Cognex Reports Record First Quarter Results for Revenue, Net Income and Earnings Per Share

NATICK, Mass.--()--Cognex Corporation (NASDAQ: CGNX) today announced that the company set new first quarter records for revenue, net income and earnings per share in the first quarter of 2017. In Table 1 below, selected financial data for the quarter ended April 2, 2017 is compared to the first and fourth quarters of 2016. A reconciliation of certain financial measures from GAAP to non-GAAP is shown in Exhibit 2 of this news release.

Table 1

(Dollars in thousands, except per share amounts)

 
       

 

Revenue

     

 

Net Income

     

Net
Income per
Diluted Share

Quarterly Comparisons

                       
Current quarter: Q1-17       $134,942       $45,655       $0.51
Prior year’s quarter: Q1-16       $96,205       $14,885       $0.17
Change from Q1-16 to Q1-17       40%       207%       200%
Prior quarter: Q4-16       $129,322       $38,253       $0.43
Change from Q4-16 to Q1-17       4%       19%       19%

“I am thrilled with the results that we reported tonight for the first quarter of 2017,” said Dr. Robert J. Shillman, Chairman of Cognex. “Generally, we see a dip in revenue from Q4 to Q1, but this year revenue increased significantly over both Q4 and Q1 of 2016. And the substantial leverage that incremental revenue has on our profitability drove net income and earnings per share to a record first quarter level.”

“I am delighted with our team’s strong performance in the first quarter,” said Robert J. Willett, Chief Executive Officer of Cognex. “The year started on an outstanding note. We made significant progress expanding our position with large customers in consumer electronics and logistics. And, our outlook for the broad factory automation market continued to improve as the quarter progressed. Our customers appear confident in their business prospects, and we believe they are eager to invest in Cognex machine vision and ID because of the benefits that these products bring to their companies.”

Details of the Quarter

Statement of Operations Highlights – First Quarter of 2017

  • Revenue for Q1 2017 grew 40% from Q1 2016 and 4% from Q4 2016. Revenue grew year-on-year in all major geographic regions, led by China and the rest of Asia. From an industry perspective, the largest contributions came from consumer electronics and automotive. On a sequential basis, growth came from the consumer electronics industry in Asia.
  • Gross margin was 79% for both Q1 2017 and Q4 2016, and 78% for Q1 2016. Gross margin increased year-on-year due to cost efficiencies related to higher sales volume.
  • Research, Development & Engineering (RD&E) expenses increased 11% from Q1 2016 and 17% from Q4 2016. RD&E increased year-on-year due to higher employee-related costs, including the addition of new engineering personnel from the company’s acquisitions in 2016. On a sequential basis, RD&E increased due to support of potential high-volume opportunities and higher stock option expense.
  • Selling, General & Administrative (SG&A) expenses increased 21% from Q1 2016 and 8% from Q4 2016. SG&A increased year-on-year due to investments in the sales organization, higher commissions and travel, and a higher bonus accrual. SG&A increased on a sequential basis due to higher employee-related costs. Partially offsetting the sequential increase was lower spending on sales demonstration equipment.
  • Investment and other income was $2,282,000 in Q1 2017, $1,344,000 in Q1 2016 and $2,476,000 in Q4 2016. The increase year-on-year was due to higher yields and a higher average invested balance. The decrease on a sequential basis was due to an investment gain in Q4 that did not repeat in Q1.
  • The effective tax rate was (16%) in Q1 2017, 15% in Q1 2016 and 11% in Q4 2016. Excluding discrete tax items, the rate was 18% in all periods presented (tax adjustments are summarized in Exhibit 2). Notably, Q1 2017 included a discrete tax benefit of $13 million ($0.15 per share) related to employee stock options exercised during the quarter.

Balance Sheet Highlights – April 2, 2017

  • Cognex’s financial position as of April 2, 2017, was very strong, with $781 million in cash and investments and no debt. Cash and investments increased by $36 million from the end of 2016, the net result of $48 million in cash generated from operations and $29 million in cash received from the exercise of employee stock options, offset by $6 million in dividends paid to shareholders and $30 million spent to repurchase 380,000 shares of Cognex’s common stock. Cognex intends to continue to repurchase shares of its common stock in Q2 2017, subject to market conditions and other relevant factors.
  • Inventories increased by $5.6 million, or 21%, from the end of 2016 to support expected growth in 2017.

