Cognex (CGNX) 16 Feb 232022 Q4 Earnings call transcript

Greetings, and welcome to the Cognex Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Nathan McCurren, Head of Investor Relations. you. Thank ahead. go Please

Good on and Willett, today's and CFO. and Dona. us. Cognex's for With CEO; our Todgham, me call Paul evening, you, thanks everyone, joining President Thank are Rob

earlier results XX-K will our reference call Form on website. today. Our the available released The release release report are section and Relations Investor today press non-GAAP press the Both measures. on annual of our were and

the we in press reconciliation a certain from Exhibit of we we X as be non-GAAP in are or of during believe Any You earnings can see true that call of made release. GAAP items upon statements may forward-looking release to information today. this to based the any make that

due SEC that described tonight to risks Our including may filings, for actual Form results and in XXXX. are projections differ XX-K our most our materially recent our filed uncertainties from

With that, Rob. I'll to turn call over the

thank joining Hello, for us. everyone, Nathan. and Thanks, you

challenging We continue a navigate to environment.

guidance, line Our fourth quarter our expectations. growth our results not in were with of long-term representative but largely are

of then The and the challenges long-term on near-term today in remain opportunities. be and will facing, our growth remarks why confident the we're excited reasons on my we focus

our slowdown Our temporarily our logistics continue challenge a investments we to post-pandemic their reduced within largest e-commerce customers see capacity. with to of few have a business, largest who absorb excess

to term. logistics our highest be long to growth to Looking over this expect we market the pause, beyond mid continue temporary end

basis of Outside XXXX what of we currency expect strong reported constant a the quarter by expectations challenges, is the revenue we business for line these over new currency generated typical. lower saw would grew the a in compared in full roughly Bookings where year year X% increased markets below end also in than term. on basis revenue from growth constant of on long to XX%. the and with We our logistics, in quarter. a were less revenue activity our XXXX, remainder Despite

of periods of softness experience growth. can we demonstrates, history robust periods in our As between

of target billion annual is XXXX compared double revenue revenue represented a $X over of lens and growth that Our in multi-year XXXX. XXXX annual growth XX% to target, with digit

in periods Margins margin our year with below to full Gross target long line both due expectations. in of our brokers. XX% term QX for elevated XX% the were latest was the components level scarce and XX% is purchase through in mid

you I go QX, outlook and results. I'd markets over on to of the it detail end turn walk our for Before through into like to Paul an more to

of decline constant This catch-up and QX approximately Revenue in $XXX an or Thank increase on fire. hello, delayed year-on-year a you, everyone. X% currency was a were deliveries that X% $XX Rob, in the basis. from million million QX, following the includes

large addition of at more few lowered by year, currency to end the throughout translation business in and customers foreign X% In the a fourth e-commerce XXXX slower the broadly million slowness activity by and revenue quarter. $XX in quarter the X% with the or

a year Looking change primary QX constant-currency at basis. for year-on each in grew region from geographic on the perspective, revenue a

few were Growth among from growth point related logistics beverage excluding excluding logistics. XX X% XX environment by offset exchange electronics percentage an industries challenging reduction from led Revenue softness more exchange from Revenue in the X%, year-on-year. large revenue by China. In increased and percentage a point customers offset Lower Europe and semi currency currency Asia the in by medical consumer growth electronics, from investments rates. offset decline by an X% by from and automotive others. by revenue and consumer food automotive from Americas, increased a automotive, that reduction and grew than rates. in was

replenish quarter significant in basis in by approximately in in QX QX. component paying the due XX% The in decline to inventory XXX of QX XX% the to destroyed to fire. margin QX points is gross year. These Gross purchases impacted and from negatively we've the and basis XX% margin approximately for XXX was compared XXXX the been premiums points

winding activity and has the we've post-fire now pleased that down, are supply environment is broker replenished We our buy improved.

the take will it a expect impact couple in of half resulting the way We quarters through their to a components higher-priced for minimal the second by P&L, XXXX. work of

Moving to expenses. on operating

in QX. operating a expenses reported QX charge modest in included of XXXX and Our loss restructuring fire both a and QX

operating mid-single and charges, impact of engineering primarily these increased incremental by from investments digits, been offset headcount. to by expenses compensation. exchange QX Excluding These year-on-year, by due benefits currency rates making X% the QX. operating partially favorable were lower the we've incentive expenses Comparing decreased sales and in

The and tax margin GAAP in $X.XX compared of Non-GAAP XX% for due effective the QX, a in in charges an in of one-time mentioned was operating profitability was below the earnings QX QX Non-GAAP excluding tax QX. on level were in in items $X.XX per XX% were in to XXXX lower XX% share QX, from with XXXX was Reported QX. in and margin revenue XX% rate $X.XX year. basis tax of QX discrete in our This per $X.XX from earlier improvement QX. softness. XX% Operating excluding XX% operating share in adjustments. full earnings and margin QX target deleverage XX% and long-term is gross

cash in of investments position balance and components a lost cash the strong to fire. million sheet debt. aggressively replenish no balance with to Turning our us to and enabled in The $XXX sheet. the June have Cognex continues strength

position. caught healthy we the second deliveries in result, a during As half quickly and year on customer the a of XXXX up inventory ended

a substantial year, and dividends more the $XXX had activity paid. over repurchase we share than return $XX million with shareholders of to of million During of capital also

for it color on outlook. to our our I'll Rob turn back markets on Now, end and over

now a Thanks, Paul. context. I would like to little give historical

we a remember, through You in restructuring went may XXXX.

