Investor Press Release
Cognex Reports First Quarter 2016 Results
|Current quarter: Q1-16||
|Prior year's quarter: Q1-15||
|Change from Q1-15 to Q1-16||(5%)||(24%)||(23%)|
|Prior quarter: Q4-15||
|Change from Q4-15 to Q1-16||(2%)||(21%)||(23%)|
*Table 1 excludes the results of discontinued operations, which relate
to the company's Surface Inspection Systems Division (SISD) that was
"I am pleased to report that our first quarter results were better than
the guidance we gave to investors in February," said Dr.
"The year started off on a stronger note than anticipated, and our
guidance for Q2 reflects a significant sequential increase in revenue
and substantial margin expansion due to an expected concentration of
large orders in the consumer electronics industry," said
Details of the Quarter
Statement of Operations Highlights - First Quarter of 2016
Revenue for Q1 2016 decreased 5% from Q1 2015 and 2% from Q4 2015.
Cognexexperienced the typical seasonal decline from Q4 to Q1 in factory automation. The decline from last year's record first-quarter revenue was primarily due to lower revenue from the consumer electronics industry.
- Gross margin was 78% for both Q1 2016 and Q1 2015, and 76% for Q4 2015. Gross margin increased on a sequential basis due to revenue mix, with a higher percentage of revenue coming from product sales than service.
- Research, Development & Engineering (RD&E) expenses increased 21% from Q1 2015 and 17% from Q4 2015. RD&E increased year-on-year due to Cognex's investment in engineering resources and higher outsourced engineering costs. RD&E increased on a sequential basis due to support of potential high-volume opportunities and higher stock option expense.
- Selling, General & Administrative (SG&A) expenses decreased 4% from Q1 2015 and increased 2% from Q4 2015. SG&A decreased year-on-year as Cognex's investment in its sales and support organization was offset by lower patent-related legal fees. SG&A increased on a sequential basis due to higher stock option expense.
Investment and other income was
$1,344,000in Q1 2016, $540,000in Q1 2015 and $2,059,000in Q4 2015. The increase year-on-year was due to a higher average invested balance. The decrease on a sequential basis was the result of a larger reduction in Q4 than in Q1 to the estimated liability for contingent consideration related to a recent acquisition.
- The tax rate was 15% in Q1 2016, 16% in Q1 2015, and 13% in Q4 2015. Excluding discrete tax items, the rate was 18% in Q1 2016 and Q1 2015, and 17% in Q4 2015 (tax adjustments are summarized in Exhibit 2).
Balance Sheet Highlights -
Cognex's financial position as of
April 3, 2016, was very strong, with $649 millionin cash and investments and no debt. During Q1 2016, Cognexpaid out $6 millionin dividends to shareholders. Earlier today, Cognexannounced it will increase the cash dividend paid in Q2 2016 to $0.075per share from $0.07per share paid in Q1. The company also intends to repurchase shares of its common stock in Q2 2016, subject to market conditions and other relevant factors.
Financial Outlook - Q2 2016
Cognexexpects revenue for Q2 2016 to be between $135 millionand $140 million. This range represents substantial growth over Q1 2016, due primarily to large orders expected from consumer electronics customers, but a slight decline from Q2 2015 due to timing. In 2016, Cognexexpects to recognize large consumer electronics orders in both Q2 and Q3, as opposed to last year when the majority was recognized in Q2.
- Gross margin is expected to be in the mid-to-high 70% range.
- Operating expenses are expected to increase by up to 4% on a sequential basis, and to be essentially flat year-on-year.
- The effective tax rate is expected to be 18% before discrete tax items.
Non-GAAP Financial Measures
Exhibit 2 of this news release includes a reconciliation of certain
financial measures from GAAP to non-GAAP.
Cognexbelieves these non-GAAP financial measures are helpful because they allow investors to more accurately compare Cognexresults 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 (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), and (2) certain one-time discrete events, such as tax adjustments. Cognexdoes not intend for 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
Cognexwill host a conference call today at 5:00 p.m. Eastern Time(ET). 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. ETtoday and will run continuously until 11:59 p.m. ETon Thursday, May 5, 2016. 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 1670550.
Internetusers 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.
