What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 209 added, 137 removed, 462 unchanged (43% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three-months Ended

April 2, 2023 April 3, 2022

Three-months Ended Six-months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(unaudited) (unaudited)

Revenue $ 242,512 $ 274,628 $ 443,636 $ 557,035

3 unchanged sentences

Selling, general, and administrative expenses 83,423 79,950 166,460 160,785

Loss (recovery) from fire (Note 17) ( 2,500 ) 17,403 ( 2,500 ) 17,403

Operating income 65,175 65,141 87,336 151,869

16 unchanged sentences

(In thousands)

Three-months Ended

April 2, 2023 April 3, 2022

Three-months Ended Six-months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(unaudited) (unaudited)

Net income $ 57,474 $ 58,901 $ 83,089 $ 126,234

1 unchanged sentence

Available-for-sale investments:

Net unrealized gain (loss), net of tax of $ 1,858 and $( 4,036 ) in the three-month periods, respectively

Net unrealized gain (loss), net of tax of $( 584 ) and $( 698 ) in the three-month periods, and net of tax of $ 1,274 and $( 4,734 ) in the six-month periods, respectively

( 1,706 ) ( 2,322 ) 3,720 ( 15,870 )

10 unchanged sentences

(In thousands)

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

Current assets:

49 unchanged sentences

(In thousands)

Three-months Ended

April 2, 2023 April 3, 2022

Six-months Ended

July 2, 2023 July 3, 2022

Cash flows from operating activities:

3 unchanged sentences

Depreciation of property, plant, and equipment 8,177 8,114

(Gain) loss on disposal of property, plant, and equipment ( 8 ) 12

Amortization of intangible assets 1,685 1,662

Excess and obsolete inventory charges 1,443 741

Non-cash impact of write-offs related to fire (Note 17) — 44,903

Amortization of discounts or premiums on investments 1,200 2,714

11 unchanged sentences

Other 2,347 2,655

Net cash provided by operating activities 27,553 49,517

Net cash provided by (used in) operating activities 57,402 93,629

Cash flows from investing activities:

21 unchanged sentences

Shares Par Value

Balance as of April 2, 2023 172,601 $ 345 $ 992,690 $ 517,526 $ ( 64,230 ) $ 1,446,331

Net issuance of common stock under stock plans 179 1 5,709 — — 5,710

Repurchase of common stock ( 487 ) ( 1 ) — ( 24,984 ) — ( 24,985 )

Stock-based compensation expense — — 12,574 — — 12,574

Payment of dividends ($ 0.070 per common share)

— — — ( 12,069 ) — ( 12,069 )

Net income — — — 57,474 — 57,474

Net unrealized gain (loss) on available-for-sale investments, net of tax of $( 584 )

— — — — ( 1,706 ) ( 1,706 )

Foreign currency translation adjustment — — — — ( 2,866 ) ( 2,866 )

Balance as of July 2, 2023 (unaudited)

172,293 $ 345 $ 1,010,973 $ 537,947 $ ( 68,802 ) $ 1,480,463

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive

Shareholders’

Shares Par Value

Balance as of April 3, 2022 173,738 $ 347 $ 933,452 $ 488,511 $ ( 63,565 ) $ 1,358,745

Net issuance of common stock under stock plans 47 — 820 — — 820

Repurchase of common stock ( 388 ) — — ( 23,912 ) — ( 23,912 )

Stock-based compensation expense — — 12,997 — — 12,997

Payment of dividends ($ 0.065 per common share)

— — — ( 11,270 ) — ( 11,270 )

Net income — — — 58,901 — 58,901

Net unrealized gain (loss) on available-for-sale investments, net of tax of $( 698 )

— — — — ( 2,322 ) ( 2,322 )

Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — ( 12 ) ( 12 )

Foreign currency translation adjustment — — — — ( 3,962 ) ( 3,962 )

Balance as of July 3, 2022 (unaudited)

173,397 $ 347 $ 947,269 $ 512,230 $ ( 69,861 ) $ 1,389,985

The accompanying notes are an integral part of these consolidated financial statements.

