Cognex (CGNX) 2 May 242024 Q1 Earnings call transcript

Greetings. Welcome to the Cognex First Quarter 2024 Earnings Conference Call. [Operator Instructions]

I will now turn the conference over to your host, Nathan McCurren, Head of Investor Relations.

You may begin.

Shamali. you, Thank and everyone, for us. joining Good thank morning, you

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

a certain press items find release. GAAP to can You from reconciliation of our non-GAAP in

make made presentation any true statements we believe in this may posted that our forward-looking release, we accompanying the based Any the as are or to website we that upon during call press of information today. be to

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

On Willett, today's MacDonald, strategic additional Rob Controller our also Interim on an CEO, of first then will for and our on update results. portion and joined will the has discuss Financial President the provide outlook. the I Principal the Laura financials, and and room our in will with Q&A detail call, call. quarter us Officer, Corporate Cognex' conclude initiatives Rob our

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

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

Revenue, most Our end was order down year-on-year saw volumes first stable above the but our factory but the of remained quarter Revenue of range results we our automation fourth contribution sequentially as we from slightly expected. reflect business the had of environment. excluding a across Moritex, markets. challenging quarter than guidance high increased end higher

we end started early CapEx investments, markets. to indications with see cautious of encouraged I'm remain certain their by customers in the have recovery While

to the macro a the leading be most slight PMI tailwind geographies important improvement as We also many our for of expect business. our in such indicators of

LXX, the by steps against In-Sight world's strategic system. This taken XD industrial expanded learning our Edge technology have initiatives. year, AI-enabled application launching of vision our We executing we in the important the first

began integration. actively the for track We sales cohort operating of its accretive customer be adjusted XXXX adjusted operated customers. Our a to on emerging and business EPS and calling the acquisition and in full advanced to quarter remain on margin And field this for we noise XXXX. entered Moritex

of would to who I Dennis a to announced as take Chief Officer, XX over the become XK X after CFO, global in Dennis of brings Energy, this This global effective morning moment and joined Siemens, years spent execute Finance of living tomorrow, Fehr, our like experience, years to which will Cognex, he XK, Inc. will and we years China, the company's X he welcome Prior to as and lead President time most Financial be as last information Dennis Fluence to working X. in to growth organizations. includes experience on the spending years value great finance knowledge Germany will Cognex May an continue Dennis our the a XXXX. as technology broad this where led a spending Dennis CFO strategy. we Fluence new Mexico, of recently Indonesia. Vice at was career. his of through Dennis XX first the brings Energy, IPO CFO international

QX hear earnings Dennis will from our You on call.

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

website posted to I highlights, our the earnings Rob. you, will this you X financial see which our Thank Page presentation morning. walk on can of through

of total revenue. $XXX Moritex First increased under quarter revenue the of by X% of just year-on-year from million with contribution X%

revenue X%. effects, Excluding Moritex and declined exchange foreign

X.X a X QX, margin we Moritex down strategic ago. from percentage due last full revenue on effect margin and XX.X% logistics the with project effects. call. Moritex. in our quarter, a future included quarter and gross margins. was that a from of of onetime recurring down to unfavorable was XX.X% margin Gross also points mentioned line year to point stepped guidance Adjusted in onetime in Turning the Sequentially, with There primarily events dilution adjusted percentage gross

Adjusted operating full of increased expenses driven quarter customer in Moritex year-on-year increased X% expected, and by as investment emerging our a initiatives.

Excluding adjusted as Sequentially, expenses X% declined investments, operating these strategic year-on-year. OpEx expected. X% adjusted increased

incentive full to higher of year, the beginning and emerging of the mentioned a for reset addition In there quarter. last quarter initiative we the the as in customer was compensation Moritex, costs at

lower operating accretive Adjusted EBITDA to offset a This contribution margin from related was the acquisition, adjusted higher gross by XX.X% emerging was in driven and Moritex was ago. partially margin. positive to EBITDA of QX, expenses XX.X% by which year margin the a down customers,

per tax basis effective year-on-year year-on-year a The and share unfavorable sequentially. XX% down in and EPS Sequentially, to $X.XX flat operating X%. $X.XX, XXXX. QX due both costs margins, GAAP GAAP lower adjusted and earnings was rate Diluted acquisition discrete items. was of diluted Adjusted of diluted on $X.XX, EPS down and was XXXX tax amortization QX increased

market earnings seen continued the weakness through end as and geographic market XXXX results, on signals. I'll can pockets Slide results, excluding presentation. been mixed well to as both now begin find as Moritex. positive which we X contribution have of discuss our end you will Markets the I go have of of the