Financial Outlook – Q2 2017

  • Cognex expects revenue for Q2 2017 to be between $165 million and $170 million. The company expects to report growth year-on-year in Q2 despite a lower contribution from consumer electronics, where larger orders are expected to turn to revenue later in the year. Last year, large consumer electronics orders were more evenly split between Q2 and Q3.
  • Gross margin is expected to be in the mid-to-high 70% range.
  • Operating expenses are expected to increase by up to 10% on a sequential basis due to continued investments in growth activities and costs associated with recent acquisitions.
  • The effective tax rate is expected to be 18% before 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. In particular, non-GAAP presentations exclude the following: (1) stock option expense for the purpose of calculating non-GAAP adjusted operating income, net income and earnings per share (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), and (2) certain one-time discrete events, such as tax adjustments. 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.
  • The tax effect of items identified in the reconciliation is estimated 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, the tax effect is estimated 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 Time (ET). The telephone number is (888) 615-2024 (or (734) 385-2520 if outside the United States). A replay will begin at 8:00 p.m. ET today and will be available until 11:59 p.m. ET on Thursday, May 4, 2017. The telephone number for the replay is (855) 859-2056 (or (404) 537-3406 if outside the United States). The access code for both the live call and the replay is 63207017.
  • Internet users can listen to a real-time audio broadcast of the conference call or an archived recording on the Cognex Investor Relations website: http://www.cognex.com/Investor.

About Cognex Corporation

Cognex Corporation designs, develops, manufactures and markets a range of products, all of which 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 1.5 million vision-based products, representing over $5 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. For details visit Cognex online at http://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 forward-looking statements, which include statements regarding business and market trends, future financial performance, customer order rates, the timing of revenue recognition, expected areas of growth, emerging markets, future product mix, research and development activities, further stock repurchases, investments, and strategic plans, 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 loss of a large customer; (2) current and future conditions in the global economy; (3) the reliance on revenue from the consumer electronics or automotive industries; (4) the inability to penetrate new markets; (5) the inability to achieve significant international revenue; (6) fluctuations in foreign currency exchange rates and the use of derivative instruments; (7) information security breaches or business system disruptions; (8) the inability to attract and retain skilled employees; (9) the reliance upon key suppliers to manufacture and deliver critical components for our products; (10) the failure to effectively manage product transitions or accurately forecast customer demand; (11) the inability to design and manufacture high-quality products; (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 inability to protect our proprietary technology and intellectual property; (15) our involvement in time-consuming and costly litigation; (16) the impact of competitive pressures; (17) the challenges in integrating and achieving expected results from acquired businesses; (18) potential impairment charges with respect to our investments or for acquired intangible assets or goodwill; (19) exposure to additional tax liabilities; and (20) the other risks detailed in Cognex reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2016. 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 CORPORATION
Statements of Operations
(Unaudited)
Dollars in thousands, except per share amounts

 

  Three-months Ended

April 2,
2017

 

December 31,
2016

 

April 3,
2016

 
Revenue $ 134,942 $ 129,322 $ 96,205
Cost of revenue (1) 28,225   26,660   20,968  
Gross margin 106,717 102,662 75,237
Percentage of revenue 79 % 79 % 78 %
Research, development, and engineering expenses (1) 22,770 19,440 20,555
Percentage of revenue 17 % 15 % 21 %
Selling, general, and administrative expenses (1) 46,521 42,985 38,338
Percentage of revenue 34 % 33 % 40 %
Operating income 37,426 40,237 16,344
Percentage of revenue 28 % 31 % 17 %
Foreign currency gain (loss) (263 ) 478 (100 )
Investment and other income 2,282   2,476   1,344  
Income before income tax expense 39,445 43,191 17,588
Income tax expense (benefit) (6,210 ) 4,938   2,703  
Net income $ 45,655   $ 38,253   $ 14,885  
Percentage of revenue 34 % 30 % 15 %
 
Net income per weighted-average common and common-equivalent share:
Basic $ 0.53   $ 0.45   $ 0.18  
Diluted $ 0.51   $ 0.43   $ 0.17  
 
Weighted-average common and common-equivalent shares outstanding:
Basic 86,323   85,861   84,943  
Diluted 89,177   88,251   86,541  
 
Cash dividends per common share $ 0.075   $ 0.075   $ 0.070  
Cash and investments per common share $ 9.02   $ 8.67   $ 7.64  
Book value per common share $ 11.67   $ 11.20   $ 10.00  
 
(1) Amounts include stock option expense, as follows:
Cost of revenue $ 430 $ 257 $ 293
Research, development, and engineering 2,610 1,329 2,179
Selling, general, and administrative 4,443   3,089   4,332  
Total stock option expense $ 7,483   $ 4,675   $ 6,804  

 

Exhibit 2

COGNEX CORPORATION
Reconciliation of Selected Items from GAAP to Non-GAAP
(Unaudited)
Dollars in thousands