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, customer order rates, timing for future orders,
expected areas of growth, future product mix, research and development
activities, future stock repurchases, investments, 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) the loss of a large customer; (2)
current and future conditions in the global economy; (3) the reliance on
revenue from the consumer electronics or automotive industries; (4) the
inability to penetrate new markets; (5) the inability to achieve
significant international revenue; (6) fluctuations in foreign currency
exchange rates and the use of derivative instruments; (7) information
security breaches or business system disruptions; (8) the inability to
attract and retain skilled employees; (9) the reliance upon key
suppliers to manufacture and deliver critical components for our
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 our proprietary technology and
intellectual property; (15) our 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 our
investments or for acquired intangible assets or goodwill; (19) exposure
to additional tax liabilities; and (20) the other risks detailed in
Statements of Operations
Dollars in thousands, except per share amounts
|Cost of revenue (1)||20,968||23,400||22,344|
|Percentage of revenue||78||%||76||%||78||%|
|Research, development, and engineering expenses (1)||20,555||17,526||16,986|
|Percentage of revenue||21||%||18||%||17||%|
|Selling, general, and administrative expenses (1)||38,338||37,694||39,933|
|Percentage of revenue||40||%||39||%||39||%|
|Percentage of revenue||17||%||20||%||22||%|
|Foreign currency gain (loss)||(100||)||542||659|
|Investment and other income||1,344||2,059||540|
|Income from continuing operations before income tax expense||17,588||21,749||23,309|
|Income tax expense on continuing operations||2,703||2,895||3,837|
|Net income from continuing operations||14,885||18,854||19,472|
|Percentage of revenue||15||%||19||%||19||%|
|Net income (loss) from discontinued operations (1)||—||(108||)||1,030|
|Basic earnings per weighted-average common and common-equivalent share:|
|Net income from continuing operations||$||0.18||$||0.22||$||0.22|
|Net income from discontinued operations||—||—||0.02|
|Diluted earnings per weighted-average common and common-equivalent share:|
|Net income from continuing operations||$||0.17||$||0.22||$||0.22|
|Net income from discontinued operations||—||—||0.01|
|Weighted-average common and common-equivalent shares outstanding:|
|Cash dividends per common share||$||0.07||$||0.07||$||—|
|Cash and investments per common share||$||7.64||$||7.32||$||6.30|
|Book value per common share||$||10.00||$||9.73||$||8.80|
|(1) Amounts include stock option expense, as follows:|
|Cost of revenue||$||293||$||348||$||467|
|Research, development, and engineering||2,179||1,097||1,814|
|Selling, general, and administrative||4,332||2,759||4,382|
|Total stock option expense||$||6,804||$||4,204||$||6,946|
Reconciliation of Selected Items from GAAP to Non-GAAP
Dollars in thousands
|Adjustment for stock option expense|
|Operating income (GAAP)||$||16,344||$||19,148||$||22,110|
|Stock option expense related to continuing operations||6,804||4,204||6,663|
|Operating income (Non-GAAP)||$||23,148||$||23,352||$||28,773|
|Percentage of revenue (Non-GAAP)||24||%||24||%||28||%|
|Exclusion of tax adjustments|
|Income from continuing operations before income tax expense (GAAP)||$||17,588||$||21,749||$||23,309|
|Income tax expense (GAAP)||$||2,703||$||2,895||$||3,837|
|Effective tax rate (GAAP)||15||%||13||%||16||%|
|Discrete tax events||(463||)||(910||)||(364||)|
|Income tax expense excluding tax adjustments (Non-GAAP)||$||3,166||$||3,805||$||4,201|
|Effective tax rate (Non-GAAP)||18||%||17||%||18||%|
|Net income from continuing operations excluding tax adjustments (Non-GAAP)||$||14,422||$||17,944||$||19,108|
|Percentage of revenue (Non-GAAP)||15||%||18||%||19||%|
Dollars in thousands
|Cash and investments||$||649,463||$||621,531|
|Property, plant, and equipment||53,413||53,285|
|Liabilities and Shareholders' Equity|
|Accounts payable and accrued liabilities||$||40,949||$||41,132|
|Deferred revenue and customer deposits||11,862||11,571|
|Total liabilities and shareholders' equity||$||913,637||$||887,756|
Additional Information Schedule
Dollars in thousands
|Revenue by geography:|
|Revenue by market:|
|Semiconductor and electronics capital equipment||6||%||5||%||6||%|
Senior Director of Investor Relations
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