continues was first spending near-term project down uncertain battery EV be they as Revenue saw to delay year-on-year, in we but quarter, automotive. revenue some demand. flat face and sequentially. lumpy, customers with the Starting

year-on-year the grew revenue project flat of year-on-year quarter, Moving sizable on the Much driving Revenue logistics. back decline business sequentially. we of electronics and but Consumer remains year. Consumer stable, although go from we compared strategic more half to of Rob a growth. will was in for into expect the year-on-year, detail regarding rate the what the to full XXXX. Electronics slowed executed down was

of semi Americas its for in led grew challenging quarter, strong had growth remained driven significant logistics. logistics, of for was logistics with quarter. softness China as the outside in also sixth geographic the the strength business revenue growth continued after Americas positive quarters Asia higher of in a in Semi declines. our turning year-on-year China year-on-year also by revenue X across automation Outside in momentum factory by Europe. the mix. From the viewpoint, region consecutive quarter, strongest declined as is experienced case and

sheet. to to Turning balance with $XX compared million strong flow and Cognex have $XX increased ago, We new dividends. and no cash in Free of returned to year the investment in and a working we stock cash as the to chain million investments buybacks scale a continues continue net form initiatives. in GAAP supply shareholders million lower capital and to reflecting cash million income QX was position debt. $XXX $XX

over it Now back I'll turn Rob. to

Nathan. Thanks,

Let on the priorities. our some progress discussing me spend time we're making strategic

machine making strong vision. to are the of field AI world-class We industrial progress introducing

examples measurement of this a In-Sight applications. of Our AI, inspection LXX is vision vision which XD combines range system, XD and and latest our to solve technologies XD

array process technology through greatly The replaces and example captured to of configuring broad of thanks LXX to required embedded previously long our serving with uses the application in simplifies applications. data. that Cognex In-Sight steps customers. of these address systems, has technology training development complex our based vision AI The models LXX a enables history programming data XD domain-specific pretrained In-Sight

With requiring rubber locate or view up can examples, in click its black on In-Sight a to X glue images simple customers set numbers arms The tire measure minutes, can a to unique training material. low-contrast as and AI-powered consistent LXX be few this XD a robotic conveyor, to guide labeled to application XX tools ensure identification points items task. lead automate on

or more intuitive in a Example been solves its based measurements option. off-line expand the to Cognex and viable human applications inspectors XD where only learning way, previously enabling have human-like application

I'll to customer emerging on give shift you our now update an initiative.

and our our this of began with such it selling demoing called penetration to emerging sell this as into have end have applications on. fully initiative entered our a customers nodes new customer excitement the base seen been sales Our sales build to deepens to customers. lot and at customer continues of packaging, and year. to field these previously These cohort initial as the not broadens we We've beginning markets

quality a food for air field, the character optical parts inspecting classification recognition customer and correct include biscuits, the items and electronics emerging manufacturer. an connectors caps bread, of caps insertion applications ceiling verifying of absence properly of like Some on examples parts customer confirming presence and pizzas the of fresheners, for bottle automotive detecting of an

of for initiative a opportunities encouraged we and have this funnel are what building are by We seen.

we to early end We We've over expect sales XX,XXX build least markets, geographies to customer this million and XXXX. make in continue customer XXXX. Early our of our $XX emerging delivering team this at in reinforce revenue year. continue noise initiative and accretive. emerging success this visits initiative We're orders this be across towards margin welcoming incremental that will our cohort belief second to sales excited customer to noise grow gross by had of

update integration an Let our me you We the made in on QX. Moritex. integration good now of progress give on

collaborating engineering who and Our experienced now engagements. already successful joined The Moritex teams leaders us Cognex optics customer our sales from leading teams are Japan. are on innovation are driving

adjusted medium beyond. acquisition slightly expect in to company to and the continue expect EPS be and we Moritex adjusted dilutive products total XXXX margin in margin we to term, While gross operating the accretive to to be

year in I seasonality. the This quarter turn the now included you million second quarter that I'll revenue step million for QX XXXX. of revenue our to we second from between consumer outlook we of QX up typical will quarter, of is that $XX quarter. In million. and in our originally QX last electronic to the electronics with $XXX expect $XXX remind the first line third expected consumer

implies Adjusting for excluding slightly range down this that be effect revenue baseline to and Moritex, year-on-year.

