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Cognex 3Q 2019 Report YoY Shows Declines in Revenue and Net Income

NATICK, Mass.--(BUSINESS WIRE)--Cognex Corporation (NASDAQ: CGNX) today reported financial results for the third quarter of 2019. Table 1 below shows selected financial data for Q3-19 compared with Q3-18 and Q2-19, and for the nine months ended September 29, 2019 compared with the same period in 2018.

Cognex reports third quarter of 2019 financial results

 

Table 1

(Dollars in thousands, except per share amounts)
                 
   

Revenue

  

Net Income

  

Net Income
per Diluted
Share

  

Non-GAAP
Net Income
per Diluted
Share*

Quarterly Comparisons

                

Current quarter: Q3-19

 

$183,325

  

$41,685

  

$0.24

  

$0.23

Prior year’s quarter: Q3-18

  

$232,221

  

$80,436

  

$0.45

  

$0.39

Change: Q3-18 to Q3-19

  

(21%)

  

(48%)

  

(47%)

  

(41%)

Prior quarter: Q2-19

  

$199,047

  

$48,749

  

$0.28

  

$0.27

Change: Q2-19 to Q3-19

  

(8%)

  

(14%)

  

(14%)

  

(15%)

Year-to-Date Comparisons

                

Nine months ended Sept. 29, 2019

  

$555,856

  

$123,538

  

$0.71

  

$0.67

Nine months ended Sept. 30, 2018

  

$613,052

  

$173,849

  

$0.98

  

$0.88

Change from first nine months of 2018 to first nine months of 2019

  

(9%)

  

(29%)

  

(28%)

  

(24%)

*Non-GAAP net income per diluted share excludes tax adjustments. A reconciliation from GAAP to Non-GAAP is shown in Exhibit 2 of this news release.

 

“Our Q3 results were in line with our guidance, with revenue at the top end of our expected range,” said Dr. Robert J. Shillman, Founder and Chairman of Cognex. “Even so, it is frustrating to report a decline in revenue, both year over year and sequentially, due to the ongoing slowdown in spending by customers in our two largest markets, consumer electronics and automotive.”

“Difficult market conditions notwithstanding, there is a lot to be excited about at Cognex, including our recent acquisition of Sualab Co., Ltd.,” said Robert J. Willett, Chief Executive Officer of Cognex. “The scope of applications addressable by Cognex products continues to broaden and we are allocating resources to fast-growing areas, such as logistics and deep learning. We are confident in the long-term potential for machine vision and Cognex.”

Details of the Quarter

Statement of Operations Highlights – Third Quarter of 2019

  • Revenue decreased 21% from Q3-18 and 8% from Q2-19. The year-on-year decline in revenue was expected and reflects substantially lower sales to customers in consumer electronics, particularly smartphone manufacturing. This decline was partially offset by strong growth during the quarter in logistics. Revenue from automotive and other industrial markets continued to weaken on a sequential basis.
  • Gross margin was 74% for Q3-19 compared with 75% for Q3-18 and 74% for Q2-19. Gross margin declined year-on-year primarily due to unfavorable absorption of manufacturing overhead costs.
  • Research, Development & Engineering (RD&E) expenses decreased 5% from Q3-18 and remained consistent with Q2-19. The year-on-year decline in RD&E reflects lower incentive compensation for 2019.
  • Selling, General & Administrative (SG&A) expenses decreased 2% from Q3-18 and 6% from Q2-19. The year-on-year decline in SG&A was due to lower incentive compensation and lower costs associated with the implementation of a new enterprise resource planning system (Cognex implemented SAP® in mid-2018). This was partially offset by growth in the sales and support organization over the past year. The sequential decline in SG&A was due to lower incentive compensation and stock option expense, as well as the timing of marketing initiatives.
  • The effective tax rate was 12% in Q3-19, 1% in Q3-18, and 14% in Q2-19. Excluding discrete tax adjustments, the tax rate was 16%, 16%, and 17%, respectively (tax adjustments are summarized in Exhibit 2).
 

Balance Sheet Highlights – September 29, 2019

  • Cognex’s financial position as of September 29, 2019 continued to be very strong, with $918 million in cash and investments and no debt. In the first nine months of 2019, Cognex generated $185 million in cash from operations, spent $62 million to repurchase its common stock, and paid out $26 million in dividends to shareholders. Cognex intends to continue to repurchase shares of its common stock, subject to market conditions and other relevant factors. In addition, on October 16, 2019, Cognex acquired Sualab Co., Ltd. (Sualab), a Korea-based developer of vision software using deep learning for industrial applications, for an aggregate purchase price of approximately $195 million. At the time of purchase, Cognex paid out $171 million in cash. The remaining $24 million has been deferred until a later date.

Financial Outlook – Q4 2019 ----- click here to see the full news release

 

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