Cognex (CGNX) 31 Oct 232023 Q3 Earnings call transcript

Greetings, and welcome to the Cognex Third Quarter 2023 Earnings Conference Call. [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. Thank you. Please go ahead.

Thank you, Donna. Halloween thank happy us. for and morning, everyone, you and joining Good me Rob Todgham, and are today's our Cognex' With call CEO Willett, on President and CFO. Paul

Cognex's Hamm known Toy Formerly Woody celebration and Sheriff Story week. as at annual Halloween last from

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

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

materially Form projections risks our morning results filed Our including due described our differ our actual uncertainties for and that, over most turn SEC may and XX-Q the our XX-K in the Rob. filings, are call that I'll to this QX. With Form to recent from

Thanks, operating what and quarter end conditions and delivered margin each for quarter you line third similar everyone, remains difficult. markets. thank joining last of gross We expenses be The our to us. guidance. revenue, continue in with we Business saw environment to operating our Hello, across Nathan.

cautious timing remains Electronics softer market demand, steepest expected, This China, lower customers decline project the levels. the by inventory faced to underlying both and As was particularly Consumer in are the driven quarter. where managing in and

adding components $X.X continue served previously market billion, These important we growth In execute market important market. our and medium quarter, term. Despite strategy. X optical the our the to adjacencies: served be The to billion. We we we expect by to sized in market X peers our expand $X.X markets at vision third to served to market the a for challenging headwinds, long-term steps near and on sensor market focus and to continue take our grew entered China these our us as

market step-up exciting sensor vision In-Sight launched recently position standards vision defect control with sensors, including a a sensor locate Powered the assembly and easiest-to-use verification few In Let trained in entered. defects common range detection. In-Sight just September, vision product sensors improve challenges, require a systems providing capabilities and quality not and features and programming sensor does or inspection, for the examples. It SnAPP and for the shares is from to ease SnAPP accuracy our detection. SnAPP pretrained we by that any sensors common knowledge laser-based sensor. using any industrial AI, is in presence/absence parts user. redefining solves an me the SnAPP Vision-based to easiest of start we superior vision of use, launched. The functionality to with hardware conventional ever In-Sight In-Sight by sell are and our

and and environment broader In-Sight force. pathway will more to be emerging then with a for us web-based products the to from to allows require a software allow reach Sensors installation. Vision do the systems. we're In-Sight vision our gateway our sensor in sales the will the customers for customer browser, not run the new and Additionally, web standard interface targeting using plug into first programming user will these customer the offer anywhere base powerful SnAPP Cognex customers

than this systems, product expect line. will lower price point we to product margin vision at offered our be accretive a gross this While be a

completed the We've We emerging our customer of make for and continue in are of final hiring the year, many stages hires with to initial initiative. the progress training.

this plans we're to initiative remain of strong in what growth initiative early Based invest potential this evolve on and confident returns learn in model We and in these our stages. continue XXXX. and in the seeing, we continue to to

is other we our acquisition entered premium components that market Moritex. high-end market, $XXX we Moritex served optical components industry-leading market of Japan. entered based million with in is The an recently the a optical provider

we on a like transaction. this spend and why me Let moment expand

First, lights R&D of relies the acquiring the Historically, image, use before Vision third-party majority and better lenses acquisition. image algorithm of focused vision analyzing image it, machine better the our an the the we on technology often development tools. performance on our customers and for

lighting to past Over SAC. acquisition of This optics. proprietary led more increasing recently, the we've lenses our amounts in computational decade, and from liquid invested our

speeds served Sophisticated to gives customers barcodes the some logistics those an the lower although in on where semiconductor, capture the X images high-quality high-resolution equipment. machine vision also our integrated. reflective vehicle and included important are market manufacturers product our detailed These a a on recess share. Historically, images advanced to liquid have in for considered optics is deep of embedded the of battery. an which be automotive us surface learning such in products with with Japan, into step as substantial of analyzed optics, who markets more capital the represents a us technology their can for often optics with images we've presence algorithms. Moritex reading Moritex Their most lens and fast electronics are line, as we sophisticated of they be electric boxes acquired bigger then allow us. capture dark at such between barcode

an a served market million. $XXX existing external to we components Moritex in is We exposes gain additional aim at us high-end portfolio optical owning Now approximately leader, and share lighting market. and an lens this sized attractive of to market market. the

profile of go Now the let me into on more detail financial Moritex.