deploy at rate. architectures innovations that action, R&D is faster standard reorganized can on edge As efficiently engineering and and These that teams and groundbreaking focused of our technology teams. part we on more learning product a

new these XXXX. of in many improvements, have products As now market to coming a we result

Recent apply package, tunnels applications. the vision cover optimizing to information on for cited label in surprisingly by product new five barcode spot Pairing increasing our difficult logistics demanding in task not Cognex speeds this This logistics processes designed a in traceability that a on launches fixed-mount and package for automate. XD other results rates. with product does Cognex reader use a a and DataMan helps read modular that XXX. include is customers to line systems vision without six lowering This most

AI-based the of Prior their engineers this include recognition. deploy by character of trained required highly industry product another hours Technology skill expanded to capabilities In of of automating type learning we This OCR enabled solutions regardless Insight many level. companies deep from optical customers vision to inspection. powerful system launch, XXXX preventing our programming allows

can deployed directly be up device models as set on in sample the images. this Now, minutes, and with XX view

is decipher products we codes curved position will able We the package of EV vehicle to believe launch and routing and even prevent of expiration text bottom on read businesses market many proper a edged side on these And surfaces. ensure alphanumeric us on broaden capture metal manufacturers be share. can beverage easily manufacturers batteries can quickly for that XXXX for locate planned traceability. and types serve, and more and of variety rework. to the dates, logistics to and Food Electric read the text

each jump With more we're seeing detail markets. end of in about what our into that, let's

represented introductions year-on-year automotive, in our revenue of XXXX and record growth is vehicles. demand double The and to EV end largest electric We was in from driven in batteries. Our XX% constant and the vehicles increase transition currency. increase electronic reported components market which vehicles transition electric ongoing This the approximately by automotive revenue. digit new an is model in generated primarily in to for

-- projected new with who growth and continued growth are the battery the Europe. projected We strong in who and within EV have relationships Americas manufacturers major Asia

lighting fourth our In the larger acquired AI will an Cognex's SAC, company. SAC and we or to a GmbH Advanced support battery Combining equips capabilities the market. strategy vision battery for Cybernetics capture inspection tools, with of Sirius with high-growth acquisition industry leading share inspection. The computational SAC's quarter, offering us a German

revenue XX% our After logistics. XX% in represented XXXX. total to in on annual XX% revenue approximately logistics by in growth Logistics XXXX, from Moving over logistics in of XXXX. contracted

are machine was highly exist small companies most realizing the and few on of still type previously is of remainder e-commerce An of with opportunities retailer early for us who in customer that a from will relatively quarter globally our the We Aside and Fortune few warehouses potential example win long growth us. believe full recent in XX customers a in year. from adopting automation. the the logistics driver both the the logistics market of grew The reduced important business still the revenue over investment, an continue large labor vision, term. logistics of stages be to very that is of a reliant are

deepened because enhance that angles. its we with relationship to in-store to consumers. our barcodes chosen had Cognex previously read shopping algorithms our machine are sortation centers They this who orders establishing regional to of was sortation investment stockrooms experience. announced pack In converting centers multi-billion and into ship and of direct company, can to dollar XXXX, a best-in-class provide vision reliably

customers on them, between barcodes our at still of Our conveyor while perfect read a tunnel by increase products the number rates. gaps solution reducing near to the enabled reading high-speed

and converting to additional excellent areas, automated to value support, operations and execution labor in the regional shortages customers tunnels, Cognex centers. in costs existing distribution wins initial asked offset After to as add such manual

consumer Shifting to electronics.

third an electronics revenue. the and tablets accessories. for electronics Growth market in end particularly consumer grew the representing additional learning We this solutions in XD Our mid-teens driven currency was approximately a Consumer basis. year-on-year primarily XXXX contribution end XX% had our from of by largest other market of premium as strong constant products market. in smartphone with the demand such and deep on

our now outlook. to Turning

down revenue and expect between in first $XXX the which be million will step meaningful $XXX year-on-year. represents quarter We a million,

revenue, us the QX. across recall even may exceptionally in sequential that one in led as unusual our quarter which ever reported business was logistics. broadly typically had quiet from XXXX we highest of an strong our strong increase an is for demand for You second first electronics, We by consumer quarter

also million XXXX. backlog in We $XX supply quarter of on caused chain orders by the of in fourth up delays caught

