2,317 4,605 10,857 other income

Income beforeincome tax 88,584 93,538 101,309 260,953 121,991 expense

Income tax 9,684 15,940 13,803 34,607 15,150 expense

Net income $ 78,900 $ 77,598 $ 87,506 $ 226,346 $ 106,841

Percentage of 28 % 29 % 35 % 29 % 18 %revenue



Net income perweighted-averagecommon and common-equivalentshare:

Basic $ 0.45 $ 0.44 $ 0.50 $ 1.28 $ 0.62

Diluted $ 0.44 $ 0.43 $ 0.49 $ 1.26 $ 0.61



Weighted-averagecommon andcommon-equivalent sharesoutstanding:

Basic 176,812 176,626 173,943 176,572 172,881

Diluted 180,342 179,991 177,138 180,109 176,038



Cash dividends $ 0.060 $ 0.060 $ 0.055 $ 0.180 $ 0.165 per common share

Cash andinvestments per $ 5.57 $ 5.39 $ 5.80 $ 5.57 $ 5.80 common share

Book value per $ 8.44 $ 8.09 $ 8.62 $ 8.44 $ 8.62 common share



(1) Amountsincludestock-based compensationexpense, asfollows:

Cost of revenue $ 366 $ 351 $ 324 $ 965 $ 1,041

Research,development, and 3,091 3,064 2,815 10,158 10,582 engineering

Selling, general,and 7,157 7,315 6,129 22,230 20,453 administrative

Total stock-basedcompensation $ 10,614 $ 10,730 $ 9,268 $ 33,353 $ 32,076 expense



Exhibit 2

COGNEX CORPORATIONReconciliation of Selected Items from GAAP to Non-GAAP(Unaudited)Dollars in thousands, except per share amounts

Three-months Ended Nine-months Ended

Oct. 3, Jul. 4, Sept. 27, Oct. 3, Sept. 27, 2021 2021 2020 2021 2020

Discrete tax adjustments reconciliation

Incomebeforeincome tax $ 88,584 $ 93,538 $ 101,309 $ 260,953 $ 121,991 expense(GAAP)



Income taxexpense $ 9,684 $ 15,940 $ 13,803 $ 34,607 $ 15,150 (GAAP)

Effectivetax rate 11 % 17 % 14 % 13 % 12 %(GAAP)



Discrete taxbenefitrelated to 3,250 1,431 4,354 9,888 10,447 stock-basedcompensation

Discrete taxbenefit(expense)related to 3,012 (535) (129) 2,477 (3,638) tax returnfilings andother

Totaldiscrete tax $ 6,262 $ 896 $ 4,225 $ 12,365 $ 6,809 adjustments



Income taxexpense $ 15,946 $ 16,836 $ 18,028 $ 46,972 $ 21,959 (Non-GAAP)

Effectivetax rate 18 % 18 % 18 % 18 % 18 %(Non-GAAP)



Restructuring and other charges and discrete tax adjustments reconciliation

Net income (GAAP)

$

78,900

$

77,598

$

87,506

$

226,346

$

106,841

Excess and obsolete inventory charges

303

1,111

603

2,120

9,386

Restructuring charges

-

-

251

-

15,049

Intangible asset impairment charges

-

-

-

-

19,571

Tax effect on restructuring and other charges

(55)

(200)

(154)

(382)

(7,921)

Discrete tax adjustments

(6,262)

(896)

(4,225)

(12,365)

(6,809)

Net income (Non-GAAP)

$

72,886

$

77,613

$

83,981

$

215,719

$

136,117

Percentage of revenue (Non-GAAP)

26

%

29

%

33

%

27

%

23

%

Net income per diluted weighted-average common and common-equivalent share (GAAP)

$

0.44

$

0.43

$

0.49

$

1.26

$

0.61

Per share impact of non-GAAP adjustments identified above

(0.04)

-

(0.02)

(0.06)

0.16

Net income per diluted weighted-average common and common-equivalent share (Non-GAAP)

$

0.40

$

0.43

$

0.47

$

1.20

$

0.77

Diluted weighted-average common and common-equivalent shares outstanding

180,342

179,991

177,138

180,109

176,038

Exhibit 3



Restructuring and other charges and discrete tax adjustments reconciliation



Net income (GAAP) $ 78,900 $ 77,598 $ 87,506 $ 226,346 $ 106,841

Excess andobsolete 303 1,111 603 2,120 9,386 inventory charges

Restructuring - - 251 - 15,049 charges

Intangible assetimpairment - - - - 19,571 charges

Tax effect onrestructuring and (55) (200) (154) (382) (7,921) other charges

Discrete tax (6,262) (896) (4,225) (12,365) (6,809) adjustments

Net income $ 72,886 $ 77,613 $ 83,981 $ 215,719 $ 136,117 (Non-GAAP)

Percentage ofrevenue 26 % 29 % 33 % 27 % 23 %(Non-GAAP)



Net income perdilutedweighted-average $ 0.44 $ 0.43 $ 0.49 $ 1.26 $ 0.61 common andcommon-equivalentshare (GAAP)

Per share impactof non-GAAP (0.04) - (0.02) (0.06) 0.16 adjustmentsidentified above

Net income perdilutedweighted-average $ 0.40 $ 0.43 $ 0.47 $ 1.20 $ 0.77 common andcommon-equivalentshare (Non-GAAP)



Dilutedweighted-averagecommon and 180,342 179,991 177,138 180,109 176,038 common-equivalentsharesoutstanding





Exhibit 3

COGNEX CORPORATIONBalance Sheets(Unaudited)Dollars in thousands

October 3, 2021 December 31, 2020

Assets

Cash and investments $ 985,386 $ 767,438

Accounts receivable 129,784 125,696

Inventories 81,170 60,830

Property, plant, and equipment 76,882 79,173

Operating lease assets 24,154 22,582

Goodwill and intangible assets 254,581 259,633

Deferred tax assets 420,962 434,704

Other assets 75,884 50,646



Total assets $ 2,048,803 $ 1,800,702



Liabilities and Shareholders' Equity

Accounts payable and accrued expenses $ 107,134 $ 93,534

Deferred revenue and customer deposits 37,843 21,274

Operating lease liabilities 26,811 26,230

Income taxes 68,039 72,551

Deferred tax liabilities 302,019 314,952

Other liabilities 13,996 9,959

Shareholders' equity 1,492,961 1,262,202



Total liabilities and shareholders' equity $ 2,048,803 $ 1,800,702

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CONTACT: Susan Conway Investor Relations +1 508-650-3353 Susan.conway@cognex.com