X% account to to revenue. Moritex overall X% expect We of for our

profitability to to line in sales rebound impacted support company semi and and target investment those can see remainder electronics capital its But for been the expect R&D over newly recent operational to focusing higher-end sophisticated of growth improving business to revenue has this believe will been on growth on recently, Moritex we to While growth optical the in segment network grows the improvements has through heavy and our has focused market. Moritex's products, of by in exposure market in To leverage total capabilities we segments chips also and accelerate as most growing, equipment combined components company's will XX% negatively demand distribution of we innovation. broaden in gaining participating share. by we our leverage long and decade. We term gain accelerate of acquired our the with share, grow Moritex's this strong growth.

on our Moritex integrated companies. optics margins other fact, are offering businesses. of premium for advantaged our optics less software approximately perspective, engineers sophisticated and collaborating has In from more distinguishing a combined From margin Moritex's XX%, already and gross

company integrate the margin business. Cognex's as dilution we to operating Moritex's total is margin. gross margin in line We expect operating about X percentage with points of target our XX%

basis transaction we going this So expect an operating forward. on neutral accretive or margin to be

go results. more I on I'd further the walk of Before the call for to outlook to into QX, Paul the like over through commentary turn to

Rob, you, everyone. and hello, Thank

$XXX million, X% that revenue comparisons. or a was of X% currency. I'll quarter couple constant prior Third of a impact decline period items decline in you the year-on-year a remind

which June in markets. market. This reaching unaffected we primary because into the largely million in revenue shift the across our XXXX. of was $XX An the of the First, manufacturer contract due into and our had of broad, that fourth timing Electronics, to was from end XXXX, at quarter geographies was of fire Consumer impact exception third quarter shipments

QX. revenue end in last also and that QX. of Consumer approximately from in an products from standpoint, increased including were QX From shifted declines and our consumer Electronics automotive $XX million year-on-year market other end biggest Consumer semi. into quarter markets, discussed Electronics, Revenue We year-on-year many logistics,

the these fire. each last markets remain However, relatively we comparisons of disruption markets are underlying easy year The conditions we business quarter. the due consistent what each seeing these in last benefited to by with of from caused reported end

to over geographic roughly was declined currency. Gross unfavorable revenue due in industry offset XX%. in year, mix flat grew in a was On was gross by automation down Americas and was and Asia automotive favorability by dramatic Europe most in step due in XX% expectations volume regions to The from other margin unfavorable to basis. product in XX%, line on approximately QX in respectively, basis, which a constant in at XX% and with decline the change margin buys and nearly broker currency. increases sequential and deleverage. at by constant other logistics, markets. factory the Looking Compared year-on-year by The mix. last China, was

earnings expenses offset incentive discretionary by spending year-on-year year-on-year a a Let's slightly operating XXXX our operating on transaction our Operating were expenses. QX, and management, our non-GAAP decreased due and couple basis, and management costs. items excluding compensation. On operating investment had of X% $X.XX related non-GAAP Non-GAAP emerging transaction basis. per customers. increased a in Investment share one-time Moritex declined tight Reported in turn and negatively emerging QX X% to the on fire-related in lower EPS. margin costs now below of share by sequentially, basis. We headcount and to GAAP items to per expenses primarily GAAP of QX was customer initiative XX% $X.XX in a of significant acquisition impacting Moritex were

loss. reported we currency a foreign First,

business. Given $X.X between the certainty forward agreement. we And reported The million of the dollar Japanese the to large movement signing and we rate in have U.S. transaction dollar locked Moritex the in the rates around exchange the yen, a for the pretax after the loss pay a would for we entered as of weakened into amount a result, yen contract. we at

of unfavorable discrete was expense. EPS GAAP to headwind million tax Another $X

XX% in XXXX. XXXX Moving QX on. of tax QX The was and of non-GAAP rate in effective XX%