a improved contrast, and with seeing our slow will start many broader in what the significant In XX% at activity to The a investment. a in believe We margin we're of by of to end remain has buy anticipated, we wound than flow our end also of impact take P&L. already new continues, was slowdown customers of committing the Lower we've range. wary down customers of supply purchased had will gross QX markets quarters to business and across logistics the are couple we slower broker XXXX our largest through environment XXXX. activity as and our low has activity

increase will dollar. in sequential by basis, and investments to force XXXX, XX% increases approximately the QX in force driven sales to ramp-down restructuring by a in is impact new This along our our a We on investment. in customer in Throughout expenses charges and expect with sales we're related operating fire making emerging excluding weaker QX. the a customer see of merit we a broker and buys US the emerging expect ramp-up increase

offset. the we margin an From standpoint expect year, two operating these roughly for drivers to

customer for to the the We is are performance. automation our customer emerging reach, thousands and easy use of looking potentially to hundreds representing expect base, highest further penetration our easy increase that businesses. initiative provide diversify and This to of solutions customer implement, broaden segment

initiative. edge this learning ID position Our us and newest for products well

We've customers, these sales we're segment. force. the already reach directly focused expanding this noise hired our sales on To initial

and the ahead. quarters will We train in more onboard

expect initiative three first the this this quarters We through from ramp year. to costs of

continue in result for our costs initiative will it's period and environment, this continued during believe slower high initiatives. near We ROI a believe to an long in growth operating invest we remain important managing investments to it's operating we committed also important deleverage, term term tightly growth. in While to

year about gives team right a I'm to value me excited and China proud back having emerging reopen deliver. the start challenges. together timing is the our even to in our and growth new customers growth We're Cognoids customer of continue, meaningfully to large in come. Though to strong more we into battery in initiatives customer how growth long-term many prospects. with more confidence It deliver years shift to expect responded investment to to e-commerce uncertain, EV mode,

call for will please ahead. open we Operator, the questions. Now, go

Please for [Operator Thank open today from first you. Morgan now questions. question Stanley. Pokrzywinski floor The coming Instructions] is is Josh ahead. Our of go

all. Hi, good evening,

Hi, Josh.

on supply XQ I representing the unusual But the just in on kind other gone off-cycle make first chain and Just that we've seasonality amount know the volatility about without in of and noise catch-up items any of of stuff other you of of, I a of rest with position question the sort kind through of guide. some don't e-commerce. no we we call there's year? normal decent think side, the the trying fire revenue should it, of know big the as give to but kind there? think XQ guidance, was backlog sure

yes. right, All

So, QX out seen this them slow. before growth. periods looking of slow and is meaningful delivered We've come we've like and

tough know markets. kind flex of and and you business what of And in we're unusually not last given from that our think, as our year's revenue QX, is I backlog quickly driven comparing peers. it's other a particularly some additionally, high to logistics

that and business, across activity a few certainly fair of a than expecting that, think seeing, the I all we at is regions in to it's also reflected lower months But rate in PMI ago. lower the we're see we regular data that serve which say that's our were we

course, of a back then, quite really a I explained a e-commerce logistics spending. as result on customers really lot, I've as low large very is And business level, think really pulling of the the at

So, at. the kind we're color looking that's that of

large followed of always QX, consumer our a who electronics QX high that. that with Cognex this lowest quarter that or long-time, logistics in sometimes you of those got we have a know For but like somewhat any coming in business was orders looks quarter without for historically changed

better. that a reduction that's in helpful. good about some sounds guy. want sure said something make buys then A that a Got in prepared the just I’ve to mentioned understand in appreciate year And through remarks it, broker the thinking wrong, the is that the you develop like, those And sound force color. in both you sales then like ramp I I expense Are of customer like it phrasing revenue? these capability sorry, that to but target – in investment expense get ramp exact customers good. of saying it's I you the or product that a a ramp

Josh, expense. Paul. the in ramp a It's this is

margin way to buy about we the broker is, of think our results. had XXXX in about gross basis to this So, points XXX impact

XXX low-XXs So, XXX point expecting see point million over expense revenue. We're million impact that to up reduction $X.X year, think gross to in the roughly a expect $XX buys. $XX broker basis about our billion to $XX of We it around time. margin to so, million first or quarter have in in of is this still basis ramping reflected of

investment in should that's of a -- comparable million $XX to investment, margin we from we emerging buys OpEx. see $XX to savings million But broker to gross make customer initiative roughly and our in level to the expect

an ramping-up quarters. the it's over So first increase three over --

the more are -- expect that we see OpEx of QX, QX. we'll there QX why of part the but and reflected which sequential in in guidance, some increase to OpEx So see sequential of our QX that is from one

clear. Crystal Thanks, Paul.

of Thank Goldman ahead. Joe you. Ritchie coming question The from Sachs. go next is Please

Thanks. Good afternoon, everybody.