X X% continues targets below Moritex We percentage deleverage approximately business Gross the expect an our QX. revenue and margin volume point Moritex. X% the to given dilution be long-term in to of from to effect contribute

first the to adjusted the low We year quarter gross expect in be point for margin. the

revenues, diluted slightly events sequential second a the margin and QX stronger the above gross adjusted mentioned. as gross we XX%, quarter, past margin For move as onetime in just expect we expect step-up

expect incentive to initiatives basis on We low expenses the operating sequential to compensation. higher customer investment digits in emerging mid-single to additional increase due a adjusted and

million last an the $XX XXXX. incremental disclosed XXXX full should throughout year, the OpEx investment As we expect ramp timing customer the similar quarter, for emerging which of made of we in to

stable quarters. positioned and to be year-on-year in penetration increases million million materializing We be investment automation the has and also incentive continued as to $XX is a $XX compensation e-commerce fourth to headwind we expect well second believe grow returns. to through Logistics mostly

we materializing. to start plans grow the as logistics to see infrastructure expect For we investment full year,

contribution So be to market. a logistics electronics growth in expect below term significant the XXXX trends, growth Consumer be this year long be timing likely lumpy. electronics. and We revenue this has we consumer for still growth but target will can the long-term not positive do XX% year

line in approximately full XXXX uncertainty the be and with For we XXXX expect timing. revenue in size project with year, continued to of

the We result see concern tentativeness a driven EV from end and political customers are of investments EV delayed more user started in seeing our reduction uncertainty. projects in battery pace demand customers. by around to We greenfield from near-term

existing The gives semi seeing Moritex that EV our is still over expect still opportunities term. have landscape product XXXX market, customers and battery are leading excited this long growth communicated a manufacturers business equipment more as looks for We strong in in improving upgrades lines the robust us well and optimistic driver growth. we positioned additional productivity which outlook. We're be invest improvements on to

us the improve. by on keeps progress well we trends the to capitalize strategic as have to operating begins see, We we making industry on our signals environment believe and the exciting are to positioned encouraged are we initiatives started positive macro

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

first Our Instructions] question Securities. [Operator of the with Karas line Damian comes from UBS

hear me? you Can

you. hear can we Yes,

-- getting put you Terrific. yes. the that logistics No, Congratulations that. effort I of you your completing start perspective bit into a know more CFO begin market. by Maybe a off search. on could lot on To

might stable, kind get you across the largest that you've You to but are funnel growth Can visibility just you as hit the more progresses. from what customer later And some the that likely logistics this in characterize projects some got about you're good Are expecting have strategic curious space. year. modest to what in there as it the of year just your some indications seeing talk market. you're more

Thanks.

So let's start a with bit of context.

XXXX. in kind as And XXXX. and investment $XXX it XX% stopped, logistics by XX% fueled our in that in contracted down particularly. lot grew business by and of by investment e-commerce, XXXX around million a was of really then in It slowed So XX%

much we've really think industry. in I that positive feeling So to seen downturn come more big that come now a it's starting back. to We're

we we recovery. this So Logistics call, year-on-year starting project having flat revenue to first talked the although very last early but the see that conversations if and large it's XX% indications positive quarter of you we're to grew exclude on in of the year, about

logistics expecting a industry customers, we for growth we're return of the over going year long large although term, of to still expect on. target from e-commerce And we're growth as We that the the broader long this term. that see automation expecting warehouse -- XX% below to over

bringing We're other very, of grow really starting into very we where seeing more the of technology more names to us brings be we're and damage, good is us is vision see like revenue trials the technologies the technology opportunities we're major due see parcel et We're products to XX the to adoption detector with we're we In-Sight beyond smaller last barcode that for there. cetera, more reading We're Intelligence, to industry. I customers, starting some which dimensioning, really that from packages penetrate seeing the to inspect such the and Cognex we in post seeing that some growing as referred allow competitive and referred in customers that call recurring also nicely Edge with our to. marketing, for

signs customers larger would more of investments, levels. starting see be we'll returning kind positive of sort back to investments we're those and I normal that to reference what In more consider to

of But next fairly bookings that but year would us, in that. over a nicely the of saying some this lot markets. time for result we long emerging growing Asia may particularly Although year penetrated because revenue business potential growth relatively logistics in in be a just our see worth is on also States, long there's opportunities Europe term. the and It lead India concentrated in United those and

