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Cognex Corporation designs, develops, manufactures, and markets a range of products that incorporate sophisticated machine vision technology that gives them the ability to “see.” Cognex products include barcode readers, machine vision sensors, and machine vision systems that are used in factories, warehouses, and distribution centers around the world to guide, gauge, inspect, identify, and assure the quality of items during the manufacturing and distribution process. Cognex is the world’s leader in the machine vision industry, having shipped more than 1 million vision-based products, representing over $4 billion in cumulative revenue, since the company’s founding in 1981. Headquartered in Natick, Massachusetts, USA, Cognex has regional offices and distributors located throughout the Americas, Europe, and Asia.
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Cognex Corporation Reports Fantastic Second Quarter Results
POSTED 08/03/2011
Cog
"This was an outstanding quarter for Cognex," said Dr. Robert J. Shillman, Chairman of Cognex. "We expected to have a good quarter when we gave revenue guidance in May but the actual results surpassed our estimate. Demand was strong in both the Factory Automation and Surface Inspection markets; in fact, we received a record level of orders from each of those markets during the quarter, resulting in record bookings overall. This order strength led to the second highest quarterly revenue in Cognex's 30-year history. The substantial leverage that incremental revenue has on our profitability drove our gross margin to 77%, operating margin to 29% and net income to 23% of revenue for the quarter."
"We are very pleased with our performance in the second quarter of 2011," said Robert J. Willett, Chief Executive Officer of Cognex. "Revenue increased significantly over both the second quarter of last year and the prior quarter as we continued to execute well on our growth initiatives. A key contributor was our business in Asia, particularly China, where we foresee good long-term growth potential for machine vision. And, from an operations standpoint, we delivered strong margin expansion while investing in new product development and in our sales team."
Details of the Quarter
Statement of Operations Highlights -- Second Quarter of 2011
-- Revenue for the second quarter of 2011 increased 16% from the second quarter of 2010 and 12% from the prior quarter. The increase, both year-on-year and sequentially, was due to record revenue from the Factory Automation market. The largest percentage increase was in Asia, primarily due to strong growth in China where Cognex is expanding its sales and distribution network.
-- Gross margin was 77% in the second quarter of 2011, 74% in the second quarter of 2010 and 75% in the prior quarter. Gross margin increased year-on-year due to leverage from the higher revenue level and a stronger mix of modular vision systems, which are Cognex's highest-margin products. Gross margin increased on a sequential basis also due to the higher revenue level as well as improved margins on surface inspection products and services.
-- Research, Development & Engineering (R, D & E) spending in the second quarter of 2011 increased 30% from the second quarter of 2010 and 11% from the prior quarter. The increase year-on-year is due to investments in engineering headcount to accelerate new product introductions, stock option expense, and higher patent-related costs on products under development. The increase on a sequential basis is primarily due to a higher bonus accrual. Also contributing to the increase in R, D & E spending, both year-on-year and sequentially, was the impact of foreign exchange rates on the company's international operations.
-- Selling, General & Administrative (S, G & A) spending in the second quarter of 2011 increased 14% from the second quarter of 2010 and 1% from the prior quarter. The increase year-on-year is due to the company's initiative to expand its sales organization, the impact of foreign exchange rates, higher stock option expense and higher spending on marketing programs.
-- The tax rate was 23% in all quarters presented.
Balance Sheet Highlights -- July 3, 2011
-- Cognex's financial position as of July 3, 2011 was very strong, with no debt and $353,388,000 in cash and investments. In the second quarter of 2011, Cognex generated positive cash flow from operations of approximately $27,300,000, and paid out $3,780,000 in dividends to shareholders.
-- Inventories as of July 3, 2011 were relatively flat with the end of the prior quarter.
Financial Outlook
-- In Q3-11, revenue is expected to be between $78 million and $81 million, which is a decrease of 3% to 6% on a sequential basis due to typical seasonal softness. Operating expenses are expected to be relatively flat with Q2-11. And, the effective tax rate is expected to remain at 23%.
