News Details

NATICK, Mass.--(BUSINESS WIRE)-- Cognex Corporation (NASDAQ: CGNX) today announced its financial results for the third quarter of 2013. Selected financial data for the quarter and nine months ended September 29, 2013 is compared to the second quarter of 2013, the third quarter of 2012 and the first nine months of 2012 in Table 1 below. A reconciliation of certain financial measures from GAAP to non-GAAP is shown in Exhibit 2 of this news release.

Table 1
			Revenue			Net Income			Net Income per Diluted Share*
Quarterly Comparisons
Current quarter: Q3-13			$90,788,000			$20,727,000			$0.23
Prior year's quarter: Q3-12			$80,076,000			$17,805,000			$0.20
Change from Q3-12 to Q3-13			13%			16%			14%
Prior quarter: Q2-13			$86,510,000			$16,820,000			$0.19
Change from Q2-13 to Q3-13			5%			23%			22%
Year-to-Date Comparisons
Nine months ended Sept. 29, 2013			$258,190,000			$53,130,000			$0.59
Nine months ended Sept. 30, 2012			$242,111,000			$51,854,000			$0.59
Change from first nine months of 2012 to first nine months of 2013			7%			2%			0%
*Adjusted for the two-for-one stock split effective September 16, 2013.

"What great results we reported tonight for the third quarter of 2013!" exclaimed Dr. Robert J. Shillman, Chairman of Cognex. "We set new quarterly records for both revenue and net income during what is typically a seasonally soft quarter for Cognex. Sales of our machine vision products were particularly strong in the factory automation market; in fact, we set a new quarterly revenue record in that market as well."

"Cognex had an outstanding quarter in Q3 of 2013," said Robert J. Willett, Chief Executive Officer of Cognex. "Revenue increased significantly both year-on-year and sequentially as a result of the continued strong execution of our growth plans. We are particularly pleased with the performance of our ID products business."

Details of the Quarter

Statement of Operations Highlights — Third Quarter of 2013

• Revenue increased 13% from Q3 2012 and 5% from Q2 2013. Growth came from the factory automation market, where revenue increased 18% year-on-year and 7% sequentially to set a new quarterly record of $72 million. A notable contributor to factory automation revenue in Q3 2013 was volume orders for ID products received for logistics applications.
• Gross margin was 76% for Q3 2013, Q3 2012 and Q2 2013.
• Research, Development & Engineering (RD&E) spending increased 22% from Q3 2012 and 2% from Q2 2013. The increase year-on-year and sequentially was due to the company's investment in new product development.
• Selling, General & Administrative (SG&A) spending increased 18% from Q3 2012 and 2% from Q2 2013. The increase year-on-year was due to Cognex's sales force expansion and employee-related costs, commissions and professional fees. On a sequential basis, those higher costs were partially offset by the timing of marketing initiatives, lower stock option expense and savings from employee vacation time taken during Q3.
• The tax rate was 13% in Q3 2013 compared to 19% in both Q3 2012 and Q2 2013. Excluding discrete tax items, the tax rate for these periods was 19%, 21% and 19%, respectively (tax adjustments are summarized in Exhibit 2). The tax rate, excluding tax adjustments, decreased year-on-year due to a higher percentage of income being earned in lower-tax jurisdictions.

Balance Sheet Highlights — September 29, 2013

• Cognex's financial position as of September 29, 2013, was very strong, with no debt and $444,000,000 in cash and investments. During Q3 2013, Cognex spent approximately $16,000,000 to repurchase 563,000 shares of its common stock on the open market at an average split-adjusted price of $28.72 per share. The company intends to continue to repurchase shares of its common stock in Q4 2013, subject to market conditions and other relevant factors.

Financial Outlook

• Cognex expects revenue for Q4 2013 to be between $93 million and $96 million. Gross margin is expected to continue in the mid-70% range. Operating expenses are expected to increase by up to 4% on a sequential basis. The effective tax rate is expected to be 19%.