So view. that's overall kind of an

wanted I like how And us ask attacks year? semis. X% how factoring then for Or this And year? this than much be give possibly that spending expected. maybe snapback you're your based you initial I more better? to recovery, in guide you business Could a semis had better is a improving It to sounds about for sense you that was a for already color. much you see helpful you could you X%. a tracking was Very of of just just seeing, more the up in what on could outlook think

is So year-on-year in up semi some starting business more growth. we're difficult Moritex. return in couple back to seeing in after excluding to nice years of pretty a was our X%, well, potential Revenue -- XXXX QX

exposure in So still, that seeing is OEMs. on long-term I think, where But relationships we to pretty this start market ramp. early a and have some with longer-term

investments growth very, like very is they're starting certainly look to brand. characteristics, Some And for being by highly then bandwidth is high memory, very us. driven regarded really investments, positive a Moritex AI which in in

very as ago. grow, for of the beneficial longer of great bunch that lot a I've a be term. have business visiting start them those in companies a of in should the relationships their machine pleasure of with Japan couple weeks We business builders. it see that's had to a And us

there's scaling big period some that China through recalibration related changes think the the I probably CHIPS AI a investments to of around going we've such particularly been in up on Act. as where are been around going investments perhaps and market, the and So

growth we're optimistic long as see a So return in that finalized section their to in we'll strong the market. and work those nice over investments through way automation really become those term that

it's we next around around our years. XX% then when semi growth in overall we with a sort few And strong of potential of business for of Moritex, if size lot you, include the

our timing. There's that total growth terms I coming X% in revenue point and Moritex. you and how X% Moritex move puts that's year. And that's the still year, guided to Damian, to still We originally just market, businesses for of I'd end our of -- of pieces our of to from the some and just for end know market other mentioned guidance throughout takes given some the the expected are

with Robert line the Rob of Baird. question comes from next Mason Our W.

maybe consumer the So flat you of mix you last coming business been I'm composition from with curious just the historically customer there diversification Have year. any how would to comment said makeup efforts and on? that front flat on a tracks compare larger really versus what electronics year-over-year other Rob, efforts would customers? that customer change basis the on probably your that

of right or swung said particular X of overly range interpreting a not in had you're customer. sort a large a major flat. It's the historically, that a think different although for my isn't we've I large business customers Rob, in do is our broadly with is I would overall. I industry We of way overall -- what one being industry, lot there of very another exposure sort names change in to outlook across broad broad customer say customers. by

can But as features in that expected out. might can year I industry coming into and or this did we products coming been perhaps that be lumpy, mention that see moving year have next

that quite move So a can lot in experience. our around

could your with Curious Sure. feedback had you've start early year, know in all as to being but if field just a whether Cognex market in can productivity kind a And just comment. follow-up, successful things field the of just early from And be emerging product is. customer initiative. it's I'm help as tweaks, just if feedback levels. product and curious forces the on the you're any early on I the enhancements. do tougher understanding reads that's you it's just maybe into them selling more portfolio lead to well. of But what generation terms that the

Yes.

engineer. an and And couple I sell. traditionally, Learning, strong makes where the applications customers pretty developed engineer ago, been to really think the years world central at called vision to demo most machine Edge we've easy -- this we've in accounts which they difficult technology sophisticated or of very emerging around was work thesis like but

example So that we types the those at the of laser XXXX things. is in the world ID reading is area. considered buckets printed the best broadly the or And a such applications, have portfolio, then metal nice in best product as barcodes also of XD which matrix industrial

needed XXX,XXX it So is realized we more we as technology with or go today, or strength, And of to we get reaching we so technology XX,XXX could that be if to that that perhaps kind customers. there this customers easier. serve and more with becomes customers this

them them, implemented the very we've over time, have with trained lot engineers, last now what So few we're how generate of we've leads salespeople. field they're in and activity brought most Salesforce.com we get the salespeople, to years, now. terms the those of going strong same At and demoing, intelligence that, we a young where those into like of goes in to on, and and

this that. So that that engine certainly customers. we over target in on pleased to getting they that's to we're to mentioned process think to what gone seeing. year. They're team is I of the I I spools about up, customer make effective kind get And visits We're help generation implemented. with think, XX,XXX to expect of, front we're pretty do be front in as time of our in them able learn as lead going be customers about field more

their So we productivity. expect

month would that in see say selling and more each average, I they're I currently. And on more the data

new have of But our too salespeople from probably demo of ago in customers now much to I generally would you and be So in to applications and and those things they're new I you would those emerging because products front It's gave what to make can walked well, there's sell of engineering work. just away examples impacts few observe. going business. we probably years a some -- certainly that getting customers,

what the metrics pretty So with seeing. see keep we're up. We're we're to moving going pleased

tools, and them coming We will more and market applications here. more from more enabling products it to builds see address to

that on and we're class, flywheel, and we're turning faster full training time. all in getting getting confidence, based like better and another it's the does So faster. we're feel bringing up them It a

the line & Joe Giordano of Our Cowen Company. next question with from comes

for on Michael is This Great. Joe.

