Cognex Corporation Announces Third Quarter Results
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- Cognex Corporation Announces Third Quarter Results
Machine Vision Company Announces Sequential Increase in Revenue and Earnings
NATICK, Mass.--(BUSINESS WIRE)-- Cognex Corporation (NASDAQ: CGNX) today announced its financial results for the third quarter of 2009. Revenue and income/(loss) from continuing operations for the quarter and nine months ended October 4, 2009 are compared to the second quarter of 2009, and the third quarter and first nine months of 2008 in Table 1 below.
Table 1
Non-GAAP
Income/(loss) Income/(loss)
Income/(loss) per Share from per Share from
from
Continuing Continuing Continuing
Revenue Operations Operations Operations*
Quarterly
Comparisons
Current quarter: $41,178,000 $4,501,000 $0.11 $0.03
Q3-09
Prior year's $63,256,000 $11,333,000 $0.27 $0.18
quarter: Q3-08
Change from Q3-08 (35%) (60%) (58%) (85%)
to Q3-09
Prior quarter: $40,968,000 ($6,419,000) ($0.16) ($0.08)
Q2-09
Change from Q2-09 1% 170% 170% 133%
to Q3-09
Year to Date
Comparisons
Nine months ended $124,433,000 ($5,328,000) ($0.13) ($0.13)
10/4/09
Nine months ended $190,858,000 $28,685,000 $0.68 $0.58
9/28/08
Change from first
9 months of 2008 (35%) (119%) (120%) (123%)
to first 9 months
of 2009
*Non-GAAP income/(loss) per share excludes restructuring charges and tax adjustments. A reconciliation of GAAP to non-GAAP is shown in Exhibit 2.
"We are encouraged by the sequential improvement in our financial results, and we are pleased to announce our return to profitability after two quarters of losses, which is sooner than anticipated," said Dr. Robert J. Shillman, the Chairman and Chief Executive Officer of Cognex. "Revenue increased slightly over the prior quarter due to higher demand from the Semiconductor and Electronics Capital Equipment market and also from the Factory Automation market, which was especially good news given that this market is typically seasonally soft during the summer months. The gross margin improved by 800 basis points. And, on the expense side we realized additional savings from our cost-cutting measures. These facts resulted in our return to profitability at both the operating income and net income lines."
"While business conditions remain challenging, the number of projects that we are chasing has increased, and we expect that this will lead to higher revenue on a sequential basis in the fourth quarter of 2009. Offsetting this higher revenue will be higher operating expenses, which are expected to increase by 7% to 10% primarily due to savings from mandatory shutdown days in Q3-09 that will not repeat in Q4-09." Dr. Shillman concluded.
Details of the Quarter
Statement of Operations Highlights - Third Quarter of 2009
-- Revenue for the third quarter of 2009 decreased 35% from the third
quarter of 2008 and increased 1% from the prior quarter. Revenue from
the Semiconductor and Electronics Capital Equipment (SEMI), Factory
Automation and Surface Inspection markets declined year-on-year. The
increase on a sequential basis is due to higher revenue from the SEMI
market and, to a lesser extent, the Factory Automation market.
-- Gross margin was 71% in the third quarter of 2009, 72% in the third
quarter of 2008 and 63% in the prior quarter. The percentage decreased
year-on-year due to an increase in new product introduction costs as a
percentage of total cost of goods sold and product mix (revenue from
surface inspection systems, which have a lower product margin than
modular vision systems, represented a higher percentage of total revenue
in Q3-09 than in Q3-08). On a sequential basis, the percentage increased
because Q3-09 included a higher percentage of revenue from modular
vision systems, and Q2-09 had a higher provision for obsolete inventory.
-- Research, Development & Engineering (R, D & E) spending in the third
quarter of 2009 decreased 26% from the third quarter of 2008 and 12%
from the prior quarter. The decrease in R, D & E spending, both
year-on-year and sequentially, is due to headcount reductions and the
effect of mandatory shutdown days. Lower stock option expense, the
elimination of company bonuses and the impact of foreign exchange rates
on the company's international operations also contributed to the
year-on-year decrease in spending.