Non-GAAP Financial Measures
-- Exhibit 2 of this press release includes a reconciliation of certain financial measures from GAAP to non-GAAP. Cognex believes that these non-GAAP financial measures are useful to investors because they allow investors to more accurately assess and compare the company's results over multiple periods and to evaluate the effectiveness of the methodology used by management to review its operating results. In particular, Cognex incurs expense related to stock options included in its GAAP presentation of cost of revenue, research, development, and engineering expenses (R, D & E), and selling, general and administrative expenses (S, G & A). Cognex excludes these expenses for the purpose of calculating non-GAAP adjusted net income and non-GAAP adjusted net income per share when it evaluates its continuing operational performance and in connection with its budgeting process and the allocation of resources, because these expenses have no current effect on cash or the future uses of cash and they fluctuate as a result of changes in Cognex's stock price. Cognex also excludes certain items if they are one-time discrete events, such as revenue from certain customers. Cognex does not intend for these non-GAAP financial measures to be considered in isolation, nor as a substitute for financial information provided in accordance with GAAP.
Cognex estimates the tax effect of the items identified in the reconciliation by applying its effective tax rate to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such items is estimated by applying such specific tax rate or tax treatment.
Analyst Conference Call and Simultaneous Webcast
-- Cognex will host a conference call to discuss its results for the second quarter of 2011, as well as its financial and business outlook, today at 5:00 p.m. Eastern time. The telephone number for the live call is 866-835-8905 (or 703-639-1412 if outside the United States). A replay will begin at 8:00 p.m. Eastern time today and will run continuously until 11:59 p.m. Eastern time on Thursday, August 4, 2011. The telephone number for the replay is 888-258-7854 (or 703-925-2490 if outside the United States) and the access code is 1539078.
-- Internet users can listen to a real-time audio broadcast of the conference call, as well as an archive replay of the call, on Cognex's website at http://www.cognex.com/Investor .
About Cognex Corporation
Cognex Corporation designs, develops, manufactures and markets a range of products that incorporate sophisticated machine vision technology that gives them the ability to "see." Cognex products include barcode readers, machine vision sensors and machine vision systems that are used in factories, warehouses and distribution centers around the world to guide, gauge, inspect, identify and assure the quality of items during the manufacturing and distribution process. Cognex is the world's leader in the machine vision industry, having shipped more than 600,000 vision-based products, representing over $3 billion in cumulative revenue, since the company's founding in 1981. Headquartered in Natick, Massachusetts, USA, Cognex has regional offices and distributors located throughout North America, Japan, Europe, Asia and Latin America.
"This was an outstanding quarter for Cognex," said Dr. Robert J. Shillman, Chairman of Cognex. "We expected to have a good quarter when we gave revenue guidance in May but the actual results surpassed our estimate. Demand was strong in both the Factory Automation and Surface Inspection markets; in fact, we received a record level of orders from each of those markets during the quarter, resulting in record bookings overall. This order strength led to the second highest quarterly revenue in Cognex's 30-year history. The substantial leverage that incremental revenue has on our profitability drove our gross margin to 77%, operating margin to 29% and net income to 23% of revenue for the quarter."
"We are very pleased with our performance in the second quarter of 2011," said Robert J. Willett, Chief Executive Officer of Cognex. "Revenue increased significantly over both the second quarter of last year and the prior quarter as we continued to execute well on our growth initiatives. A key contributor was our business in Asia, particularly China, where we foresee good long-term growth potential for machine vision. And, from an operations standpoint, we delivered strong margin expansion while investing in new product development and in our sales team."
Details of the Quarter
Statement of Operations Highlights -- Second Quarter of 2011
-- Revenue for the second quarter of 2011 increased 16% from the second quarter of 2010 and 12% from the prior quarter. The increase, both year-on-year and sequentially, was due to record revenue from the Factory Automation market. The largest percentage increase was in Asia, primarily due to strong growth in China where Cognex is expanding its sales and distribution network.
-- Gross margin was 77% in the second quarter of 2011, 74% in the second quarter of 2010 and 75% in the prior quarter. Gross margin increased year-on-year due to leverage from the higher revenue level and a stronger mix of modular vision systems, which are Cognex's highest-margin products. Gross margin increased on a sequential basis also due to the higher revenue level as well as improved margins on surface inspection products and services.
