Investor Press Release
Cognex Reports Record First Quarter Revenue, Net Income and EPS
|Current quarter: Q1-14||
|Prior year's quarter: Q1-13||
|Change from Q1-13 to Q1-14||12%||19%||17%|
|Prior quarter: Q4-13||
|Change from Q4-13 to Q1-14||(5%)||(9%)||(9%)|
*Adjusted for the two-for-one stock split effective
"Cognex started 2014 on a fantastic note," said Dr.
"Our record first quarter financial performance is the direct result of
the investments in new product development and sales that we made over
the past several years," said
"Regarding our guidance for Q2, as you will see in the Financial Outlook
section below, we are planning for both revenue and operating expenses
to increase substantially on both a year-on-year and sequential basis.
We believe that the revenue growth will come from the strong demand we
are currently experiencing for our products combined with the
recognition of some deferred revenue from SISD, our Surface Inspection
Systems Division. We expect higher expenses in Q2 due to a number of
factors including incremental support capabilities for our recently
Details of the Quarter
Statement of Operations Highlights - First Quarter of 2014
- Revenue for Q1 2014 increased 12% over Q1 2013 and decreased 5% from Q4 2013. Growth year-on-year came from the factory automation market, where revenue increased 19% year-on-year. Revenue decreased on a sequential basis, as expected, as a result of the typical seasonal decline in factory automation from Q4 to Q1.
- Gross margin was 77% for Q1 2014 as compared to 76% in Q1 2013 and 77% in Q4 2013. The increase year-on-year was due to a higher percentage of revenue coming from modular vision systems, which have higher product margins than surface inspection systems. Product margins for modular vision systems also increased due to the favorable impact of higher sales volume.
- Research, Development & Engineering (RD&E) expenses increased 10% over Q1 2013 and decreased 2% from Q4 2013. The increase year-on-year was due to Cognex's investment in new product development and higher stock option expense. The sequential decrease was due to the timing of outside services and a lower bonus accrual, partially offset by higher employee-related costs.
- Selling, General & Administrative (SG&A) expenses increased 8% from Q1 2013 and decreased 3% from Q4 2013. The increase year-on-year was due to investments made to grow Cognex's sales force. The sequential decrease was due to lower commissions and the timing of marketing initiatives, partially offset by higher employee-related costs.
- The tax rate was 19% in Q1 2014, 16% in Q1 2013 and 18% in Q4 2013. Excluding tax adjustments, the rate was 19% in each period (tax adjustments are summarized in Exhibit 2).
Balance Sheet Highlights -
Cognex's financial position as of
March 30, 2014, was very strong, with no debt and $464,000,000in cash and investments. Cognexspent $14,000,000in the first quarter to repurchase 380,000 shares of its common stock at an average price of $37.60per share. Cognexrepurchased these shares to offset the potential dilution from 2014 employee stock options awards, which the company believes are instrumental in its ability to recruit, retain and motivate the highest caliber employees. The company intends to continue to repurchase shares of its common stock in 2014, subject to market conditions and other relevant factors.
Cognexexpects revenue for Q2 2014 to be between $101 millionand $105 million. This range includes the recognition of some surface inspection revenue that had been deferred.
- Gross margin is expected to be in the mid-70% range.
On a sequential basis, operating expenses are expected to increase by
up to 15%. This increase is partially due to additional support
required for the
$40 millionbusiness win that was announced on April 23, 2014, further investments in growth areas and legal fees related to the company's patent lawsuit against Microscan Systems, Inc.
- The effective tax rate is expected to be 19% 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, 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), 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.
- 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
Cognexwill 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 timetoday and will run continuously until 11:59 p.m. Eastern timeon Saturday, May 3, 2014. 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 1636071.
- 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.