-- Selling, General & Administrative (S, G & A) spending in the third
quarter of 2009 decreased 26% from the third quarter of 2008 and 5% from
the prior quarter. S, G & A spending decreased year-on-year due to
headcount reductions, an intangible asset impairment charge of
$1,500,000 in the third quarter of 2008 that did not repeat, the effect
of mandatory shutdown days, lower spending on marketing communications,
travel and commissions, lower stock option expense, the elimination of
company bonuses, and the impact of foreign exchange rates. These lower
expenses were partially offset by higher professional fees. S, G & A
spending decreased on a sequential basis due to headcount reductions,
the effect of mandatory shutdown days, lower spending on marketing
communications and travel, and lower stock option expense offset by
higher professional fees, commissions and the impact of foreign exchange
rates.
-- Cognex reported restructuring charges of $223,000 in the third quarter
of 2009 and $3,738,000 in the prior quarter related to cost-saving
initiatives implemented by the company.
-- Cognex reported a foreign currency gain of $1,000 in the third quarter
of 2009, a foreign currency gain of $327,000 in the third quarter of
2008 and a foreign currency loss of $422,000 in the prior quarter. The
company recognizes foreign currency gains and losses on the revaluation
and settlement of accounts receivable and intercompany balances that are
reported in one currency and collected in another.
-- Investment and other income was $261,000 in the third quarter of 2009,
$1,830,000 in the third quarter of 2008 and $447,000 in the prior
quarter. The decrease year-on-year is due to a lower average invested
balance and lower yields. The decrease on a sequential basis is due to
lower yields and lower rental income.
-- Excluding tax adjustments, the effective tax rate was 20% in the third
quarter of 2009 as compared to an effective tax rate of 26% in the third
quarter of 2008 and a tax benefit of 18% in the prior quarter. The
effective tax rate decreased year-on-year due to more of the company's
profits being earned in lower tax jurisdictions. The effective tax rate
was higher than the prior quarter's tax benefit due to more of the
company's projected losses for 2009 being incurred in higher tax
jurisdictions than previously anticipated.
The third quarter of 2009 included a benefit from tax adjustments of $3,586,000, of which $3,150,000 is due to the reversal of reserves made based upon the expiration of the statute of limitations. Including tax adjustments, Cognex reported a tax benefit of 294% in the third quarter of 2009, 12% in the third quarter of 2008 and 18% in the prior quarter.
Balance Sheet Highlights - October 4, 2009
-- Cognex's financial position at October 4, 2009 was very strong, with
approximately $205,915,000 in cash and investments and no debt. In the
third quarter of 2009, Cognex generated positive cash flow from
operations of approximately $3,800,000, and paid out $4,500,000 to
acquire certain assets associated with the SmartAdvisor(TM) web
monitoring system product line, approximately $1,400,000 in severance
and other payments related to the company's restructuring initiatives
and approximately $2,000,000 in dividends to shareholders.
-- Inventories at October 4, 2009 decreased by $4,138,000, or 17%, from the
end of 2008.
Financial Outlook
-- Given the high degree of uncertainty resulting from global economic
conditions, Cognex is not providing revenue or earnings per share
expectations for the fourth quarter of 2009 as it cannot do so with any
degree of confidence. However, Cognex expects that revenue will increase
on a sequential basis but net income will decrease on a sequential basis
as Q3-09 included a benefit from tax adjustments of $3,586,000 and
savings from mandatory shutdown days that will not repeat in Q4-09.
Non-GAAP Financial Measures
Exhibit 2 of this press release includes a reconciliation of certain financial measures from GAAP to non-GAAP. Cognex believes that these non-GAAP financial measures are useful to investors because they allow investors to more accurately assess and compare the company's results over multiple periods and to evaluate the effectiveness of the methodology used by management to review its operating results. In particular, Cognex incurs expense related to stock options included in its GAAP presentation of cost of revenue, research, development, and engineering expenses (R, D & E), and selling, general and administrative expenses (S, G & A). Cognex excludes these expenses for the purpose of calculating non-GAAP adjusted income/(loss) from continuing operations and non-GAAP adjusted income/(loss) from continuing operations per share when it evaluates its continuing operational performance and in connection with its budgeting process and the allocation of resources, because these expenses have no current effect on cash or the future uses of cash and they fluctuate as a result of changes in Cognex's stock price. Cognex also excludes certain items if they are one-time discrete events, such as restructuring charges related to cost-cutting initiatives and tax adjustments. Cognex does not intend for these non-GAAP financial measures to be considered in isolation, nor as a substitute for financial information provided in accordance with GAAP.