Joe. Hi,

Hey.

bit logistics to the little So, commentary further. I touch a wanted on

customers? probably of down with sounds kind while there me the the what maybe in a been kind the to year just XX% have lot throughout to of that and quarter. year, the year logistics It volatility is understand particularly the having fourth is based things forward, the logistics, in think you worsened clearly, about your have the just where see XXXX. on more might So, for you're so, I'm would bottom as like rest in conversations of you you going expect trying down

them Little regular logistics overinvested and some right? first and And XX% strong through large less story that really businesses, pretty for period half COVID we I logistics growing different approximately really in of and X largest And reined And our now them, yes, we've it's of we it investments. of really those million, the grow. overall customers it kind of half nicely, $XXX to business contraction a So of think expect logistics who second very saw famous we revenue customers, are then got roughly. through few than in so represent of they've continue then was a to in types. have all XXXX year earn relatively contracted. and customer increases and then got the was that about market, We've

investment there's at through year And we significant they'll emerge going from through But on. until those expect Some business, of the to or right? do That of going now expect we year, with then the even improvements, regular see restructuring. even And more customers, going and on are they'll invest next happen still again. automation that's that work start kind them right get not as productivity that. late in to goes may regular on projects. year, But we

not that's significantly But been of like greenfields the customers certainly, away delayed. these a of all or has that greenfields, have stopped So gone completely. some bigger really of business for lot the

state So the that's really of play.

XXXX a about was out consistently so and in that in And quarter. -- earnings we quarter rates QX ever Joe, to logistics question that was logistics in very market QX was quarterly the was and call think did by growth I unfavorable comparison. for provide I But think we a of QX each on your data our end It low versus on, XXXX, particularly XXXX. annual again, don't highest

compare on logistics last new there QX difficult. up against QX, the certainly, expansion was contraction the were in growth logistics was year-on-year QX logistics capacity or our rate and to from of quarter announcements then, that was to quarter biggest say some I that in another our would In so and revenue QX. year. QX about pretty XXXX So then in pauses obviously, comparable tough and we're muted

could like percentage well? food or biggest provide as business consumer for asking markets. I products on end color I or the beverage as one a was If some just emerged interesting. don't And what the your know and helpful XXXX to just XXXX? It it's ask just for the if your feel and bad maybe fourth if is baseline, of now provide it helpful. but around like I curious, very for is end you the the like and is expectation in right, super end I'm but semis, sizable three want of to markets That's like that it. more market maybe get Got one color

does. electronics are there automotive electronics, products, security, And right, or include Well, solid if continue with for overall yes, those big general. Joe, -- you other expectations. our variation and provide of rest markets. in industries, grow to But they your something? markets asking about and broad, think let they've pretty growth markets been end question think there's they in Cognex among then we medical me consumer related good about the much product specific way I'm growth business the for Were for clarification. I generally, talked about those And logistics. consumer really line the a largest us But ask in being of asking they And our markets, -- beverage, correctly, kind you're food and understanding so consumer I market

was really grown driving others. the [Multiple that? I the be Yes. And of Speakers] been what's has more markets substantial wondering to whether one just end than

about beverage. at of in I And growth food and way terms to got Yes. really what of our nice in moving the a we're drivers I seeing and don't needle some Yes. results -- in think that's mean but life spaces I currently. and could those going sciences length significant we've some -- talk

which of business couple certainly has our we've the and for growth. years, generally ago been or has before, kind quite semiconductor of robust last years is have XX%, small -- it experienced three us, two still spoken but below obviously, of I might this think but over And to X%

there. So obviously, some cyclicality we're seeing

kind We of the Analyst grow more fairly of at is medical-related diverse been with overall which yes, generally say, which are Day. consistent. business is starting that volatile, But our XX% of our speaking, semi, trends about exclusion business, have across to I would discussed we of the range

business we're building has and And into many semiconductor business is reporting run. the a growing slower medical look. And we And as had think the a I are I great period companies think semi on as steadily. that, nicely

you Okay. the for Thank color.

Thank go coming Giordano Joe you. Cowen. The Please next ahead. from of question is

Hey, guys.

Joe. Hey,

commentary logistics is that just about I players on not ground like to kind wanted surprising of the Rob, outside much you follow the hear a bit. And of I think up it's about logistics the floor talked mega to appreciate Obviously, those start stronger. are players. most large But little and it people in that still who behind, customers? to below group declining the those sort of but PMI lower going likely even XX, environment? that logistics globally. they likely When trending that for are of is that or cycle people decline that does impact to reflect economic the Is

Right.

lower sort affecting think business is that's I you're at? is getting Joe, what base So is your of question logistics how that PMI our

Yes.

