Cognex Reports Third Quarter 2024 Results
NATICK, Mass., Oct. 30, 2024 /PRNewswire/ -- Cognex Corporation (NASDAQ:CGNX) today reported financial results for the third quarter of 2024. Table 1 below shows selected financial data for Q3-24 compared with Q3-23 and Q2-24.
"Cognex generated third quarter revenue and adjusted EBITDA margin in line with our guidance," said Robert J. Willett, CEO. "Revenue grew year-on-year on both a reported basis and excluding Moritex, led by continued strength in our Logistics and Semiconductor end markets. However, conditions across our broader factory automation business remain soft, with a further step-down in Automotive."
Mr. Willett continued, "We made good strides in innovation, rolling out additional out-of-the-box AI features that are enhancing our products. We also continue to see our Emerging Customer initiative ramp well and attract many new customers."
Dennis Fehr, CFO, added, "In this prolonged soft macro environment, we tightly managed costs and working capital. Despite a ramp in strategic investments, we delivered a sequential decrease in operating expenses. Combined with working capital efficiencies, this led to our highest quarterly operating cash flow and free cash flow since Q4-2022."
Table 1(Dollars in millions, except per share amounts)
Current Quarter
Q3-24
Prior Year Quarter Q3-23
Y/Y Change
Prior
Quarter
Q2-24
Q/Q
Change
Revenue
$235
$197
+19 %
$239
-2 %
Operating Income
$32
$31
+3 %
$38
-18 %
% of Revenue
13.4 %
15.5 %
(209 bps)
16.1 %
(262 bps)
Adjusted EBITDA*
$41
$34
+20 %
$48
-13 %
% of Revenue
17.6 %
17.4 %
+19 bps
19.9 %
(232 bps)
Net Income per Diluted Share
$0.17
$0.11
+57 %
$0.21
-18 %
Adjusted EPS (Diluted)*
$0.20
$0.17
+19 %
$0.23
-13 %
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, Third Quarter of 2024
As previously noted, results include four months of financials for Moritex, which was acquired by Cognex in October 2023, as we aligned Moritex's accounting close schedule with the Cognex close schedule in the quarter.
Revenue grew by 19% from Q3-23. Excluding the 12 percentage point contribution to revenue growth by Moritex, revenue increased by 7%. The year-on-year increase in revenue excluding Moritex was driven by strong growth in our Logistics and Semiconductor businesses as well as the timing of Consumer Electronics revenue. Sequentially, revenue decreased by 2% from Q2-24, or 5% excluding Moritex, primarily due to the seasonality of Consumer Electronics revenue.
Gross margin was 67.9% for Q3-24 compared to 72.4% for Q3-23 and 69.6% for Q2-24. We recorded $2 million in amortization of intangible assets and other acquisition charges in cost of revenue in Q3-24, primarily related to the Moritex acquisition. Adjusted gross margin was 68.7% for Q3-24 compared to 72.7% for Q3-23 and 70.3% for Q2-24. The year-on-year decline was primarily driven by an approximately 3 percentage point dilution effect from Moritex while negative mix and pricing contributed to the sequential decline.
Operating expenses of $128 million increased by 14% from Q3-23 and were slightly down from Q2-24. We recorded $3 million in amortization of intangible assets, integration costs, and other acquisition charges in operating expenses in Q3-24, primarily related to the Moritex acquisition. Adjusted operating expenses of $125 million in Q3-24 increased by 10% from Q3-23 and were slightly down from Q2-24. The year-on-year increase was driven by expenses related to Moritex, our investment in the Emerging Customer initiative, and incentive compensation, partly offset by lower headcount excluding Moritex and the Emerging Customer initiative, as well as disciplined cost management.
Net Income of $30 million increased by 56% from Q3-23 and declined by 18% from Q2-24. Adjusted Net Income of $34 million in Q3-24 increased by 19% from Q3-23 and declined by 13% from Q2-24. The year-on-year increase in Adjusted Net Income was primarily driven by the contribution from Moritex.
The effective tax rate was 19% in Q3-24 and 30% in Q3-23. Excluding discrete tax items and the tax impact of non-GAAP adjustments, the adjusted effective tax rate was 18% in both periods.
Balance Sheet and Cash Flow Highlights, September 29, 2024
Cognex's financial position as of September 29, 2024 continued to be strong, with $607 million in cash and investments and no debt as of September 29, 2024.
In Q3-24, Cognex generated $56 million of cash from operating activities and $52 million in free cash flow, a $15 million and $17 million improvement year-on-year, respectively.
The company spent $4 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, Fourth Quarter of 2024
Cognex expects revenue to be between $210 million and $230 million. This range represents a sequential decrease in revenue from Q3-24 to Q4-24 driven by Consumer Electronics seasonality and one fewer month of Moritex financials. Year-on-year, at the midpoint, this represents a low-double-digit increase on a reported basis, or a high-single-digit increase, excluding Moritex, driven by continued growth in Logistics and Semi. We expect the Moritex business to contribute 6 to 8 percent of revenue in Q4-24.
Adjusted gross margin1 is expected to be in the high 60 percent range. Mix as well as competitive pricing are expected to be sequential headwinds, partially offset by the favorable impact of one fewer month of Moritex financials.
Adjusted EBITDA margin1 is expected to be between 14% and 17%. This represents a 3 percentage point increase year-on-year at the midpoint driven by expected continued tight management of operating expenses and positive operating leverage slightly offset by lower gross margin and investment in the Emerging Customer initiative.
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 October 31, 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
(in thousands)
September 29,2024
December 31, 2023
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$ 197,075
$ 202,655
Current investments, amortized cost of $91,658 and $132,799 in 2024 and 2023, respectively, allowance for credit losses of $0 in 2024 and 2023
90,803
129,392
Accounts receivable, allowance for credit losses of $604 and $583 in 2024 and 2023,respectively
157,968
114,164
Unbilled revenue
2,117
2,402
Inventories
155,278
162,285
Prepaid expenses and other current assets
68,841
68,099
Total current assets
672,082
678,997
Non-current investments, amortized cost of $318,268 and $250,790 in 2024 and 2023, respectively, allowance for credit losses of $0 in 2024 and 2023
319,287
244,230
Property, plant, and equipment, net
103,177
105,849
Operating lease assets
72,433
75,115
Goodwill
391,673
393,181
Intangible assets, net
102,550
112,952
Deferred income taxes
395,205
400,400
Other assets
6,840
7,088
Total assets
$ 2,063,247
$ 2,017,812
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$ 29,984
$ 21,454
Accrued expenses
76,675
72,374
Accrued income taxes
24,226
16,907
Deferred revenue and customer deposits
30,045
31,525
Operating lease liabilities
9,806
9,624
Total current liabilities
170,736
151,884
Non-current operating lease liabilities
67,375
68,977
Deferred income taxes
230,368
246,877
Reserve for income taxes
26,491
26,685
Non-current accrued income taxes
—
18,338
Other liabilities
1,251
299
Total liabilities
496,221
513,060
Commitments and contingencies (Note 10)
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: 171,515 and 171,599 shares in 2024 and 2023, respectively
343
343
Additional paid-in capital
1,076,363
1,037,202
Retained earnings
527,909
512,543
