NATICK, Mass., July 31, 2024 /PRNewswire/ -- Cognex Corporation (NASDAQ:CGNX) today reported financial results for the second quarter of 2024. Table 1 below shows selected financial data for Q2-24 compared with Q2-23 and Q1-24. "Cognex delivered second quarter revenue and gross margin in line with expectations and operating expenses favorable to our guidance," said Robert J. Willett, CEO. "Year-on-year revenue growth in the quarter was strong in our Logistics and Semiconductor end markets, however revenue across the rest of our factory automation business continues to be soft." "Amidst this challenging operating environment, we remain focused on creating long-term value through AI-driven product innovation and our Emerging Customer initiative, as well as on key financial priorities including cost management and capital efficiency." Table 1 (Dollars in millions, except per share amounts) CurrentQuarter Q2-24 Prior YearQuarterQ2-23 Y/YChange Prior Quarter Q1-24 Q/Q Change Revenue $239 $243 (1 %) $211 +14 % Operating Income $38 $65 (41 %) $14 +171 % % of Revenue 16.1 % 26.9 % (1,080 bps) 6.7 % +933 bps Adjusted EBITDA* $48 $68 (30 %) $25 +89 % % of Revenue 19.9 % 28.1 % (826 bps) 11.9 % +794 bps Net Income per Diluted Share $0.21 $0.33 (37 %) $0.07 +201 % Adjusted EPS (Diluted)* $0.23 $0.33 (31 %) $0.11 +100 % Note: Numbers shown may not foot due to rounding. *Adjusted EBITDA and Adjusted EPS (Diluted) exclude Non-GAAP adjustments. A reconciliation from GAAP to Non-GAAP metrics is provided in this news release. Details of the Quarter Statement of Operations Highlights – Second Quarter of 2024 Revenue declined by 1% from Q2-23. Excluding the 7% contribution of Moritex and 1% negative impact of FX, revenue declined by 7%. The year-on-year decline in revenue was driven primarily by continued softness across our factory automation business, partially offset by growth in our Logistics and Semiconductor businesses. Sequentially, revenue increased by 14% from Q1-24, or 15% excluding a 1% negative impact of FX, primarily due to the seasonality of Consumer Electronics revenue. Gross margin was 69.6% for Q2-24 compared to 74.1% for Q2-23 and 67.3% for Q1-24. We recorded $2 million in amortization of intangible assets and other acquisition charges in cost of revenue in the quarter, primarily related to the Moritex acquisition. Adjusted gross margin was 70.3% for Q2-24 compared to 74.3% for Q2-23 and 68.8% for Q1-24, in line with our prior guidance. The year-on-year stepdown was driven by an approximately 2 percentage point dilution effect from Moritex, in addition to negative mix effects. Operating expenses of $128 million increased by 12% from Q2-23 and were flat from Q1-24. We recorded $3 million in amortization of intangible assets, integration costs, and other acquisition charges in operating expenses in the quarter, primarily related to the Moritex acquisition. Adjusted operating expenses of $126 million increased by 8% from Q2-23 and were flat from Q1-24, below our prior guidance. The year-on-year increase was primarily driven by incremental costs related to Moritex and our investment in the Emerging Customer initiative, partly offset by lower headcount excluding Moritex and Emerging Customers, as well as disciplined cost management. Net Income of $36 million declined by 37% from Q2-23 and increased by 201% from Q1-24. Adjusted Net Income of $39 million declined by 32% from Q2-23 and increased by 100% from Q1-24. The year-on-year decline in Adjusted Net Income was primarily driven by lower revenue excluding Moritex, lower gross margins and continued investment in our Emerging Customer initiative. The effective tax rate was 13% in Q2-24 and 15% in Q2-23. Excluding discrete tax items and the tax impact of non-GAAP adjustments, the adjusted effective tax rate was 15% in both periods. Balance Sheet and Cash Flow Highlights – June 30, 2024 Cognex's financial position as of June 30, 2024 continued to be strong, with $555 million in cash and investments and no debt. In Q2-24, Cognex generated $28 million in cash from operations. In addition, the company spent $11 million to repurchase its common stock and paid $13 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. Financial Outlook – Q3 2024 Cognex expects revenue to be between $225 million and $240 million. This range represents a slight sequential decrease in revenue from Q2-24 to Q3-24 and a slight increase