Yes. Yes.

growth and We and have underlying business, growth strong really and still share we great have a trends in drivers. our technology a base of lot is relatively low

we So we're that it it's immune PMI not look activities. either say as business, as I But to looking growth would good we're forward. from expecting that at strong

we of tentative too. cycles a of data do the kind it more now, kind really down business, to underlying think, that see seeing are will But PMI growth space, although the little of good, regardless longer customers et I bit. orders very prospects it placing we're close slow about in cetera, So

potentially data in is good employer have. to data Yes. now delayed manufacturing customers are those production number consumer I my COVID the we've those getting speak some more plans a back back just investments exposure for I place. many depending early a just seen. mean little on can and than former cases, robust in of the In And again they consumer the to

so low economic we center distribution tend PMI a the and building shorter-term on delayed, a of a but higher cycles transcend might generally, in percent see projects investment environment, a to So of cycle. I think new

opportunity look advantage. have a of to and where -- And at I we competitive grow still have Europe business, low we're as so we Asia share our in would lot too, say, then still that much and we business really

our we're certainly, of seeing in and business. areas outsized outsized those expecting growth So

Okay.

it is to to in But year. fair that just So make. where we're logistics still statement given between to the it right I end that obviously can be environment that, you'd the mean are, the in change business say now things that fair and grow? expect a base of would and things now,

Yes.

would then know use emerging the Like follow-up doing. of that actual that of and developing like on smart on products? than kind product you've to sensors about my are customer stuff be And you you're are you're talking I historically. easier and Where like the things done a different type

So the ramping organization you're this, up I to where this the Cognoids and support themselves? the you sales but ready know products are on getting

sales Yes. good range, Right of competitive very, very and noise are in these a -- well to for the customer and we're business a there But field, equipped customers. see very they to they close right? So out are products the that coming. small at now, we sell, more emerging have lot

Thanks, on. guys. it pass I'll

Guy question Thank of from next you. go coming ahead. is Credit The Hardwick Please Suisse.

afternoon. good Hi,

Hello.

known, Could a you you the know -- slow any well preamble, I a to a showing you markets which logistics in market. weakness. -- your also to are the that? Just other Are Obviously, expand as gave on end little start referenced you bit semiconductor and there year. referred

Yes.

described pretty and general I I think think witnessed broadness as in PMI data is is broad overall. you as in weakness --

broad business rates And really, -- right? capital. rising and then China, capital in driven things if improving spend, over is, we're the I seeing our think, And year, the of that challenges I else obviously, disruption in anything other creating would is right? of themes well, draw. still related One there's interest I'd some lot a are start if I obviously, at think -- there by

of call regulatory would And then a out. I I there's couple think things

inflation away in Asia going Act to that it's EV Reduction And Europe. draw to of the going battery and investment from a of some lot United investment So States. drive the it's

we're projects and been be Asia installing we Europe So America. because were winning they're in moving that seeing delayed have to or into in expecting

CHIPS be dynamic Act to causing exports long China. somewhat of spending more among on is that's be a equipping I restricting outside they the term, similar to expect changes I China think, less and where, So those going will term, them customers some facilities near with

some causing delays that's so also. And

a mean, have logistics as you CapEx I in middle just Tier really in XX-month your XXXX, partner discussions times? are integrators typically logistics have to lead impact So any by telling what start of given comes follow-up, XXXX, do on this X back year if the projects

you're right. Was [Multiple question a Yes, Speakers] there? there

your integrator are term. longer you partner of what telling General terms is in outlook potential

If Day, you have to in recovery the that return logistics Investor to at to growth the kind XXXX. back got want you've of you referenced

Yes.

those rollout. to one implementing So with company thing often maybe we technology their understand working with and customers, think directly I for plans -- their on and is big we're right? do their the itself, engineers

not clear us it we So a in dry to It's really first then to think of -- see and exactly when certainly half. in we integrators has plans. Right? So period. not comes more this capacity help back, execute we're their

it ourselves We We of the that. think it we're I something that, XXXX think half? meaningful And this when Is I back. have will beyond customer customers necessarily information are more more think second But on clear our clear not is about it on it solid think we optimistic and that. year. timing don't we're that we'll either. share And come

Okay. Thank you.

Thank from of Jacob Please question Melius ahead. The next Levinson is go Research. you. coming

everyone. evening, Good Hi.

Good evening.

did the and technology about important you what differentiation this sounds the what particular? Just help acquisition, pretty can the little that really bit in process us -- in understand I they're in doing that SAC is, how guess, why that interesting. is a so you quarter on why inspection that But battery

question. Yes. the appreciate I you. Thank Yes. Yes.

on images, particularly have really to competitors. you something of capabilities right? better to phenomenal something Cognex, goes interpret acquire And make our image wanted image our our right? so think, that I then to But is that image, is in of with and felt do we area. we technology, learning relative and is an sense to decode we in So undisputed that deep machine vision sense really to acquisition where and in vision -- make ability you tools And use