Moritex Turning QX and closed to no the million strong balance the the position after debt. in end at sheet. with of investments and a $XXX reported quarter cash cash We end. Cognex transaction

we to the better for return help objectives some on plans sufficient stock and million M&A includes buybacks balance our subsequently Moritex, our to and want growth provide organic capital this to transaction. nearly So to additional impact about we you continue Moritex to dividends. I used that to business. acquiring information continuing $XXX capital have its understand and in through support shareholders After

the are this investment about We can returns that deliver. excited

for with early operating opportunity well targets. This, the growth synergies leads expected this of margins years consistent We with in X for excess by have capital, of invested acquisition financial return contribute on high capital our along overall we're to and bar an to pleased a and cost X. revenue company to Moritex topline clears targets hurdle our that substantial of profile

be deal GAAP the EPS on starting basis to expect XXXX. to in We a accretive

exposure more facing with are, to similar conditions electronics we First, Moritex is but semi. and as operating

less So the what mid-to anticipate long-term. in we than is contribution the immediate

by EPS intangible asset immediate costs. basis is income, on importantly, dilution investment acquisition and GAAP primarily a More driven amortization foregone

we evenly accretive acquisition. well expect This roughly costs of in the amortization, of to includes are cost a sales by consistent items acquisition XXXX. In we with charges increase one-time split with accounting inventory in to cost income the Moritex hitting value, relating line mostly approximately Moritex quarter, increase to expect of intangible driven be market between OpEx portion These as immediately an other $XX requirements. expenses, Excluding million, small the and deal EPS fair below acquisition fourth expense. as revenue and the to in purchase to changes

Additionally, approximately we expect to $X Moritex amortization of asset intangible million. related

we Our the as November. October of of the from fourth given quarter operating results the X-month X include will of the operations differences QX about so on each Moritex, include required be closed from end a close results lag reporting through will will to We then Moritex's XX, the in our transaction weeks on results time books Moritex quarter. results

the the As our these changes next closed exclude costs report be purchase measures non-GAAP we impact Moritex to metrics quarter, impacted acquisition our transaction the and accounting to or asset more that begin charges, forward. quarter. making will by going intangible of be non-GAAP in materially amortization we Having will to financial begin fourth results non-recurring

reporting. color provide QX We roll this out more we as change will with

of continued long-term this to has quarterly Board we morning, demonstrates prospects. Directors confidence increased cash in financial by This growth strength announced As the dividend Cognex's our X% the $X.XXX. and

to over turn I'll back call Now the Rob.

Thanks, Paul.

quarter our outlook. Turning now fourth to

manage quarter This We to million we $XXX with environment. million be to million, challenging between including relatively the expect of and to revenue a through continue $XXX as from $X third million $X operating is revenue Moritex. line in

primarily basis, be deleverage We mix. XX% non-GAAP margin and to gross operating on to continued expect due approximately a unfavorable

about a long-term to on pressures, we challenging As remain to our be expect non-GAAP in We management. we to we return to the OpEx of investments look slightly through are we will until compensation. confident expect target QX, cost achieve to it stronger will near-term increase remain Sequentially, mid-XX% and about us basis, excited beyond our environment which we growth fully diligent made ability challenging manage Moritex. Considering our help timing forward we to incentive growth integrate a due model. operating strategic primarily return and the to have

Now open the for we will call questions. Operator.

from Research. Today's first question Levinson Melius Instructions] Jacob is [Operator coming of

and and give a the you're I but and major end field are Maybe from telling markets, sense you hearing it's are the just season. been over little kind you just know your what because can certainly, next customers the your world demand wonky, in what is a what of looking comps looking logistics messy the quarters the around consumer couple earnings this of electronics like and us of

what curious hearing. just you're So

Yes.