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 and demand, the timing of
certain revenue recognition, expected areas of growth, future product
mix, research and development activities, investments, 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 or consumer electronics
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) 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 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; (20) information security breaches or
business system disruptions; and (21) the other risks detailed in
|Statements of Operations|
|Dollars in thousands, except per share amounts|
|Cost of revenue (1)||21,084||22,159||19,423|
|Percentage of revenue||77||%||77||%||76||%|
|Research, development, and engineering expenses (1)||12,502||12,695||11,321|
|Percentage of revenue||14||%||13||%||14||%|
|Selling, general, and administrative expenses (1)||34,900||36,007||32,167|
|Percentage of revenue||38||%||38||%||40||%|
|Percentage of revenue||25||%||26||%||22||%|
|Foreign currency gain (loss)||(110||)||(343||)||63|
|Investment and other income||514||367||509|
|Income before income tax expense||22,847||24,859||18,553|
|Income tax expense||4,341||4,416||2,970|
|Percentage of revenue||20||%||21||%||19||%|
|Earnings per weighted-average common and common-equivalent share (2):|
|Weighted-average common and common-equivalent shares outstanding (2):|
|Cash dividends per common share (2)||$||-||$||-||$||-|
|Cash and investments per common share (2)||$||5.34||$||5.24||$||4.76|
|Book value per common share (2)||$||7.61||$||7.42||$||6.90|
(1) Amounts include stock option expense, as follows:
|Cost of revenue||$||348||$||217||$||290|
|Research, development, and engineering||1,056||576||813|
|Selling, general, and administrative||2,600||1,528||2,195|
|Total stock option expense||$||4,004||$||2,321||$||3,298|
(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.
|Reconciliation of Selected Items from GAAP to Non-GAAP|
|Dollars in thousands, except per share amounts|
|Adjustment for stock option expense|
|Operating income (GAAP)||$||22,443||$||24,835||$||17,981|
|Stock option expense||4,004||2,321||
|Operating income (Non-GAAP)||$||26,447||$||27,156||$||21,279|
|Percentage of revenue (Non-GAAP)||29||%||28||%||26||%|
|Net income (GAAP)||$||18,506||$||20,443||$||15,583|
|Stock option expense||4,004||2,321||3,298|
|Tax effect on stock options||(1,306||)||(756||)||(1,094||)|
|Net income (Non-GAAP)||$||21,204||$||22,008||$||17,787|
|Percentage of revenue (Non-GAAP)||23||%||23||%||22||%|
|Net income per diluted share (GAAP) (1)||$||0.21||$||0.23||$||0.18|
|Stock option expense per diluted share||0.04||0.03||0.03|
|Tax effect on stock options||(0.01||)||(0.01||)||(0.01||)|
|Net income per diluted share excluding stock option expense (Non-GAAP)||$||0.24||$||0.25||$||0.20|
|(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)||$||22,847||$||24,859||$||18,553|
|Income tax expense (GAAP)||$||4,341||$||4,416||$||2,970|
|Effective tax rate (GAAP)||19||%||18||%||16||%|
|True up of annual tax rate||-||(307||)||-|
|Discrete tax events||-||-||(555||)|
|Income tax expense excluding tax adjustments (Non-GAAP)||$||4,341||$||4,723||$||3,525|
|Effective tax rate (Non-GAAP)||19||%||19||%||19||%|
|Cash and investments||$||464,156||$||455,121|
|Property, plant, and equipment||37,826||37,136|
|Goodwill and intangible assets||95,496||96,412|
|Liabilities and Shareholders' Equity|
|Accounts payable and accrued liabilities||$||35,811||$||43,818|
|Deferred revenue and customer deposits||16,443||15,941|
|Total liabilities and shareholders' equity||$||717,517||$||709,699|
|Additional Information Schedule|
|Dollars in thousands|
|Revenue by division:|
|Modular Vision Systems Division||90||%||89||%||87||%|
|Surface Inspection Systems Division||10||%||11||%||13||%|
|Revenue by geography:|
|Revenue by market:|
|Web and surface inspection||10||%||11||%||13||%|
|Semiconductor and electronics capital equipment||7||%||5||%||9||%|
Director of Investor Relations
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