And to software dense leader it's that's technology And that are a we this controlled very LEDs of using really And of light very this an type image sophisticated of with need being top almost in does it lit often company, we've way can or quickly is that's big there being and computational in that almost The a and a saw SAC do that and is XD analyzed. what it sits a that. acquired this They analyzed. is what's And underneath computational create capability. optics. a on illuminating area XD market of specific that like of very scratches them. dome think do are it up in image in lighting surface case, the like very on it to

hot this is needs better going it's is have to that that EV battery at to and other used in done, of out cause right? battery is market pretty And far. outside just material Dense and and fire other problems world widely even of cylindrical allow technology production. going do, than in sure. the seen and help there that the in And EV. at any important it's that us can so a we've some like very widely looking topic in a And serve for take doing So the what really scratches to us battery production,

prized This As be growth we will companies manufacturing battery they're will in and come drive capability. billions of dollars of space. and that technology in to are EV a technology rolling years highly help out is us think building new

of So overview. little that's bit an a

you just quickly. rather? a Super plan you suppliers been update to but description, some or I a interesting. for diversification Indonesia the qualify of you've And just supply better to maybe embarking in Paul that on know what able we're fire us contract guys other on can chain lack one for prior manufacturers

Yes, sure. Thanks, Jacob.

we've progress Qs in our making a manufacturer think And primary manufacturer. we've as reflected this I there. since contract for in previous good of and bringing a second been K. contract our well as online Really, sites we're XXXX, couple

point in The second manufacturer is producing at QX. this

happy we'll up that and more, do to capacity quite this we're year. that bit to with So the continue has a over ramp and

we our I center in instance, much but the are looking we and and Americas, headed for direction earlier of broader XXXX think supply including in distribution to It a efforts will as at journey. for opportunities this in distribution some is risk, centers, -- larger potential So a chain to distribution right warehousing. are we're the move progress, globally there diversify as well a be

Perfect. Still XXXX you. guys. welcome Thank

question next Jim Ricchiuti The you. Thank of is Please coming from go Needham. ahead.

right. you. All Thank

many given more maybe around I'm expectations bit your end the of little Rob, about You've wondering commentary, if talk for markets. would some some you a automotive. color And

What's year? the you as your got automotive and like of takes. Obviously, healthy. EV You've still look puts seems part sense business fairly it's your this the some at market

Yes.

lot think pretty capacity is of overall. see term. about XXXX manufacturing of do in see investment particularly United I multiyear up, we going which more automotive a what optimistic And new teed we that also investment capacity getting into right? EV States. we're battery the for above And mean, we the in long the constant currency, market from over expect I grew XX% that automotive revenue market

team problem. SEC mentioned, share very to I mean manufacturing those what strong acquisition on to And the and companies. a very, a strong tool I very which then very the we're difficult a a we is have very, that really powerful brings needs of into execute bear able

So deep be really, valuable think, capabilities our and general are and those going our applications. learning edge tools in I very to learning in

we -- over pretty about the optimistic outlook coming the it's for I think yes, -- remain automotive years. and quarters So

lot in that more all know don't to places that shifting of more India have consumer I area The electronics electronics production, consumer reports is I like had applications around And we've you smartphones. for including on around color about that seeing market. the question normally a been the

seeing signs far places out are how going, of it how like all, that? that is -- out soon occurring and actually would were that of any you orders built capacity if And gets in see that? First you as

of for definitely we've number that to markets Vietnam, that and are kind some continuing I on pace. been their drive such smartphone manufacturing the other footprint. and journey to manufacturers I a as being recent diversify think various production years, and world going sentiment And over various of certainly multiyear been that India and a is major have gathering continuing on are to -- think sure, in things seeing moved it's

in and business being done certainly now we yes, historically might China and are orders been doing have And India. business for a in is receiving that done

Okay. Thank you.

Mason go is Baird. of Please question from next Rob coming ahead. The you. Thank

I good -- have Yes, about evening. question a

Hi, Rob.

Good of your question the force expect force. count of of you head sales What two if the over end that even what of -- sales the you years, to at build-out the next about comprise? percent would I evening. customer had or a emerging the sales think about this course year maybe

going that for Yes, just get we're do I competitive to think reasons. information

and tight have a competitors going about if their deliver heads it's products add and going that's I about for number cetera. years investment, are an this put of becomes in many build, would over train field. expect investments, the get on many, do better kind being then et And that We and as year But told for of be the what sales significant our to established. us to more as this see certainly, own into our this to we us Paul really could market initiative math force that you very lipped space

kind only got it's our distribution. direct our and Maybe more is But and implement was certainly or through business years were as bigger, our I'd we XX% products easier is and of talking, got business has plus XX% powerful when our about there's to have and another XX% through now business to really right? going like of of data distribution, point ago trend point

to and going mean be So head certainly, end-user direct continued count. that's continued growth a we'll we're continue to path that on. we recognize And on is sales

I see.

the just anything growth year, that guess, little sizing I I would is going thinking around seeing as visibility this that anything, support, overall I we maybe of just often is up point on? which but again, think in And then out about to But you outset think would there a business as -- that, the year. electronics. there don't just know are is follow-up, out just played Okay. Or And call any that that should out year. we model maybe try indications you -- year than the a last XXXX? better at the the bit consumer you at you were have Is you given great the just this that cadence questioner, the typical had,