Analyst Conference Call and Simultaneous Webcast
Cognex will host a conference call to discuss its results for the third quarter of 2009, as well as its financial and business outlook, today at 5:00 p.m. eastern time. The telephone number for the live call is 866-244-4637 (or 703-639-1179 if outside the United States). A replay will begin at 8:00 p.m. eastern time today and will run continuously until 11:59 p.m. eastern time on Thursday, November 5, 2009. The telephone number for the replay is 888-266-2081 (or 703-925-2533 if outside the United States) and the access code is 1393154.
Internet users can listen to a real-time audio broadcast of the conference call, as well as an archive replay of the call, on Cognex's website at http://www.cognex.com/Investor.
About Cognex Corporation
Cognex Corporation designs, develops, manufactures, and markets machine vision sensors and systems, or devices that can "see." Cognex vision sensors are used in factories around the world to automate the manufacture of a wide range of items and to assure their quality. Cognex is the world's leader in the machine vision industry, having shipped more than 500,000 machine vision systems, representing over $2.5 billion in cumulative revenue, since the company's founding in 1981. In addition to its corporate headquarters in Natick, Massachusetts, Cognex also has regional offices and distributors located throughout North America, Japan, Europe, Asia, and Latin America. Visit Cognex on-line at http://www.cognex.com/.
Forward-Looking Statements
Certain statements made in this press release, which do not relate solely to historical matters, are forward-looking statements. These statements can be identified by use of the words "expects," "anticipates," "estimates," "believes," "projects," "intends," "plans," "will," "may," "shall," "could," and similar words. These forward-looking statements, which include statements regarding business and market trends, future financial performance, customer demand and order rates, strategic plans and the impact of the company's cost-cutting measures, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) current and future conditions in the global economy; (2) the cyclicality of the semiconductor and electronics industries; (3) the inability to achieve significant international revenue; (4) fluctuations in foreign currency exchange rates; (5) the loss of a large customer; (6) the reliance upon key suppliers to manufacture and deliver critical components for Cognex products; (7) the inability to attract and retain skilled employees; (8) the inability to design and manufacture high-quality products; (9) the technological obsolescence of current products and the inability to develop new products; (10) the failure to effectively manage product transitions or accurately forecast customer demand; (11) the failure to properly manage the distribution of products and services; (12) the inability to protect Cognex proprietary technology and intellectual property; (13) Cognex's involvement in time-consuming and costly litigation; (14) the impact of competitive pressures; (15) the challenges in integrating and achieving expected results from acquired businesses; (16) potential impairment charges with respect to Cognex's investments or for acquired intangible assets or goodwill; (17) potential disruption to Cognex's business from its restructuring programs; (18) exposure to additional tax liabilities; and (19) the other risks detailed in Cognex reports filed with the SEC, including its Form 10-K for the fiscal year 2008 and subsequent reports on Form 10-Q. You should not place undue reliance upon any such forward-looking statements, which speak only as of the date made. Cognex disclaims any obligation to update forward-looking statements after the date of such statements.