Non-GAAP Financial Measures

• Exhibit 2 of this news release includes a reconciliation of certain financial measures from GAAP to non-GAAP. Cognex believes these non-GAAP financial measures are helpful because they allow investors to more accurately compare Cognex results over multiple periods using the same methodology that management employs in its budgeting process and in its review of Cognex's operating results. In particular, non-GAAP presentations exclude the following: (1) stock option expense for the purpose of calculating non-GAAP adjusted operating income, non-GAAP adjusted net income and non-GAAP adjusted net income per share (because these expenses have no current effect on cash or the future uses of cash, and they fluctuate as a result of changes in Cognex's stock price), (2) the impact of currency exchange rate fluctuations from non-GAAP revenue (because period-to-period comparisons are better understood by assuming constant exchange rates), and (3) certain one-time discrete events, such as tax adjustments. Cognex does not intend for non-GAAP financial measures to be considered in isolation, nor as a substitute for financial information provided in accordance with GAAP.
• The tax effect of items identified in the reconciliation is estimated by applying the effective tax rate to the pre-tax amount. However, if a specific tax rate or tax treatment is required because of the nature of the item and/or the tax jurisdiction where the item was recorded, the tax effect is estimated by applying the relevant specific tax rate or tax treatment rather than the effective tax rate.

Analyst Conference Call and Simultaneous Webcast

• Cognex will host a conference call today at 5:00 p.m. eastern time. The telephone number is (866) 256-9239 (or (703) 639-1213 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, October 31, 2013. The telephone number for the replay is (888) 266-2081 (or (703) 925-2533 if outside the United States). The access code for both the live call and the replay is 1624698.
• Internet users can listen to a real-time audio broadcast of the conference call or an archived recording on the Cognex Investor Relations website: http://www.cognex.com/Investor.

About Cognex Corporation

Cognex Corporation designs, develops, manufactures and markets a range of products that incorporate sophisticated machine vision technology that gives them the ability to "see." Cognex products include barcode readers, machine vision sensors and machine vision systems that are used in factories, warehouses and distribution centers around the world to guide, gauge, inspect, identify and assure the quality of items during the manufacturing and distribution process. Cognex is the world's leader in the machine vision industry, having shipped more than 900,000 vision-based products, representing over $3.5 billion in cumulative revenue, since the company's founding in 1981. Headquartered in Natick, Massachusetts, USA, Cognex has regional offices and distributors located throughout North America, Japan, Europe, Asia and Latin America. For details visit Cognex online at http://www.cognex.com.