year-on-year excluding Moritex driven by a lower comparison in Q3-23 as $15 million of Consumer Electronics revenue shifted from Q3-23 into Q2-23 last year. We expect the Moritex business to contribute 10 to 12 percent of revenue in Q3. This is higher than the typical 6 to 8 percent of revenue as Q3 will include four months of Moritex financials as we align accounting close schedules. Adjusted gross margin1 is expected to be slightly below 70%, a sequential decrease from Q2-24 driven by the additional month of Moritex financials and negative mix. Adjusted EBITDA margin1 is expected to be between 16% and 19%. Expectations for a similar EBITDA margin year-on-year reflect positive operating leverage on higher revenue mostly offset by additional investment in the Emerging Customers initiative and higher incentive compensation. The adjusted effective tax rate1 is expected to be 16%. 1Cognex has provided the forward-looking non-GAAP measures of adjusted gross margin, adjusted EBITDA margin, and adjusted effective tax rate, but cannot, without unreasonable effort, forecast such items to present or provide a reconciliation to corresponding forecasted GAAP measures. These include special items such as restructuring charges, acquisition and integration charges, and amortization of acquisition-related intangible assets, all of which are subject to limitations in predictability of timing, ultimate outcome and numerous conditions outside of Cognex's control. Additionally, these items are outside of Cognex's normal business operations and not used by management to assess Cognex's operating results. Cognex believes these limitations would result in a range of projected values so broad as to not be meaningful to investors. For these reasons, Cognex believes that the probable significance of such information is low. Information with respect to special items for certain historical periods is included in the section entitled "Reconciliation of Selected Items From GAAP to Non-GAAP". Analyst Conference Call and Simultaneous Webcast Cognex will host a conference call on August 1, 2024 at 8:30 a.m. Eastern Daylight Time (EDT). The telephone number is (877) 704-4573 (or (201) 389-0911 if outside the United States). A real-time audio broadcast of the conference call or an archived recording, together with a slide presentation, will be accessible on the Events & Presentations page of the Cognex Investor website: www.cognex.com/investor. COGNEX CORPORATION CONSOLIDATED BALANCE SHEETS June 30,2024 December 31,2023 (In thousands) ASSETS Current assets: Cash and cash equivalents $           176,626 $           202,655 Current investments, amortized cost of $114,177 and $132,799 in 2024 and 2023,respectively, allowance for credit losses of $0 in 2024 and 2023 112,449 129,392 Accounts receivable, allowance for credit losses of $665 and $583 in 2024 and 2023,respectively 159,305 114,164 Unbilled revenue 1,858 2,402 Inventories 157,255 162,285 Prepaid expenses and other current assets 73,524 68,099 Total current assets 681,017 678,997 Non-current investments, amortized cost of $272,613 and $250,790 in 2024 and 2023,respectively, allowance for credit losses of $0 in 2024 and 2023 266,214 244,230 Property, plant, and equipment, net 102,997 105,849 Operating lease assets 71,283 75,115 Goodwill 381,042 393,181 Intangible assets, net 98,548 112,952 Deferred income taxes 396,723 400,400 Other assets 6,260 7,088 Total assets $       2,004,084 $       2,017,812 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $             22,617 $             21,454 Accrued expenses 75,405 72,374 Accrued income taxes 20,827 16,907 Deferred revenue and customer deposits 40,529 31,525 Operating lease liabilities 9,405 9,624 Total current liabilities 168,783 151,884 Non-current operating lease liabilities 64,778 68,977 Deferred income taxes 233,798 246,877 Reserve for income taxes 28,826 26,685 Non-current accrued income taxes — 18,338 Other liabilities 1,169 299 Total liabilities 497,354 513,060 Commitments and contingencies Shareholders' equity: Preferred stock, $.01 par value – Authorized: 400 shares in 2024 and 2023,respectively; no shares issued and outstanding — — Common stock, $.002 par value – Authorized: 300,000 shares in 2024 and 2023,respectively; issued and outstanding: 171,501 and 171,599 shares in 2024 and 2023,respectively 343 343 Additional paid-in capital 1,061,597 1,037,202 Retained earnings