Exhibit 1
COGNEX CORPORATION
Statements of Operations
(Unaudited)
Dollars in thousands, except per share amounts
Three-months Ended Nine-months Ended
Oct. 4, Jul. 5, Sept. 28, Oct. 4, Sept. 28,
2009 2009 2008 2009 2008
Revenue $ 41,178 $ 40,968 $ 63,256 $ 124,433 $ 190,858
Cost of revenue (1) 12,038 14,976 17,408 40,478 53,488
Gross margin 29,140 25,992 45,848 83,955 137,370
Percentage of 71 % 63 % 72 % 67 % 72 %
revenue
Research,
development, and 6,756 7,704 9,073 23,295 27,292
engineering
expenses (1)
Percentage of 16 % 19 % 14 % 19 % 14 %
revenue
Selling, general,
and administrative 21,281 22,404 28,788 69,826 83,362
expenses (1)
Percentage of 52 % 55 % 46 % 56 % 44 %
revenue
Restructuring 223 3,738 - 4,258 -
charges
Operating income 880 (7,854 ) 7,987 (13,424 ) 26,716
(loss)
Percentage of 2 % -19 % 13 % -11 % 14 %
revenue
Foreign currency 1 (422 ) 327 (813 ) 798
gain (loss)
Investment and 261 447 1,830 3,392 5,948
other income
Income (loss) from
continuing
operations before 1,142 (7,829 ) 10,144 (10,845 ) 33,462
income tax expense
(benefit)
Income tax expense
(benefit) on (3,359 ) (1,410 ) (1,189 ) (5,517 ) 4,777
continuing
operations
Income (loss) from
continuing 4,501 (6,419 ) 11,333 (5,328 ) 28,685
operations
Percentage of 11 % -16 % 18 % -4 % 15 %
revenue
Loss from
operations of
discontinued - - - - (3,224 )
business, net of
tax
Net income (loss) $ 4,501 $ (6,419 ) $ 11,333 $ (5,328 ) $ 25,461
Diluted income
(loss) per
weighted-average
common and common
equivalent share:
Income (loss) from
continuing $ 0.11 $ (0.16 ) $ 0.27 $ (0.13 ) $ 0.68
operations (2)
Loss from
discontinued $ - $ - $ - $ - $ (0.08 )
operations
Net income (loss) $ 0.11 $ (0.16 ) $ 0.27 $ (0.13 ) $ 0.60
Diluted
weighted-average
common and common
equivalent shares 39,666 39,656 41,462 39,658 42,298
outstanding
Cash dividends per $ 0.050 $ 0.050 $ 0.150 $ 0.250 $ 0.320
common share
Cash and
investments per $ 5.19 $ 5.20 $ 5.79 $ 5.19 $ 5.79
common share
Shareholders'
equity per common $ 10.29 $ 10.05 $ 10.79 $ 10.29 $ 10.79
share
Amounts include
(1) stock option
expense, as
follows:
Cost of $ 108 $ 122 $ 253 $ 501 $ 883
revenue
Research,
development, 387 391 732 1,354 2,325
and
engineering
Selling,
general, and 949 1,276 1,931 3,233 4,104
administrative
Total stock $ 1,444 $ 1,789 $ 2,916 $ 5,088 $ 7,312
option expense
(2)
Income (loss)
from continuing
operations per
diluted common
and common
equivalent
share excluding $ 0.03 $ (0.08 ) $ 0.18 $ (0.13 ) $ 0.58
restructuring
charges, net of
tax, and tax
adjustments
Exhibit 2
COGNEX CORPORATION
Reconciliation of Selected Items from GAAP to Non-GAAP
(Unaudited)
Dollars in thousands, except per share amounts
Three-months Ended Nine-months Ended
Oct. 4, Jul. 5, Sept. 28, Oct. 4, Sept. 28,
2009 2009 2008 2009 2008
Research,
development, and $ 6,756 $ 7,704 $ 9,073 $ 23,295 $ 27,292
engineering
expenses (GAAP)
Selling, general,
and administrative $ 21,281 $ 22,404 $ 28,788 $ 69,826 $ 83,362
expenses (GAAP)
Total RD&E and $ 28,037 $ 30,108 $ 37,861 $ 93,121 $ 110,654
SG&A (GAAP)
Stock option
expense included
in RD&E and SG&A
as follows:
Research,
development, and $ 387 $ 391 $ 732 $ 1,354 $ 2,325
engineering
expenses
Selling, general,
and $ 949 $ 1,276 $ 1,931 $ 3,233 $ 4,104
administrative
expenses
Total stock
option expense $ 1,336 $ 1,667 $ 2,663 $ 4,587 $ 6,429
included in RD&E
and SG&A
Total RD&E and
SG&A excluding
stock option $ 26,701 $ 28,441 $ 35,198 $ 88,534 $ 104,225
expense