Let me start with consumer electronics.

the So And waiting And in plans to play consumer conservative segment also in we towards that a we are I as to to chain out automate. materialize of year that invest premium how the a out QX we're we slower electronics expected. than year think consumer I year, XXXX kind down in I'd demand as see skewed some the softer expecting little is expected transition market expected to think next much say was in in going in we QX. has been the overall. Certainly, of on is more customers And challenge. I'd capital smartphone say being are to played supply both

automation we're looks and is appearance year plans get in is clearly front cosmetic new I'd improve of until term, the wearable very opportunity to in normally defects strong very that quality. terms and of and next think next generally, electronics. there of going still sense and terms coming center market still substantial. and is machine out market. And -- have at give long into we potential Customers in have finally, technologies much in and to of an consumer smartphones their improving the plans, that's then that very market moment. challenging normally a and ambitious vision eliminate is year, spring you cost we devices don't look. do when But to really how say the I overall But for good we the And shape

able a years after and intact. If and think address current been our short-term, vision through to Definitely, and of terms customers We're parcel haven't QX, our is can markets. recorded I of see in the still at long-term, in quite particularly products opportunity challenging; did that now much very situation. We logistics. still along It's sector. very it products to that more, bottom sector is say So we the provide. sequentially I in looks bumping terms our we the in lots business. and able grow year-on-year I'd major a Logistics of large the contribute But logistics, then turn both win feeling a a really capacity post for and we past slower Cognex. penetrating been be to players the do expect pretty rest past which opportunity addressing but excess in accretive few with are logistics substantial working of X and e-commerce larger player the that for many we A technology with logistics to market than increasingly get is exciting the smaller sector, of will are with to strongly of quarters. the still in like, potential due difficult is pandemic through developing what we growth we're to

to come. So see there's, in the I inflection see we're when to We're But I going getting it is think the there. your of still point lots And will. potential for think promise very is I think, waiting logistics question, e-commerce strong. we the to India, confident

but to that logistics. terms still some next of We lacking we recovery point and clarity come on where are expect it at year, there's in

cover a higher of on lot anything That's And have than more have a are margins your a targets margin I Moritex. gross software to topic, that's gross like going probably imagine company. you more profile much just I to a acquisition certainly helpful. different Okay. And similar guys maybe

over at, just just gross that guess be going curious. out terms margins the to question you your, to you of just are level? is, Obviously, it, do I So acquisitions time, find but in philosophically, type more XX% think call there let's snap are nothing type XX% you're range? important how to in Where that to going maintaining plus

Yes.

those very changed haven't history, we've gross mid-XX% our we'll -- So route will we're acquired more strongly them we to customer we gross care lots back to in back range. over what if margins that is margins. And them margins So back run, that to strongly view a acquired long increase revenue, for that of this you be of should grow software, certainly. the us look the for in to overall margins, we is and very for our gross is we hasn't our really nice see margin together improve don't emerging long optics right? start as companies we We get and gross to if the believe doing, create and And with gross accretive different us. But with about that at shorter business generally to have will we products kind integrate margin opportunity highly scale. then volume term, the with of really improve a advantaged margin we and things the term, us, in gain that time. play give see in think the and similar products the But business higher starts segment operating accretive, which gross kick

of would or business look future the not typical of acquisitions, of acquire, we view is gross any margin Moritex gross as back margins. see we to I on certainly we're So which that to path terms gross in mid-XX% of gross been has confident we're -- get in very consumer recovery as and margin. a electronics, indicative anything margin, an And kind software-driven to that would outlier of

of The Piyush next Citi. Avasthy question is coming from

EV is but seasonal to there the higher. if down comment you we is capital a there down. sequentially also end from markets strikes. get were guidance is end XQ resilience And markets to cost on component the some expect words? XQ shoots, I'm green into projects sales it, any your could of sure slipping. drill bit? are It that then Can XQ? Can a where heard like are more There you seeing weaker or any you We side, flip

Sure. Yes.

probably think in as this quarter with expected stepping we QX. out and more playing electronics in the year to have much much I and normally down as QX skewed second consumer might it's

that electronics in normally we I think for see be will year. lower this QX. consumer So pretty us similar And business profitable being

I think a in see is region very That's we is QX right? what decline. is that another showing going challenged China, on reason our significant

So average in an cycles of we operate on -- with short time XX short approximately to order ship days.