Certain statements made in this news release, which do not relate solely to historical matters, are forward-looking statements. These statements can be identified by use of the words "expects," "anticipates," "estimates," "believes," "projects," "intends," "plans," "will," "may," "shall," "could," "should," and similar words and other statements of a similar sense. These forward-looking statements, which include statements regarding business and market trends, future financial performance, expected areas of growth, future product mix, research and development activities, stock repurchases and strategic plans, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) current and future conditions in the global economy; (2) the cyclicality of the semiconductor and electronics industries; (3) the reliance on revenue from the automotive industry; (4) the inability to penetrate new markets; (5) the inability to achieve significant international revenue, including in Asia; (6) fluctuations in foreign currency exchange rates; (7) the loss of a large customer; (8) the inability to attract and retain skilled employees; (9) the reliance upon key suppliers to manufacture and deliver critical components for Cognex products; (10) the failure to effectively manage product transitions or accurately forecast customer demand; (11) the inability to design and manufacture high-quality products; (12) the technological obsolescence of current products and the inability to develop new products; (13) the failure to properly manage the distribution of products and services; (14) the inability to protect Cognex proprietary technology and intellectual property; (15) involvement in time-consuming and costly litigation; (16) the impact of competitive pressures; (17) the challenges in integrating and achieving expected results from acquired businesses; (18) potential impairment charges with respect to Cognex's investments or for acquired intangible assets or goodwill; (19) exposure to additional tax liabilities; (20) information security breaches or business systems disruptions; and (21) the other risks detailed in Cognex reports filed with the SEC, including its Form 10-K for the fiscal year ended December 31, 2012. 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
		Sept. 29,				Jun. 30,				Sept. 30,				Sept. 29,				Sept. 30,
			2013				2013				2012				2013				2012
Revenue		$	90,788			$	86,510			$	80,076			$	258,190			$	242,111
Cost of revenue (1)			21,348				21,150				19,506				61,921				59,113
Gross margin			69,440				65,360				60,570				196,269				182,998
Percentage of revenue			76	%			76	%			76	%			76	%			76	%
Research, development, and engineering expenses (1)			12,184				11,887				10,002				35,392				30,663
Percentage of revenue			13	%			14	%			12	%			14	%			13	%
Selling, general, and administrative expenses (1)			33,877				33,300				28,765				99,344				89,441
Percentage of revenue			37	%			38	%			36	%			38	%			37	%
Operating income			23,379				20,173				21,803				61,533				62,894
Percentage of revenue			26	%			23	%			27	%			24	%			26	%
Foreign currency gain (loss)			(442	)			76				(409	)			(303	)			(1,077	)
Investment and other income			771				517				692				1,797				3,369
Income before income tax expense			23,708				20,766				22,086				63,027				65,186
Income tax expense			2,981				3,946				4,281				9,897				13,332
Net income		$	20,727			$	16,820			$	17,805			$	53,130			$	51,854
Percentage of revenue			23	%			19	%			22	%			21	%			21	%
Earnings per weighted-average common and common-equivalent share (2):
Basic		$	0.24			$	0.19			$	0.21			$	0.61			$	0.61
Diluted		$	0.23			$	0.19			$	0.20			$	0.59			$	0.59
Weighted-average common and common-equivalent shares outstanding (2):
Basic			87,339				87,044				85,824				87,578				85,554
Diluted			89,359				88,714				87,258				89,450				87,220
Cash dividends per common share (2)		$	-			$	-			$	0.055			$	-			$	0.160
Cash and investments per common share (2)		$	5.08			$	4.90			$	4.84			$	5.08			$	4.84
Book value per common share (2)		$	7.31			$	7.07			$	7.05			$	7.31			$	7.05
(1) Amounts include stock option expense, as follows:
Cost of revenue		$	193			$	224			$	125			$	707			$	608
Research, development, and engineering			546				650				385				2,009				1,735
Selling, general, and administrative			1,481				1,907				982				5,583				4,452
Total stock option expense		$	2,220			$	2,781			$	1,492			$	8,299			$	6,795
(2) Prior period share and per share amounts have been adjusted to reflect the 2-for-1 stock split of the Company's common stock that occurred in Q3 of 2013.