(Non-GAAP)
Operating income $ 880 $ (7,854 ) $ 7,987 $ (13,424 ) $ 26,716
(loss) (GAAP)
Restructuring 223 3,738 - 4,258 -
charges
Operating income
(loss) excluding
restructuring $ 1,103 $ (4,116 ) $ 7,987 $ (9,166 ) $ 26,716
charges
(Non-GAAP)
Percentage of
total revenue 3 % -10 % 13 % -7 % 14 %
(Non-GAAP)
Income (loss) from
continuing $ 4,501 $ (6,419 ) $ 11,333 $ (5,328 ) $ 28,685
operations (GAAP)
Restructuring
charges, net of $ 178 $ 3,065 $ - $ 3,406 $ -
tax
Tax adjustments $ (3,586 ) $ - $ (3,871 ) $ (3,347 ) $ (3,968 )
Income (loss)
from continuing
operations
excluding $ 1,093 $ (3,354 ) $ 7,462 $ (5,269 ) $ 24,717
restructuring
charges and tax
adjustments
(Non-GAAP)
Percentage of
total revenue 3 % -8 % 12 % -4 % 13 %
(Non-GAAP)
Income (loss) from
continuing
operations per $ 0.11 $ (0.16 ) $ 0.27 $ (0.13 ) $ 0.68
diluted share
(GAAP)
Restructuring
charges, net of $ 0.01 $ 0.08 $ - $ 0.08 $ -
tax
Tax adjustments $ (0.09 ) $ - $ (0.09 ) $ (0.08 ) $ (0.10 )
Income (loss)
from continuing
operations per
diluted share
excluding $ 0.03 $ (0.08 ) $ 0.18 $ (0.13 ) $ 0.58
restructuring
charges and tax
adjustments
(Non-GAAP)
Income (loss) from
continuing
operations before $ 1,142 $ (7,829 ) $ 10,144 $ (10,845 ) $ 33,462
income tax expense
(benefit) (GAAP)
Income tax
expense (benefit) $ (3,359 ) $ (1,410 ) $ (1,189 ) $ (5,517 ) $ 4,777
on continuing
operations (GAAP)
Effective tax -294 % 18 % -12 % 51 % 14 %
rate (GAAP)
Tax adjustments:
True up of annual (239 ) - 185 - -
tax rate
Discrete tax (3,347 ) - (4,056 ) (3,347 ) (3,968 )
events
Income tax
expense (benefit)
on continuing
operations $ 227 $ (1,410 ) $ 2,682 $ (2,170 ) $ 8,745
excluding tax
adjustments
(Non-GAAP)
Effective tax 20 % -18 % 26 % -20 % 26 %
rate (Non-GAAP)
Income (loss) from
continuing
operations $ 915 $ (6,419 ) $ 7,462 $ (8,675 ) $ 24,717
excluding tax
adjustments
(Non-GAAP)
Percentage of
revenue 2 % -16 % 12 % -7 % 13 %
(Non-GAAP)
Exhibit 3
COGNEX CORPORATION
Balance Sheets
In thousands
October 4, December 31,
2009 2008
(unaudited)
Assets
Cash and investments $ 205,915 $ 221,086
Accounts receivable 25,246 30,510
Inventories 20,925 25,063
Property, plant, and equipment 28,959 27,764
Goodwill and intangible assets 112,343 112,043
Other assets 53,509 57,581
Total assets $ 446,897 $ 474,047
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities $ 20,930 $ 28,635
Income taxes 6,789 12,908
Deferred revenue and customer deposits 10,858 19,429
Shareholders' equity 408,320 413,075
Total liabilities and shareholders' equity $ 446,897 $ 474,047
Exhibit 4
COGNEX CORPORATION
Additional Information Schedule
(Unaudited)
Dollars in thousands
Three-months Ended Nine-months Ended
Oct. 4, Jul. 5, Sept. 28, Oct. 4, Sept. 28,
2009 2009 2008 2009 2008
Revenue $ 41,178 $ 40,968 $ 63,256 $ 124,433 $ 190,858
Revenue by
division:
Modular Vision 80 % 76 % 83 % 80 % 86 %
Systems Division
Surface Inspection 20 % 24 % 17 % 20 % 14 %
Systems Division
Total 100 % 100 % 100 % 100 % 100 %
Revenue by
geography:
Europe 36 % 36 % 34 % 35 % 35 %
Americas 34 % 34 % 31 % 35 % 31 %
Japan 15 % 18 % 21 % 19 % 22 %
Asia 15 % 12 % 14 % 11 % 12 %
Total 100 % 100 % 100 % 100 % 100 %
Revenue by market:
Discrete factory 70 % 70 % 67 % 73 % 68 %
automation
Web and surface 20 % 24 % 17 % 20 % 14 %
inspection
Semiconductor and
electronics 10 % 6 % 16 % 7 % 18 %
capital equipment
Total 100 % 100 % 100 % 100 % 100 %
Source: Cognex Corporation
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