So on front. the end market

a semi outperformance the in What And on some think on driving was I quarter? industry that in there. strength follow-up. we're quarter the the like of commentary the surprised have I based

strong in particularly letters, we where of -- wafers. the we're -- reading in wafer at Well, barcodes, IDs, reflective process, we're semi, very the numbers surfaces

area leading we has time long many on rely it Cognex the of been a the -- types very of for with OEMs in for our a strong So with pectin those most equipment. spaces fans very and and

nicely. So strengthening that is business

also we're America. such But like in reading strong have coming We more where and and markets is to ASEAN Europe other good team as area. Malaysia, investments on seeing that are as markets in going certainly semi more we

around But I say memory. that applications the of inspection in also as of and bandwidth the of areas alignment reading is that would some high described, such seeing growth more wafers we're and I kind

And supplying our shorter is than that cycle Michael, X industry. are a peers of who number thing much a is just this I'd our to add reminder business a

given So customers outlooks as the look very for XXXX. positive at of who serve we you type they've here,

on You industry, would other we bit front, short-cycle the a expect our here And a into China Cognex is activity. to other beyond faster lot of Asia react suppliers lot where a that of or the -- to of the business of saw geography some nature given lot Asia business in of than we business. the that the

may. super more, helpful. That's just if one Great. And I

But you the for year. the that cadence the takes was flat. thought up and expectations had there, growth can maybe well? on you as discuss the year CE likely You auto logistics throughout mentioned side, puts the

sure. Yes,

about asked automotive. You

revenue. year, moment. I It think at difficult entering looks our was market more the automotive context, to best-performing our XX% last a representing largest of be and period

this some we and not look did quarter and we order repeat year China, around over battery of scaled good year. very the right? have in I a bumps back the first pushed short last big some pretty term, term over out, nice think see of EV revenues battery the in long saw that really the investments, EV So our been give can that which that particularly

reading probably So certainly, about there's you're automotive. as some much there, tentativeness

like. down, into with hybrid broad some pushed is being automotive if success the We is are customers we've for you them there. seeing quickly slowing more are hybrid, And of that back looks into year EV view customers, and this challenging But seen investments move some out.

Levinson comes line Our with next Research. Jacob Melius from of question the

I and call quite can or the But really to help capabilities. And I before understand is you want be pretty computer that us is doesn't to changes for would folks change you manner, change GPUs to expensive been you while doing deep it I know a of this for a high-density AI in that the if learning you something folks? certainly proliferation it how how it for now. that of cameras. to imagine does guess, map computing put power the lot But next your road available product will hasn't the been compute,

for Yes. Jacob, questions. the Thanks,

acquired in has with So Jeffrey workable. technology the if Hinton the in long we in something time. see kind and began been automation learning view, in that to usable decade, that's we later think been And for started 'XX, XXXX really XXXX. a a longer-term machine XXXX, in I work then of around we of make But start and really and to vision we it to be factory Sualab saw ViDi started deep

see the this be it to powerful that environment into putting really can a a cloud Cognex do really as into our AI learning as I you in early factory vision technology easy applies use point In-Sight you generative that making we and with at I And come credit leading to So and technology and to website it and move do now leader it of deep really XD trend automation. then to system, to our seeing space is and to look taking LXX that, application vision. encourage which XD

so but And an XD, historically, dimension. XD extra has vision really adds been

has amount manage. data an So to that's of really and exponential

it's intensive. So quite computer

kind thing as difficult, -- computer-intensive X capability is used But it to works slow use to of manage. So your and data be manage these with that. change chips effectively. we're huge applies question and and and very very, train to now GPUs, and cloud very Well, one sets quickly able AI with how models

extremely it that at pretty the right? it way. happening Cognex learning edge-based case, have something apply something on And this efficient has of of And take right? technology, it's the and form deep point in really we technology been taken and right factory factor making run developed that we've a to pre-train small to the is processors models at line, But reality a edge, Learning, in right and which put called then at good all the applies devices automation efficiently. is powerful Entry manufacture very So them into

as able to So chips to right to and get very very, we're edge go that the effectively. it very faster, work make bring

of So use, easier through our making really applications through, been is that it kind and going really the to to process be much that's we've effectively to products only and easier used sell humans. broaden into managed

those going of on. some changes are So the

at I I wouldn't the come. with those everything, Law vision to -- powerful, in you're opportunity a that. leading as very we more powerful and that edge lot like But to next chips years, powerful of really to that's not the become create coming edge smaller, to Moore's They're performance in the be right bet of be the all in see And and referring chips can perhaps say. think few to, some we'll know still machine expect you going on I think the cloud. years It's

That's interesting, super Rob.