May, And We of growth when don't you're have And read periods, last we the point. we I of in I picture we you, we'll we'll high that electronics. much right? of substantially think last year. Rob, longer it's out that, characterization out. normal So as played right that digits to talk really a how next tell then drive nicely growth bought our a as and you going give play have think factors quite at year, the better last clearer things think, and year, our now, that picture there and as as there are in I'll are clear But are was in we north single yes, out right? rate I look over coming year together a

of markets. generally, outside their that large edge particularly in electronics a and chains customers that coming, we human beginning today it diversify them inspectors particularly in those in the of new augmented waves virtual has where continued trend markets new to supply numbers install we're are lot deep to vulnerability I manufacturers areas in see of investment China, a And to particularly. We think these think then to and innovation and helping which made see there There's really to working equipment really learning of Certainly, of sensitive like inspectors. I is learning, And replace COVID that's reality desire consumer links visual reality. major their are millions electronics.

that our And applying result, technology a I as vulnerability in that have. seeing more a they think interest we're address lot to help

have and this CapEx we'll to have optimism is on those certainly clearer So going how least to really relationships our kind about where consumer time. timing if some shape view with over I large that customers of expect a have such We in share up electronics, a know I and of gain great at built lot spending. of year's this future don't electronics we've and maintain, we year not

last customers our have you of they one a can And as one see largest as them of year referenced number of in years.

Thank enough. you. Fair

is from Thank Chung coming of Paul go you. Please Morgan. ahead. The next J.P. question

Hi, my for thanks question. taking

we the but -- how do kind levels on Or you first we I the offsets, of sequential XXXX. level year? in a does rate at just you about here quarterly exit OpEx think So of large run $XXX that increase OpEx of stay of that the of mentioned think million kind quarter. overall But kind as have for north some rest

don't is investment weaker from in about product perspective, what increase revenue on. about Yes. few have It's our again, and we Paul. by which XX% us Paul, some a think factors. a hurts we But investments little that's a force. us on sales our guidance driven emerging launches bit helps OpEx a an customer that. bit by this year -- driven so of said sequentially, We a full It's our by I from just in dollar, perspective, but driven

sort think I to year. model a decent of point the this starting is

year average this I XX%. sequentially XX% versus with up if a or ago, compare on if of guide, sort think I were to we're approximately

see ramp to little we of expenses a QX bit emerging versus up a time. less over to some expecting XXXX. little We're customer are But our up

So range discretionary the and being see more us XX% growth disciplined to I like of overall in in a up really of a X% very Again, little combination could about important that's being the than very, year. for investing of couple sort long-term expenses a initiatives.

just mix helpful. product follow-up very That's And Great. then vertical. on a by

margin continues you logistics think longer-term logistics past given that rates I impact? growth electronics we gross think to margin. of the So to and kind auto shrink about -- mentioned comes is slightly in the in kind how lower gross there. But relative of consumer relatively do at

gross longer you. pieces those margins we moving do term? as out about Thank how think of So kind model we

wind be you a I and activity, current to to in next really buys. already the Yes. broker new it. how biggest occurred, gross on the just then, now of think and quarter And be in target margin that of emerging, ideally half down a about to far, of a in we're the this quarter see and again, to able And getting function back flows contribution from wind it has I down new will the mid-XXs to think that is the I hope mean by year. By our second mostly right will the crisis our way expect and basis, that purchase some long-term absent that P&L we're it's through that.

overall. industries, remains mix The dilutive our margins to as certainly, between Logistics slightly

before, feel But spoken initiatives the That remarks. of mix industry front. and in mix about good including I we're that think that factors session, the and Rob manageable the on target. we've solutions vision like some within product help factors, the quite our the have overall, will I standardized about tunnel and modular prepared We some spoke mid-XXs

from continue Obviously, to if get coming slightly offset some that margin fixed area. as may a we grow, out that might lower gross disproportionate a be costs on we leverage our of

Great, you. thank

Thank D.A. you. The Davidson. coming ahead. Matt Summerville next of question is from go Please

Thanks.

point, this at So really Rob. just have one

standpoint? ago? how not you does maybe importantly, widen your end much broad now? from a this TAM? Why you. that more And from year Just what applications are Is about emerging Why I targeting? a Thank why curious year this a customer initiative. guess of markets and not sort geographic now

in shined we most most engineers in most with companies life been takes learning difficult see see Cognex technology, the it for why just the and question. which on applications. Thanks to has The version we've OCR famous work the launched, sophisticated Yes. segment. which because you and it We've can the right? products, been in now want We've and edge of -- problems for is the and vision in got -- world it is their the you Insight Well, in launching. us our XXXX, this really that can serving it's we kind Great. our really machine developing been challenging

really makes trained automation power it But now who Edge learning lot technology or vision and people aren't of our for engineers takes a available the technology of experts.