our inflects our and quickly industrial peers. as many business So it's backlog-driven not as of

our in budget So through I the historically, see flush budget any a of play results. The year often we're think not under year, end point final anticipating seeing one you're lot pressure. would thing the of to sees I is, customers while flush our that quite a we this at

So electronics, a similar flush. is have I would consumer China, where guidance why think as it's is. it budget expected, picture no our we That's

mean, of been then obviously, slight a positive, if ready we that there's the out along in call increase shoots I we've suggest so addition are in I bottom but we the Moritex we're think bumping we're green anticipating coming to again, -- would any quite logistics, the far. the of I Yes. that that and not don't think

good this quarter finally, We saw for then us. EV battery QX, growth continues in grow. progress is It progress year. And good every to a driver

time, for we continued it and long us that QX, help helping year. is next we growth a have expect green certainly, and shoots So in to expectations for

a 'XX? support remain there are deleverage margins, say to any end Got it. that can And as get profitability like markets levers Let's Is a pull you into one plan? on be game operating you to choppy, there Helpful. concern. continues

of mean customers the sort our I one. I of Yes. investment timing emerging think is

topline was year will setting customers, to that trainees, benefit pure We year emerging full support infrastructure line year up next a this on. Cognex. the hiring in and class to bottom and So be a so invest of class driving them believe

Now we're class. again a continuing to in second invest

much seen still despite picture is did it we I investment emerging we the a an environment. that in choppy overall, see that's year economic see But so throughout opportunities opportunity, we've area and this -- think customers. So

sales in that think we through our once whether we fixed assets see Obviously, one that's our be volume COGS leverage leverage extent, through So growth, our contributing force. business, we and back to on particularly can factor. some with R&D significant get to and

confident semi, results I our ready pivot that And So as think really of would to our at sure XXXX, we're customers of the that investment take slowdown and when be logistics to growth. a want I the add, from handful of our will majority decline, in that we consumer advantage and look you in industries And and largest back those represents markets into right? it comes. in electronics we're

that's future. as So ourselves we're certainly I the look think how positioning we to

quick like A you similar it. on seeing Got seeing lower some of is component that. competitors materials Like tailwind from Are and your one dynamics follow-up think raw I no? costs. or

Well, you increases we costs as of last shortages. that. certainly large years, kind we mapped through semiconductor saw -- the in from of We're couple component

are we reductions for as our is and flow is. -- inventory into generally, now so there through coming through. the Those won't seeing story the It But quarters good. turns. some P&L And some price

We are materials. in seeing certainly our raw improvements

well. And more lead as times be us helps improvements responsive. in It

& is Company. Jim of Needham from question next Ricchiuti coming The

Is back channels well? go through going sensor. SnAPP on as product to announcement the -- to Wanted to this distribution the be indirect going

that Checco a market. were wasn't at similar XX-years as I ready in it us is of a Jim, we channel about Cognex thought I When you long I how it's had Cognex. sensors SnAPP ago, this was product as -- the it came talking is to really targeting morning called ] and technology time now. interesting. covered when you've [ that we the at for And

we're -- entry going need main going and really for OEMs. of distribution simpler through will for programming level changing be and platform will sales And them But going direct is adding, So, who vision. segment they our thrust we a emerging to definitely It which us to the all good In-Sight be less SnAPP point sensor without channels. the that customers our nice certainly, of and that sell vision penetrated to it's we for up customer just is expect on that trade can more into on call entry environments. be

a move so of seamless And nice up. it's kind

to really product. primarily this answer the certainly channels So is direct, all with your but question firing

early Rob, some product this this ease And attraction quickly. terms anticipate that like to it. sounds get of you sales 'XX? deploy gate mean, sense has of out quickly? new to real presumably ability the a as fairly I Got forecast It's always that's to in in there a benefit of and hard should should now the Is products, -- but on how you might trained any this force some have been you use,

Yes.