Just in switching of folks commentary asking on the know if I what's gears your market the on that is think to And know a China, hard there. obviously, -- not of actually some on often you're I going ground for customers' sense your of what plan this from end to year. on hearing . but terms a trying just your investment you're the other get we're markets,

most year-on-year straight for it in year-on-year for was us decline at the the market XX% China Moritex. difficult X is geographically QX, seen market excluding moment. In Yes. revenue The certainly China, We've quarters. down

we're pretty larger customers, a China, in team space. successful large have with in particularly We very that and

as company up broad-based in moment. a the in can't see space we good automation the phenomenon. So of that's this putting think I a think I results China at

a think lot are over one I of we're certainly we're There's And seeing. expect typical funded of some in market. -- struggling and market market that companies would intense competition of seen the BC seeing with think there. I it's in kind So is that that of quite them pretty recently. conditions this as what We've PE obviously

decline the in quarter pronounced China in Our automotive also. was in most

So that's certainly situation. tough a

away We production China. diversifying customers or of phenomenon do see the production from moving

I into that. India markets, phenomenon, think with and often familiar so we're Vietnam. particularly

dynamic So there. going another on that's that's

talked think we that's In the now our our Moritex very business we're our has terms there Cognex I'm competitive I to make and China them our a And of is edge and about, that progress that to so selling starting in demoing the able to development. kind that positive business, Moritex a adding and be technology selling, in and enthusiastic more that see technology about something the learning of is XD broadly AI the very with team, and Cognex about good technology alongside very market. are pleased I Cognex certainly enthusiastic

So plenty on difficult work to conditions. but

of Our Moll next with Stephens from question line the Tommy comes Inc.

referenced I on of large year-over-year, times. start you've was project wanted the number flat the like to that logistics, it a revenue quarter, looks in excluding where

optimistic given us in the to You've be about that recovery some reason end market.

was just missing reason among concentrated customers? you I base follow-up seeing fairly a flat smaller the it is, asked those my is And there because And looks year-over-year. I'm positive question are like that business signs list the though. of so Maybe something, still

Yes.

your thanks question. for So

about optimism comes really my from our So logistics funnel.

customer, build overall. yes, but parcel nice And a -- nice tunnel our with modular customers. and necessarily customer we're we're not we some see dominated all space. win well with lot big a in do we our progress brings our had was see we're industry penetrating with seeing. business certainly that and where which post that logistics The by biggest in a we a launched we've vision some functionalities, of now of new year, that's demoing this progress very large making really that lot Obviously, names of, a aware those So

business growth Now base that logistics give can we that of know you see any customers, in color as don't to our do Nathan on... I way. -- terms it on see of smaller and we and QX feel us part continues if a

is out thing I And the kind based we referenced mean I we point you're Yes. of optimism. think seeing I are broader funnel stable probably said it, think year-over-year. to

We our typically, has the that expect so been well logistics. Americas. e-commerce growth forward from business in the penetration see strength as base parts other we've referenced And in -- and both saw some customers going Asia in higher of as to saw quarter large we this

there more should with given I a the over bit expect really talked a the trends pause happened a so, in across to and bifurcation months little investment. e-commerce really a greenfield and going or you expect see think by the just We that growth we've less of spectrum. little forward followed full large probably converge than their the more bit past similar what customers hyper those XX would

well. like there But is hit full it Or see And chance quarter then customer QX? roll that Is initiatives, we'll full ramping you which it run a rate is year run the It rate? there? question, the for emerging And this things gone as on Rob, a quarter cohort you related have year here do expense second. a sounds following you're up next that first, well? first before the really any out investment of third

marker else the Just on might wonder be board. what

components take the there's talked cost I'll first. side X the kind year, as of we throughout last mean, XXXX. in ramps year. And I to initiative it the

First the the you stable that is pretty expect year. throughout the made XXXX, we to investment run be should of in but really rate that

should -- A with bringing in ramp college you hiring here. what piece expect graduates, dates. second last is that and year this the the investment is just to lot the mind start what lot a so part I to will of speak Rob of is summer keep is mean, and the is of year, in throughout then XXXX, second, more in cost of class that a And we're the

QX And really similar. fairly linearly with and up so through QX ramps that QX looking

So peak expectation really OpEx kind of looking being side. the QX is the similar to and the QX on QX

potential But And XXXX, make hundreds obviously, question thousands. take of call to, about to too see on a to customers customers our as of long-term from with Yes. like would with I initiative say, your -- a long-term XX,XXX soon a that. emerging we lot as