COGNEX CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

Common Stock Additional

Paid-in Capital Retained Earnings Accumulated

Comprehensive

Shareholders’

Shares Par Value

Balance as of December 31, 2022

172,631 $ 345 $ 979,167 $ 528,179 $ ( 69,297 ) $ 1,438,394

Net issuance of common stock under stock plans 628 2 2,653 — — 2,655

7 unchanged sentences

Foreign currency translation adjustment — — — — ( 3,225 ) ( 3,225 )

Balance as of April 2, 2023 (unaudited) 172,601 $ 345 $ 992,690 $ 517,526 $ ( 64,230 ) $ 1,446,331

Balance as of July 2, 2023 (unaudited)

172,293 $ 345 $ 1,010,973 $ 537,947 $ ( 68,802 ) $ 1,480,463

Common Stock Additional

4 unchanged sentences

Balance as of December 31, 2021

175,481 $ 351 $ 914,802 $ 562,882 $ ( 47,942 ) $ 1,430,093

Net issuance of common stock under stock plans 183 — 4,414 — — 4,414

8 unchanged sentences

Foreign currency translation adjustment — — — — ( 6,073 ) ( 6,073 )

Balance as of April 3, 2022 (unaudited) 173,738 $ 347 $ 933,452 $ 488,511 $ ( 63,565 ) $ 1,358,745

Balance as of July 3, 2022 (unaudited)

173,397 $ 347 $ 947,269 $ 512,230 $ ( 69,861 ) $ 1,389,985

The accompanying notes are an integral part of these consolidated financial statements.

4 unchanged sentences

Reference should be made to the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for a full description of other significant accounting policies.

In the opinion of the management of Cognex Corporation (the "Company"), the accompanying consolidated unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, and financial statement reclassifications necessary to present fairly the Company’s financial position as of April 2, 2023, and the results of its operations for the three-month periods ended April 2, 2023 and April 3, 2022, and changes in shareholders’ equity, comprehensive income, and cash flows for the periods presented.

The results disclosed in the Consolidated Statements of Operations for the three-month period ended April 2, 2023 are not necessarily indicative of the results to be expected for the full year.

In the opinion of the management of Cognex Corporation (the "Company"), the accompanying consolidated unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, adjustments related to losses and recoveries from the fire (Note 17), and financial statement reclassifications necessary to present fairly the Company’s financial position as of July 2, 2023, and the results of its operations for the three-month and six-month periods ended July 2, 2023 and July 3, 2022, and changes in shareholders’ equity, comprehensive income, and cash flows for the periods presented.

The results disclosed in the Consolidated Statements of Operations for the three-month and six-month periods ended July 2, 2023 are not necessarily indicative of the results to be expected for the full year.

New Pronouncements

13 unchanged sentences

Financial Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of April 2, 2023 (in thousands):

The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of July 2, 2023 (in thousands):

Quoted Prices in

7 unchanged sentences

Asset-backed securities — 52,340 —

Agency bonds — 16,038 —

Sovereign bonds — 1,932 —

11 unchanged sentences

Non-financial assets, such as property, plant and equipment, operating lease assets, goodwill, and intangible assets, are required to be measured at fair value only when an impairment loss is recognized.

The Company did not record impairment charges related to non-financial assets during the three-month periods ended April 2, 2023 or April 3, 2022.

The Company did not record impairment charges related to non-financial assets during the three-month or six-month periods ended July 2, 2023 or July 3, 2022.

COGNEX CORPORATION

2 unchanged sentences

Cash, cash equivalents, and investments consisted of the following (in thousands):

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

Cash $ 146,993 $ 180,959

3 unchanged sentences

Asset-backed securities 15,339 26,890

Agency bonds 16,038 15,858

Treasury bills 9,961 11,332

Municipal bonds 635 624

Agency bonds — 15,858

Current investments 191,474 218,759

7 unchanged sentences

asset-backed securities consist of debt securities collateralized by pools of receivables or loans with credit enhancement;

agency bonds consist of domestic or foreign obligations of government agencies and government-sponsored enterprises that have government backing;

treasury bills consist of debt securities issued by the U.S.

municipal bonds consist of debt securities issued by state and local government entities;

agency bonds consist of domestic or foreign obligations of government agencies and government-sponsored enterprises that have government backing;

and sovereign bonds consist of direct debt issued by foreign governments.