and can out -- finally ID that relatively a of So vascular with becoming that, we train to hands products send and we are sales put which products, also into together powerful and we that. to have use the inexperienced and noids our that increasingly means easy do

what initiative we're That's looks this why that's doing now. like. it So

for those in customers. forward and Certainly, who the to looking types customers. going of be our very They're customers work going in They're products with to we're sharing very to ranges of competitors be market, some strong have those of our broad of may different segments but not what share them. use vision lot manufacture may -- and the a -- who a industries adopt machine and keen a it have do lot of that's who can already of lot technology already, not in automation are to

potential So very that's globally diverse yes, to kind to think how very around the of Geographically, deploy is it. initiatives. these about types of

apologize. picture already, then Rob, mentioned ongoing auto with this talk had auto and the And your of sounded if But battery year this you've expectation you it I particularly cutover currency. about EV can Thanks. kind a constant for double-digits up year like EV. What's maybe to you XXXX record big for guys,

this Just maybe on plays thoughts XXXX. versus your how year auto out overall

about will discussed pretty a on helping in with again, grow the period really, long-term We're et the pun I where in the which the some certainly business our I drivers, think, XX% EV more powertrain, But is cetera, And intended that. come. be in potential we're in is we've to that volatility momentum vision good driving engine think It entertainment, industry to feeling sold timing in segment. think, lot the somewhat currency. in bumps of some sensors There intended, electronics SEC we of I around use there. vision spend, which of is of I constant but use in think machine offset, be with reduction us grew that. in over offset year batteries over a XXXX, completely internal road most what's automotive machine the good three combustion the to that's growth EV Automotive think, really, type a which and think the not growth business, that drivers -- going of capabilities, some deployment years for lead I and and by optimistic and no used about and more design the will seen some in strong pun we EV Yes. acquisition of

Rob off -- just was and Historically, our that. you year, a of a little then And color this the piece year are we auto piece on automotive to less that slower bit quarter so last I to more by along leading think But of looked is the if slow some other right? particularly reshuffling on. against feedback the one the in will quarter and of plans some to I potentially a and year. so automotive volatile want a quarter, start and think we're investment quarter PMI, be gave would of to on given kind that, broadly. delays we legislation some Yes, if References is say for about start industries fire automotive, obviously, a low factors. of so QX with

sort relevant QX be it, So would of those being the would call low, up. QX ideally be

optimism. little a So half more back

Thank you, guys.

The you. question Daiwa. Jairam from Please next ahead. Thank of go coming Nathan is

in a terms seeing the you IRA last automotive, in and kind can especially I just of compare what Hi, thanks or little it that in dig the -- some battery way, China kind $X.X for what in given especially you the over to -- we the market with you to what incremental number Is IRA and size gave an battery seems you shift are this included you billion before, opportunity, on what of be U.S. what taking in that of grow wanted my in two to deeper question. year, on different saw has Cognex years of way batteries. think addressable us side had if a believe. in that it's or to the last because I auto Can I kind opportunity opportunity?

Yes.

we size market potential. our at growth the automotive talked long-term long-term estimated think generally market we and sized see of growth I we And XX%. billion. $X.X it about the Yes, of

is growth cycle us helped rates last periods, the that to definitely going in again to over higher and up about -- see EV but timing the come. and -- going investment could for to hope I years and I drive to year think down that's when and it I it battery comes, over time and think

We obviously need technology in see great for our space. that

recently, the we've solutions share better in I that what SEC been and would to for we such space doing more some acquisition of gain and as have So think more customers. deployable means that what hope

So share then business plays and lifts optimistic we're come we'll the a think and that. U.S. this. government we potentially have see our our great here who where experience will I with about We'll to out. automotive much U.S. that United plans But mean companies you thing a that competitors with also. how mentioned, obviously are investment the lot putting up see just the another and And do IRA the States, money of from it's more what is in reputation investment big

space. the about optimistic we're yes, So

Or the do you some related to how And move the about see just that I case? the think, finally, you the supply Is that auto on changing, than that, base rather of you more still especially guys talked have historically, are focused away ICE? OEMs. from given

a Yes, question. really it's interesting

So seen our And historically, with time. yes, dynamic we've Tier think over of the that being business majority automotive I suppliers. change may X automotive

joint technology Asian brand and of kind then ventures of relationships lot a seeing names big between You're suppliers. and

then We see that you are to business going also to manufacture partnerships. in pure-play playing really batteries. that And out see companies

quite they're But Tier be parties. are often brands driven those plenty there's themselves in that and or and certainly, Like So up, claim look wouldn't know. and users Xs. We at between executed the tend on in by Xs to can to I where user Tier end ends that space. end applications change needs how partnership of going and through third

an it's to in future. with So I about yes, forward look One, space. you evolving talking

you. a lot. Thanks thank Okay,

floor I we to for today. or for questions you. out Thank Willett closing time would Unfortunately over are additional turn the like comments. any back of to Mr.

look-forward tonight. again speaking thank you next call. night. We Good us Yes, well, on for quarter's with to you joining

Ladies event. participation. and you thank for This your today's gentlemen, concludes

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