I that. multiyear it this see So initiative is a would overall, as

that year terms for in for get recruiting in really next to as get on plan we budget for next into And that plans think we about and But XXXX, the probably our start period. of our season. to start fall concrete

of Management. Our next question the Paribas BNP comes from line Andrew Asset with Buscaglia

you that and the large to you was up marks into got is have you of questions think and point? you order gross somewhat comment step A margin what point the that low that the the a Presumably, margin. low a gross couple on QX you that guided improving that, So made gives in dilutive obviously QX. I that guess logistics confidence

the the that on larger just half you're can in guess any things the assuming would in give you not that I year. comment comment? the in So see rest you of of some confidence that some And orders back

dragged those all, larger Yes. of Moritex of about gross first headwind. and right, that impacted QX that was a so revenue described, Overall, It are the quarter. margin was X% low factors a us. year, we by is through -- order down Well, kind

should context. obviously like But markets gross going revenue a forward automation business a factory margin is particularly So high right? in in us automation, electronics, lift but Cognex with broad-based then of that what as sort for is margin particularly revenue, way, for factory

is margin, industry under gross And our that returns, that pressure recover, And lift very, discussed, market that so as now, competitive we've been has then And quarters very we a begin overall. it's gross gross customer and high few it for to see margins our emerging has selling as as products. would quite strong initiative margin.

us smaller large So gross to customers who discounts to customers margin do. expected accretive for selling be perhaps that's get that same of also do kind we going the generally

return us and more near high QX But margin in to gross in business. run to one-time that on scale gross and feel factors have. and business, return we being reasons interested, behind those be is also business semi which and automation to many about consumer electronics, going is a factory particularly back the that margin you're a XX% in where our the to positive which are term, sense back there target So long build tends

Yes.

Okay.

question, Okay. a year. to wanted I to And flattish then consumer go back this my electronics, next

is timing. And not size physical features. latest these there's You commented that's implementation I'm much of wondering, but on days, in AI and a phones wondering, uncertainty I'm innovation the not around project influence handsets change, projects, tough, an relates these terms but wondering factor does you're it what of I'm is referencing but on to in AI timing as have form vision consumer machine whether there the electronics? and

the I that about of it, right? comes that waves where hasn't couple and products, we're of right? if Well, market in excited but about a more innovation I'm we that are through we talk will, through confident of a market is long-term living potential innovation it kind the think through And has there. This customers why years very come

that's think smartphones. in the And of to world we I It starting also. and reality, technology in AI that if reality virtual we that seeing the we'll released may investment new semi that generation area. to of see whole our drive of think chips be the we're may be broadly drive some And all I augmented spending all products. understand, going and in think we're growth It

grow big. I spend occasion, replace inspectors, So a of $X expect right? with of I technology that on in Cognex' is potential one of over the just in electronics, that the mentioned -- potential And replacement hope business machine an perhaps it of that some vision. humans the on you to smartphones. visual think billion is that so And some reason idea, customers second of our gives human as I've particularly the year think The to exists I manufacturing in just

when vision in at it look can is machine becoming more our launches what And do. newest human-like you

of So many have. the products in and further technology And plans this industry in may industry aware the out road very this significant. that they are for I'm of that see at get in long and holidays we that in out that we're is launched us. But of maps ahead for it companies point, I potential lucky industry But those be this don't that year, right? might that kind the in run, popping some for year. of that years that the the see and think exciting I of assuming kind

Piyush comes Citi next Our Research. from question Avasthy of the line with

the on have Can well? Following projects on you you? space. understand help up guys constructive for on what for surprised been very as your bigger battery commentary, but I China, investments you EV in better that battery auto is EV pushed out, us Rob, you being softening some understand

EV investment getting months demand in think And all concern world. going of may most I sort it be So of constitute are order I battery we've -- yes, we've started that on. we're that little think been the think now, working closely maybe for large with I ahead the of to -- in X working manufacturers, investment really general see really battery on the EV a the of around tenants

with say, pushed do And months just as buying been very as would many over really that just the working perhaps them are a last have demand. this help I we plans going out where and I we've it's And slowed think area. phenomenon. a industry that there in helping do where And to X benefits not which One out huge customers down that's investment their been expected. well. customers Customers is with on is partly and really Cognex those capacity. build in with X had the can instances a idea ways that's those And multiyear of quite few the EVs are can

about out and uncertainty still there. the consumers companies invest just that subsidies secondly, plants, environment going political those whether for cars the plants for and being buy building battery who discussed And be whether in that EV to and are are