All of the Company's securities as of April 2, 2023 and December 31, 2022 were denominated in U.S.

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 4,559,000 and $ 3,620,000 as of April 2, 2023 and December 31, 2022, respectively.

The following table summarizes the Company’s available-for-sale investments as of April 2, 2023 (in thousands):

All of the Company's securities as of July 2, 2023 and December 31, 2022 were denominated in U.S.

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheets and amounted to $ 4,265,000 and $ 3,620,000 as of July 2, 2023 and December 31, 2022, respectively.

The following table summarizes the Company’s available-for-sale investments as of July 2, 2023 (in thousands):

Losses Fair Value

1 unchanged sentence

Asset-backed securities 15,492 — ( 153 ) 15,339

Agency bonds 16,148 — ( 110 ) 16,038

Treasury bills 10,099 — ( 138 ) 9,961

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of April 2, 2023 (in thousands):

The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of July 2, 2023 (in thousands):

Unrealized Loss Position For:

4 unchanged sentences

Corporate bonds $ 127,474 $ ( 1,767 ) $ 350,232 $ ( 17,303 ) $ 477,706 $ ( 19,070 )

Asset-backed securities 10,998 ( 213 ) 32,783 ( 1,679 ) 43,781 ( 1,892 )

Agency bonds — — 16,037 ( 110 ) 16,037 ( 110 )

Treasury bills 59,832 ( 838 ) 11,884 ( 218 ) 71,716 ( 1,056 )

Asset-backed securities 15,850 ( 199 ) 36,490 ( 1,690 ) 52,340 ( 1,889 )

Sovereign bonds — — 1,932 ( 139 ) 1,932 ( 139 )

3 unchanged sentences

When developing an estimate of expected credit losses, management considers all relevant information including historical experience, current conditions, and reasonable forecasts of expected future cash flows.

Based on this evaluation, no allowance for credit losses on debt securities was recorded as of April 2, 2023 or December 31, 2022.

There was no activity recorded in the allowance for credit losses during the three-month periods ended April 2, 2023 or April 3, 2022.

Management currently intends to hold these securities to full value recovery at maturity.

The Company recorded no gross realized gains or gross realized losses on the sale of debt securities for the three-month period ended April 2, 2023.

The Company recorded gross realized gains and gross realized losses on the sale of debt securities totaling $ 118,000 and $ 154,000 , respectively, for the three-month period ended April 3, 2022.

Based on this evaluation, no allowance for credit losses on debt securities was recorded as of July 2, 2023 or December 31, 2022.

There was no activity recorded in the allowance for credit losses during the three-month or six-month periods ended July 2, 2023 or July 3, 2022.

Management currently intends to hold debt securities that are in an unrealized loss position to full value recovery at maturity.

The Company recorded no gross realized gains or losses on the sale of debt securities during the three-month and six-month periods ended July 2, 2023.

The Company recorded gross realized gains on the sale of debt securities totaling $ 15,000 and $ 133,000 during the three-month and six-month periods ended July 3, 2022, respectively, and gross realized losses on the sale of debt securities totaling $ 3,000 and $ 157,000 during the three-month and six-month periods ended July 3, 2022, respectively.

Realized gains and losses are included in "Investment income" on the Consolidated Statements of Operations.

Prior to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, were recorded in shareholders’ equity as accumulated other comprehensive loss.

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of April 2, 2023 (in thousands):

Prior to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, were recorded in shareholders’ equity as accumulated other comprehensive income (loss).