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
					Sept. 29,				Jun. 30,				Sept. 30,				Sept. 29,				Sept. 30,
						2013				2013				2012				2013				2012
Adjustment for stock option expense
	Operating income (GAAP)				$	23,379			$	20,173			$	21,803			$	61,533			$	62,894
			Stock option expense			2,220				2,781				1,492				8,299				6,795
			Operating income (Non-GAAP)		$	25,599			$	22,954			$	23,295			$	69,832			$	69,689
			Percentage of revenue (Non-GAAP)			28	%			27	%			29	%			27	%			29	%
	Net income (GAAP)				$	20,727			$	16,820			$	17,805			$	53,130			$	51,854
			Stock option expense			2,220				2,781				1,492				8,299				6,795
			Tax effect on stock options			(721	)			(910	)			(479	)			(2,725	)			(2,212	)
			Net income (Non-GAAP)		$	22,226			$	18,691			$	18,818			$	58,704			$	56,437
			Percentage of revenue (Non-GAAP)			24	%			22	%			24	%			23	%			23	%
	Net income per diluted share (GAAP) (1)				$	0.23			$	0.19			$	0.20			$	0.59			$	0.59
			Stock option expense per diluted share			0.03				0.03				0.03			$	0.10				0.08
			Tax effect on stock options			(0.01	)			(0.01	)			(0.01	)		$	(0.03	)			(0.02	)
			Net income per diluted share excluding stock option expense (Non-GAAP)		$	0.25			$	0.21			$	0.22			$	0.66			$	0.65
	(1)		Prior period per share amounts have been adjusted to reflect the 2-for-1 stock split of the Company's common stock that occurred in Q3 of 2013.
Exclusion of tax adjustments
	Income before income tax expense (GAAP)				$	23,708			$	20,766			$	22,086			$	63,027			$	65,186
			Income tax expense (GAAP)		$	2,981			$	3,946			$	4,281			$	9,897			$	13,332
			Effective tax rate (GAAP)			13	%			19	%			19	%			16	%			20	%
			Tax adjustments:
			Discrete tax events			(1,523	)			-				(357	)			(2,078	)			(357	)
						(1,523	)			-				(357	)			(2,078	)			(357	)
			Income tax expense excluding tax adjustments (Non-GAAP)		$	4,504			$	3,946			$	4,638			$	11,975			$	13,689
			Effective tax rate (Non-GAAP)			19	%			19	%			21	%			19	%			21	%
Currency impact on certain revenue
					Growth				Impact of				Growth
					over Q2 2013				Currency				over Q2 2013
					(GAAP)				in Q3 2013				(Non-GAAP)
	Total revenue					5	%			1	%			4	%
	Factory automation revenue					7	%			1	%			6	%
	Factory automation revenue from Europe					10	%			2	%			8	%
	Factory automation revenue from Japan					-5	%			1	%			-6	%
					Growth				Impact of				Growth
					over Q3 2012				Currency				over Q3 2012
					(GAAP)				in Q3 2013				(Non-GAAP)
	Total revenue					13	%			-1	%			14	%
	Factory automation revenue					18	%			1	%			17	%
	Factory automation revenue from Europe					21	%			6	%			15	%
	Factory automation revenue from Japan					-13	%			-22	%			9	%

Exhibit 3
COGNEX CORPORATION
Balance Sheets
(Unaudited)
In thousands
		September 29,			December 31,
			2013			2012
Assets
Cash and investments		$	443,738		$	388,520
Accounts receivable			48,832			42,387
Inventories			27,625			26,182
Property, plant, and equipment			35,565			34,820
Goodwill and intangible assets			93,579			96,459
Other assets			43,411			39,237
Total assets		$	692,750		$	627,605
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities		$	38,824		$	36,405
Income taxes			4,480			6,225
Deferred revenue and customer deposits			11,722			12,690
Shareholders' equity			637,724			572,285
Total liabilities and shareholders' equity		$	692,750		$	627,605

Exhibit 4
COGNEX CORPORATION
Additional Information Schedule
(Unaudited)
Dollars in thousands
		Three-months Ended									Nine-months Ended
		Sept. 29,			Jun. 30,			Sept. 30,			Sept. 29,			Sept. 30,
			2013			2013			2012			2013			2012
Revenue		$	90,788		$	86,510		$	80,076		$	258,190		$	242,111
Revenue by division:
Modular Vision Systems Division			86%			86%			85%			86%			85%
Surface Inspection Systems Division			14%			14%			15%			14%			15%
Total			100%			100%			100%			100%			100%
Revenue by geography:
Americas			37%			35%			36%			36%			35%
Europe			31%			31%			30%			31%			31%
Asia			22%			21%			22%			22%			20%
Japan			10%			13%			12%			11%			14%
Total			100%			100%			100%			100%			100%
Revenue by market:
Factory automation			80%			78%			77%			78%			75%
Web and surface inspection			14%			14%			15%			14%			15%
Semiconductor and electronics capital equipment			6%			8%			8%			8%			10%
Total			100%			100%			100%			100%			100%

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

Source: Cognex Corporation

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