So I concern. think of that kind

that's prismatic waves patch the market we share technology coming, current and moving of to EVs, There'll cylindrical doubt, no that state. of the larger larger over see whether pouch think have technologies will long a I solid automotive be more overall. term,

closely problems So challenging it's of deal customers, with. is with there our they value challenge. going out investment Those greenfields, working recognize think waves But to I building technology. are technical and the of are there. of to we're certainly And which be the

surfaces we battery then images the learning productivity second applications. create with and inspect batteries. our partly to our that of area is of almost area an with strength increasing manufacturing tools optics to this them to Cognex applying and Moritex XD deep The Learning particularly and just those more technology, that where And excels SAC acquired applying is have Edge fantastic and we computational

or dents what for a pass surface can a and and of it real of customer if whether rejected that whether allows allows take And really what battery not is problem could a inspect that to should do through. the and it on tell an battery I is or to a it's a scratches or sort and make to be the position defect problem need

that surfaces. And customer very high there's those a batteries, $XXX,XXX a about I months good that $XXX,XXX very today. per throwing over good there's on high visited scrap of going reduce X human And me rate they're they of they're last batteries the one day, of to scrap technology told concerned inspection significantly. going can help away And because quality. rate on And our

we're see, that and that's example reasons the of in one long-term based help technology Cognex where of the plans industry. industry. all all So one challenges can that growth the investment that And on we expecting

Got it. Helpful.

and contribution mentioned presence potential you from Next and of a couple size And a my and Any market? India Moritex, growth have revenue then like related and of lot end in we concerns kind Japan, Maybe for like India color the on you would how maybe be been that a have you been the yen so opportunity reiterated but X-part us. follow-up, the little the Vietnam for to -- a are there, hearing seeing you -- has times, about there. FX, question. like [indiscernible] under the pressure, helpful. your maybe One,

of Yes. time. I'm the mindful

of small market. our building We're early part question but our is quarter. see. relatively past there. your India, huge I probably our, growth growing the if we I dynamics business still And just me. overall, huge opportunity. So a was it quickly, Cognex -- I first of was in I'm answer regularly. one to the excuse potential please there It's not going Yes, visited

business great helping more yen our it competitors the Japan. we making for helping on in some great interesting But of is the and of dollar environment The goods in their the weak the gross team yen, yes, making have cost challenging and us. and some creates strong margins a technology, certainly way, a -- we're It dynamics. for

competitive. able we're be So to

all the appreciate guys. I color,

Okay.

think one I have time more we question. for

from Last with Capital Jairam are the question Daiwa Markets. line Nathan comes

X them. of Just

and Are that Just the same had the wanted started a you to things has Or revenue large project logistics. those revenue clarification future in? first business? on the recurring recurring flowing on the that and is

project huge large edge that value with a intelligence, with with data we comes nice recurring came extract -- so our Yes, and regular allowing manage price of basis build of to our we business this excited and lower a effectively tied embedded, that. about get kind regular a where and Yes. piece on a more that we're systems took to technology and do revenue, which large a of out vision installation,

sales not understand to kind just revenue I -- per biggest at Okay. large And high the as Great. or current mix. increases. the then wanted emerging the just customers employee currently look your as finally, of for in you to I for will of as nature equate be marketing your headcount you of is customer because employees, let kind I guys of employee if growth competitor, And it employee

way you I here? at track the expect -- or the to emerging I'm days, the early is look how one you to the compared employee average million. to to trying it's potential when per How but understand understand -- just the But it is And and $XX if tracking? what's you do sales customer on current that get

reasons, customers, for have the not out modest competitive more much expectations there's that certainly, emerging share of them necessary we yes, point. gate. we But at data for Yes, this

good see go the and initiative, customer hope obviously, expect We accounts will in And we our on manage create larger which emerging to future. will improvement. salespeople,

nice feeding the salesperson in for dilute sales it's to certainly, a But So ground years. that. going per initial

Okay.

will at you best how the versus average it think like employee or of be do idea you could like kind an do tracking look if emerging Like -- customer can they salesperson, I us Okay. are of your or... they give -- high

Jairam, ramp initiative Yes, time. actually over will this

we're heads for go each give versus going to revenue sales actual expect what a to we'll on. more on expect see more those we so to And But employee. an not number tenured I of think

I'll have Rob reached for the of back call turn Willett question-and-answer we now session. to over And the the comments. end closing

Well, with We've questions. you quarter's thank and for joining interesting your you to speaking next you, look talking call. forward this on morning. again we with for you Thank enjoyed us

concludes today's This your conference, time. this disconnect at and your participation. may you Thank you for lines