-- Research, Development & Engineering (R, D & E) spending in the second quarter of 2011 increased 30% from the second quarter of 2010 and 11% from the prior quarter. The increase year-on-year is due to investments in engineering headcount to accelerate new product introductions, stock option expense, and higher patent-related costs on products under development. The increase on a sequential basis is primarily due to a higher bonus accrual. Also contributing to the increase in R, D & E spending, both year-on-year and sequentially, was the impact of foreign exchange rates on the company's international operations.
-- Selling, General & Administrative (S, G & A) spending in the second quarter of 2011 increased 14% from the second quarter of 2010 and 1% from the prior quarter. The increase year-on-year is due to the company's initiative to expand its sales organization, the impact of foreign exchange rates, higher stock option expense and higher spending on marketing programs.
-- The tax rate was 23% in all quarters presented.
Balance Sheet Highlights -- July 3, 2011
-- Cognex's financial position as of July 3, 2011 was very strong, with no debt and $353,388,000 in cash and investments. In the second quarter of 2011, Cognex generated positive cash flow from operations of approximately $27,300,000, and paid out $3,780,000 in dividends to shareholders.
-- Inventories as of July 3, 2011 were relatively flat with the end of the prior quarter.
Financial Outlook
-- In Q3-11, revenue is expected to be between $78 million and $81 million, which is a decrease of 3% to 6% on a sequential basis due to typical seasonal softness. Operating expenses are expected to be relatively flat with Q2-11. And, the effective tax rate is expected to remain at 23%.
Non-GAAP Financial Measures
-- Exhibit 2 of this press release includes a reconciliation of certain financial measures from GAAP to non-GAAP. Cognex believes that these non-GAAP financial measures are useful to investors because they allow investors to more accurately assess and compare the company's results over multiple periods and to evaluate the effectiveness of the methodology used by management to review its operating results. In particular, Cognex incurs expense related to stock options included in its GAAP presentation of cost of revenue, research, development, and engineering expenses (R, D & E), and selling, general and administrative expenses (S, G & A). Cognex excludes these expenses for the purpose of calculating non-GAAP adjusted net income and non-GAAP adjusted net income per share when it evaluates its continuing operational performance and in connection with its budgeting process and the allocation of resources, because these expenses have no current effect on cash or the future uses of cash and they fluctuate as a result of changes in Cognex's stock price. Cognex also excludes certain items if they are one-time discrete events, such as revenue from certain customers. Cognex does not intend for these non-GAAP financial measures to be considered in isolation, nor as a substitute for financial information provided in accordance with GAAP.
Cognex estimates the tax effect of the items identified in the reconciliation by applying its effective tax rate to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such items is estimated by applying such specific tax rate or tax treatment.
Analyst Conference Call and Simultaneous Webcast
-- Cognex will host a conference call to discuss its results for the second quarter of 2011, as well as its financial and business outlook, today at 5:00 p.m. Eastern time. The telephone number for the live call is 866-835-8905 (or 703-639-1412 if outside the United States). A replay will begin at 8:00 p.m. Eastern time today and will run continuously until 11:59 p.m. Eastern time on Thursday, August 4, 2011. The telephone number for the replay is 888-258-7854 (or 703-925-2490 if outside the United States) and the access code is 1539078.
-- Internet users can listen to a real-time audio broadcast of the conference call, as well as an archive replay of the call, on Cognex's website at http://www.cognex.com/Investor .
About Cognex Corporation
Cognex Corporation designs, develops, manufactures and markets a range of products that incorporate sophisticated machine vision technology that gives them the ability to "see." Cognex products include barcode readers, machine vision sensors and machine vision systems that are used in factories, warehouses and distribution centers around the world to guide, gauge, inspect, identify and assure the quality of items during the manufacturing and distribution process. Cognex is the world's leader in the machine vision industry, having shipped more than 600,000 vision-based products, representing over $3 billion in cumulative revenue, since the company's founding in 1981. Headquartered in Natick, Massachusetts, USA, Cognex has regional offices and distributors located throughout North America, Japan, Europe, Asia and Latin America.