how customer that's a markets sales So emerging and of training its to world, very I we major field for product terms impressive sell. have of demos. around product and easy it various actually how will where them me, sell sat the of it through in recently, large demos demoed end a it entering reaching it's certainly the new in be to is the and the series they well them by force to

we next we'll if it that. see and as sequentially of go move around the next then I expect think of QX. starting and year, And year, So the year in into Yes, the some through to beginning benefit the field see end do they're we increase we'll

on bringing area. I'm additional size in the you perhaps And folks an wondering it. this to terms you class investment. And investment a alluded Got could of if second in in

$XX talked as past, I be about you you million get investment a alluded million in sense think I'm is initiative? what think additional $XX and just the a this the you've to the to annual to on million trying additional expand about going possibly to as last call I $XX investment, investment.

sure, Jim. Yes,

this run given to timing So in a million college operating at knowing associated exiting would across different U.S. And with about from be geographies. But $XX which expenses about rate $XX recruitment that the so we broadly the largely size a cycle QX. hiring it was year, the it investment have ramp-up speaking, million in and what and we $XX different million not is varies

where you are we now. gives So that some on perspective right

the see coming year, QX as and achieving in will with partly and increase additional really a start We an over and of the then field sequential folks of class next QX. kind course enter commissions

not at we're step-up prepared that this a but will -- size fully in operating point, haven't be We to expense. it

be in that class who's unlike out associated will So the this delivered first year, with carrying now field. it revenue being also quota it by

with could more jump Got in, -- you in it. the was and have that if If queue. to talked win post modular if not sure the has that excited, I vision relation I'm front product to of Parcel that tunnel. that alluded the the could you I'll Post, think, slip new one significance back any you been parcel or in on elaborate about. on I you When just guys what

Yes.

to there's and nicely line. mass set and very a a easy moving we products the I high post view So them very up -- year different variability and feel, boxes the we've the really down come some high with to integrate, that where now flow-type what a beginning for are parcel at market of XXX recently XXX performance the in launched this year, the really that starting of degree with have many

really now parcel these So products are companies. big suitable for

relates that to to also this product, products us part is a that So also success but company. other really part to sell this of of wedge it becomes for

of So moves scanning benefit just as centers. it they boxes certainly presentation of simple their the see through

nicely, So win. vision also products part other as yes, that of but pulled through tunnel machine

Paribas. of is Buscaglia The next BNP Andrew coming question from

capturing light commentary a region growth beef outlook Moritex can we stature into helping that This and Andrew. of the In into in overall recent share Cognex's how for is get little Asia, in up regarding Ed color on fits that for bit strategy? more

Sure. Yes.

a strong some with very in regarded It's very are business relationships So really companies right? and of electronics its Moritex major very, relationships in very And and highly Japan. long-standing Japan, they're that and the is company and storied semi market Japan. majority and its automotive in in

So are and relationships and those to be that sticky wonderful, tend that's OEM enduring.

to products it's the customers something like that's much those we certainly, very where we business about and additional sell one sure. So for can

that in certainly customer think regions Moritex which very Asia for base to has you suitable products other Cognex's and great across being all there. one, areas, I are allude

we're large So to a customers we where of force Moritex and forward products have looking lots and sales lots throughout taking Asia. the

assembly certainly manufacturing across we in that and as potential. They have in good So Vietnam. China significant Asia, see and facilities also

So of products address larger those China. their for them supply certainly which is in us also allow customers quickly, optics some need and what customers to our

into those beachheads but So see course, Asia, nice is into all us of Japan. we of particularly, for

biggest That's history, helpful. here? the share allocation appetite is bit? And buybacks And for what increasing deal come potential strategy company's then in the as price having there following given is a a the this the in is follow-up, an

Sure.

capital I if allocation not changed. we M&A priorities And the cash to buybacks, very excess beyond well saying, really Obviously, goes without so, history dividend. And priorities, looked as over X our acquisition is and our kind our our years followed relative still matched. been this funding top that. healthy have say last generate capital the we're would of priorities prior X we over growth So to followed haven't of by by organic actual stock or allocation our

amount We in very dividend healthy significant in buyback XXXX billion And in SUALAB XXXX. So activity, we XXXX did a activity in very a of we M&A after cash. stock spent -- $X and passing did excluding little XXXX. quite