 

  Three-months Ended

April 2,
2017

 

December 31,
2016

 

April 3,
2016

Adjustment for stock option expense and tax benefit for stock option exercises                  
Operating income (GAAP) $ 37,426   $ 40,237   $ 16,344
Stock option expense 7,483   4,675   6,804  
Operating income (Non-GAAP) $ 44,909   $ 44,912   $ 23,148  
Percentage of revenue (Non-GAAP) 33% 35 % 24 %
 
Net income (GAAP) $ 45,655 $ 38,253 $ 14,885
Stock option expense 7,483 4,675 6,804
Tax effect on stock option expense (2,439 ) (1,540 ) (2,228 )
Discrete tax benefit related to employee stock option exercises (13,167 ) (4,643 ) (463 )
Net income (Non-GAAP) $ 37,532   $ 36,745   $ 18,998  
Percentage of revenue (Non-GAAP) 28% 28 % 20 %
 
Net income per diluted weighted-average common and common-equivalent share (GAAP) $ 0.51 $ 0.43 $ 0.17
Share impact of non-GAAP adjustments identified above (0.09 ) (0.01 ) 0.05  
Net income per diluted weighted-average common and common-equivalent share (Non-GAAP) $ 0.42   $ 0.42   $ 0.22  
 
Diluted weighted-average common and common-equivalent shares outstanding (GAAP) 89,177   88,251   86,541  
                   
 
Exclusion of tax adjustments                  
Income before income tax expense (GAAP) $ 39,445   $ 43,191   $ 17,588  
 
Income tax expense (benefit) (GAAP) $ (6,210 ) $ 4,938 $ 2,703
Effective tax rate (GAAP) (16 )% 11 % 15 %
 
Tax adjustments:
Discrete tax benefit related to employee stock option exercises (13,167 ) (4,643 ) (463 )
Other discrete tax events (143 ) 1,807    
Income tax expense excluding tax adjustments (Non-GAAP) $ 7,100   $ 7,774   $ 3,166  
Effective tax rate (Non-GAAP) 18% 18 % 18 %
 
Net income excluding tax adjustments (Non-GAAP) $ 32,345   $ 35,417   $ 14,422  
Percentage of revenue (Non-GAAP) 24% 27 % 15 %
 
Net income per diluted weighted-average common and common-equivalent share (GAAP) $ 0.51 $ 0.43 $ 0.17
Share impact of non-GAAP adjustments identified above (0.15 ) (0.03 )  
Net income per diluted weighted-average common and common-equivalent share (Non-GAAP) $ 0.36   $ 0.40   $ 0.17  
 
Diluted weighted-average common and common-equivalent shares outstanding (GAAP) 89,177   88,251   86,541  
                   

 

Exhibit 3

COGNEX CORPORATION
Balance Sheets
(Unaudited)
Dollars in thousands

 

  April 2, 2017   December 31, 2016
Assets
Cash and investments $ 781,305 $ 745,170
Accounts receivable 58,236 55,438
Unbilled revenue 1,289 2,217
Inventories 32,615 26,984
Property, plant, and equipment 57,255 53,992
Goodwill and intangible assets 102,720 103,592
Other assets 62,824 51,211
   
Total assets $ 1,096,244 $ 1,038,604
 
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities $ 56,019 $ 52,369
Deferred revenue and customer deposits 13,801 8,211
Income taxes 11,337 10,554
Other liabilities 3,875 4,871
Shareholders' equity 1,011,212 962,599
   
Total liabilities and shareholders' equity $ 1,096,244 $ 1,038,604

 

Exhibit 4

COGNEX CORPORATION
Additional Information Schedule
(Unaudited)
Dollars in thousands

 

  Three-months Ended

April 2,
2017

 

December 31,
2016

 

April 3,
2016

 
Revenue $ 134,942   $ 129,322   $ 96,205  
 
Revenue by geography:
Europe 31 % 38 % 35 %
Americas 31 % 32 % 38 %
Greater China 16 % 12 % 13 %
Other Asia 22 % 18 % 14 %
Total 100 % 100 % 100 %
 
Revenue by market:
Factory automation 95 % 96 % 94 %
Semiconductor and electronics capital equipment 5 % 4 % 6 %
Total 100 % 100 % 100 %

Contacts

Cognex Corporation
Susan Conway, 508-650-3353
Senior Director of Investor Relations
susan.conway@cognex.com

Release Summary

Cognex Reports Record First Quarter Revenue, Net Income and Earnings Per Share

$Cashtags

Contacts

Cognex Corporation
Susan Conway, 508-650-3353
Senior Director of Investor Relations
susan.conway@cognex.com