we more we synergies, tremendous in. technology see get when with, force sales acquisition like, trying want So or synergies we the we technology aligned future of Moritex great geographic, of view where to deals that's lean synergies, back other and kind whether we to is see

of we've buyback to an and a is the regularly can goal some the pronounced kind our stated tend On of of our in -- We dilution quite advice programs. of and have from the XXXX, flow buyback the change employee buying current X opportunistic ratable our with it we recommendation aspects And now timeframe. right to XXXX to ahead been dramatically our opportunistic. And and market positions for time since and board. course, equity offset current front, that well goal conditions cash

price where share buy something it's shares, to now But don't obviously, evaluate. but So the right we certainly we feel certainly opportunity, we pressure back given see always is.

Ken from of Markets. KeyBanc Newman coming is next The Capital question

First automation a channel I your any weaker color sales on we distribution quarter. question within seen between the just difference activity for about heard distribution you channel color have whether the discrete direct momentum if in this was little me, curious versus force? the material But a you've bit demand had

about I of direct. our No. our customers don't but not. logistics, we would large customers understand and with right? customers some would to say direct, I to in something consumer our electronics So large tend larger -- deal think generally tend to more Cognex be in is

into larger. But to percentage So those year, large distribution customers wouldn't that back And direct of we say move then enter from the -- emerging we be as to as and tenor -- business see of can sales. more field, lower direct an those as aside force make skew our are our sales for customer the there's I distribution. our will overall direct change next emerging then versus our customers all that,

years we direct And as probably And to of So generally as more perhaps tend well. see XX sales have that our business go in sales at invested as towards would portion we'll we've higher at expect see a force. speaking, gross skewing Cognex, larger we margin our direct to those the more direct over last direct. be

maybe note, lot carries inventory And industrial one a We channel some relative us. have competitors. significant Yes. don't us automation to of a that for

maybe more kind It's systems the they supply I is a or on few quarter-to-quarter chips of that bought of destocking for muted stocking need. But entirely not fluctuations. a us. during So as of think crisis phenomenon than customers overall, more drivers year-over-year quite and or end are few phenomenon customers, There absent. have who vision aggressively chain the maybe probably

of a right a be they're have seeing competitors' destocking may which now we're the lag, some facing a for time, results to of as our more our demand phenomenon. opposed to sort function and tend buffered of the results period So now of

inventory Cognex. them grow from We It's use not buy inventory. our to to good want working Yes. capital discourage from understand holding distributors us. their to about We business, their

result, up, that that's our as for more a kind will, and there I be see isn't it's business probably a what buffer. of terms So peers in terms market in And why our of pick leading they when of of pickup. would it you indicator think

that. Appreciate helpful. very that's Yes,

here. guys had But moving strong headlines impact that of I the mentioned if impact an there I'm remains was is pretty Obviously, a there's For think strike? and on my stable follow-up, so UAW around in demand from the material that the And strike. the EV done, especially lots you be still this pieces, then not or XQ now curious, to is going guide for much?

of of a result delayed resolved, I have business a And pushed look the material Maybe no. magnitude those being or think or $X million don't We no longer to concern out $X strike. us. of impact, been might for as a it really that's million as was any think

Nathan [Operator from Instructions] is Daiwa The Jairam Securities. question coming of next

customers, do have last of OEMs are should pushing capital you seen in of see investments pushouts benefits? of some Ford some any batteries, you your out any many we week. investment of for seeing EV -- -- it kind instance, of about kind the So the And we -- battery expect talked in

I in what pretty balance are we're but is -- be But huge change that's to particularly short have -- plans that to had Asia consistent America, the think which investment United more built there some we've short-term manufacturing. planned the right? So battery Europe bit in the explaining think is and probably other a of demand what in and States, some from little that, year and I to meant there's even Europe. -- EV been with over coming being communicating for built, plants to headwind geographies of is also a from seeing were

EV, and as a in And build and we process. think or playing particularly understand goes expected. go phenomenon pretty when then it's that's think plants whether facility as of much I automation semiconductor late something one in I and out quite us the to time it's long is the most So out up, robotics new that's vision that

projects EV. So that the some those we're Act by for But delayed and IRA for come. Act chips are to being CHIPS expecting the of

phenomenon. a that's So

shortages some these the factor of up get other -- of The and labor is and production projects to shortage are qualified products is delayed running. because people the of

throughput. they Xx that So machine of the we're longer-term expect quarter to On a to as add of part last to a I I quality think about those expected, add, very long-term us note, of quite And for end between prospect. production on. heard lot we going optimistic sort numbers that's think and right? the is increase Cognex spent It's I I the traveling to roadmap plans companies their of in they're I met the battery very and difficult largest looking understand the who really EV with of manufacture the important impressive terms dangerous. management. And a improving are now vision and decade. capacity of that EV their in of and and say visiting, senior I'd most know of in very And X batteries they're capacity and world

top may EV also So are as quality is such new mind. And something coming. reading state solid you there of which forms then batteries longer-term investment batteries that's have and been plans, about of

So there's think, coming. It's has is of other in this well one is is an changed focus demand there I capacity. little to overcapacity bit, been battery If a very China, I point is exciting factor, the would a paused area. and

I have of area slowed overall. some coming I investments to I and we that down. don't that that's a the real think us in think surprise may to, saw think But as result, So a

think is outside Asia. be the So to going I lot a added by capacity of and of non-Chinese players

of -- your And facility? competitors -- Moritex change could manufacturing as some you a CapEx on from stop them? to some kind talk about CapEx? expect you just integrating, , you since backward are in also would buying have of And there loss Okay. would revenue you're they since Any

Right.

to start So target we're the we expecting R&D. products sell our of over force, prospects. And good through XX% joint longer long-term. expect total growth then be the we line growth with to our in growth Moritex's term, about sales company And as

Your are question not amount we our we it's competitors not that may those terms them, to hope our don't was on company Moritex. supplying small expect from of and very a We are dis-synergies. of of few to But around -- buy really expect. we customers significant what they anymore. of possible but A dis-synergies, choose currently go in

products their through we of Moritex we them products some sales as we're growth bring our So, lot take the move and to a and in Japan. force expecting our of customers as

dis-synergies, So very very large synergies. small

in that revenue that revenue that total into dis-synergies And taken or is own X% them. estimate comprise our of we think we to X% now will lost potential company account Moritex

do CapEx side, run the On yes, they manufacturing X facilities.

-- as revenue not CapEx use light, what of higher. they're very of But remain sort slightly asset-intensive a percent our particularly scheme will business. you a there, as grand the CapEx a us to metric overall or might in of relative So

might not our any think impact material but that there on So be I a up, step results, something have modest would Jairam.

in Typically, winning question on them? -- should And talked lag, green Okay. -- on last -- Intelligrated sustainable behind how my the And sequentially. seeing a significant Honeywell slight shoot? just third a lag is coming is behind you about quarter do -- logistics. that we -- the how jump orders a in what's

increase an saw increase. So in we sequentially, also orders not a large

think I bottom. of said, the bumping we we're think along sort as we

Intelligrated industry. think integrators the as one of think of we large I that the there in

general, at we in that before and would of you of say, kind think contracts the I the they're integrators look overall. But do. see if some I we orders overall group, So similar to would things get

So I'm us to view I for a what would not as sure But through Intelligrated Honeywell more on overall. a flows lag. business, generally, said that us as get leading indicator that

in no for comments. showing I'd We're queue like back Instructions] [Operator additional the turn to at time. Mr. closing to floor this over questions Willett

Well, you. thank

quarter's or as We Sue again Over that have relations, company. Cognex. With helped call. Cognex public close XX years with best us Sue of been I Cognex Relations. to for investor in you we on the thank Investor joining Senior chapter Cognex Cognex's all well next journey call. will Sue be here look and for forward to oversee. quarterly of you with And XXXth wish next you Director was earnings of beginning done Before after Thank has has for we want the thank our this XX at we your you wrap, this leaving since the speaking that, will accounting end wrap to a for years, you Conway, quarter this Sue, across morning. a take the the moment year. Sue and

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

this the and your lines time, disconnect webcast rest enjoy your off day. may the You and at of log