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of July 2, 2023 (in thousands):

<1 year 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5-8 Years Total

2 unchanged sentences

Asset-backed securities 15,339 11,622 11,093 7,227 — 7,059 52,340

Agency bonds 16,038 — — — — — 16,038

Sovereign bonds — 974 958 — — — 1,932

2 unchanged sentences

Inventories consisted of the following (in thousands):

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

Raw materials $ 72,327 $ 71,720

7 unchanged sentences

Certain leases may contain options to extend or terminate the lease at the Company's sole discretion.

As of April 2, 2023, there was one option to terminate and eighteen options to extend that were accounted for in the determination of the lease term for outstanding leases.

As of July 2, 2023, there were no options to terminate and twenty options to extend that were accounted for in the determination of the lease term for outstanding leases.

Certain leases contain leasehold improvement incentives, retirement obligations, escalating clauses, rent holidays, and variable payments tied to a consumer price index.

There were no restrictions or covenants for outstanding leases as of April 2, 2023.

The total operating lease expense for the three-month periods ended April 2, 2023 and April 3, 2022 were $ 2,392,000 and $ 2,229,000 , respectively.

The total operating lease cash payments for the three-month periods ended April 2, 2023 and April 3, 2022 were $ 2,404,000 and $ 2,079,000 , respectively.

The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month periods ended April 2, 2023 and April 3, 2022 was $ 24,000 and $ 38,000 , respectively.

There were no restrictions or covenants for outstanding leases as of July 2, 2023.

The total operating lease expense for the three-month and six-month periods ended July 2, 2023 was $ 2,639,000 and $ 5,031,000 , respectively.

The total operating lease cash payments for the three-month and six-month periods ended July 2, 2023 were $ 2,364,000 and $ 4,768,000 , respectively.

The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and six-month periods ended July 2, 2023 was $ 136,000 and $ 160,000 , respectively.

The total operating lease expense for the three-month and six-month periods ended July 3, 2022 was $ 2,215,000 and $ 4,444,000 , respectively.

The total operating lease cash payments for the three-month and six-month periods ended July 3, 2022 were $ 2,227,000 and $ 4,306,000 , respectively.

Future operating lease cash payments are as follows (in thousands):

2 unchanged sentences

Thereafter 56,108

The discounted present value of the future lease cash payments resulted in a total lease liability of $ 39,566,000 and $ 39,752,000 as of April 2, 2023 and December 31, 2022, respectively.

The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of April 2, 2023.

The discounted present value of the future lease cash payments resulted in a total lease liability of $ 70,040,000 and $ 39,752,000 as of July 2, 2023 and December 31, 2022, respectively.

The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of July 2, 2023.

In June 2023, the Company entered into a lease for a 115,000 square-foot building in Singapore to serve as a new distribution center for customers in Asia.

The lease contains two components, including a 88,000 square-foot premises with a term of ten years, six months .

The Company has the right and option to extend the term of this lease component for an additional period of five years , commencing upon the expiration of the original term.

This lease component commenced during the second quarter of 2023, and therefore the Company recorded approximately $ 29,684,000 , which reflects an estimated extension period of five years , within "Operating lease assets" and "Operating lease liabilities" on the Consolidated Balance Sheets on the commencement date.

The second component of this Singapore lease is for a 27,000 square-foot premises with a term of eight years .

The commencement date for this lease component is in the fourth quarter of 2025, and therefore it was not yet recorded on the Consolidated Balance Sheets, nor did it create any significant rights and obligations as of July 2, 2023.

The Company has the right and option to extend the term of this lease component for an additional period of five years , commencing upon the expiration of the original term.

Future payment obligations associated with this lease component total $ 13,231,000 , none of which is payable in 2023 and which reflects an estimated extension period of five years .

Future payment obligations related to this lease component are not included in the future operating lease cash payments table above.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In December 2021, the Company entered into a lease for a 65,000 square-foot building in Southborough, Massachusetts for a term of ten years to serve as a new distribution center for customers in the Americas.

The Company has the right and option to extend the term of this lease for an additional period of five years , commencing upon the expiration of the original ten-year term.

This lease commenced during the first quarter of 2022, and therefore the Company recorded approximately $ 9,271,000 within "Operating lease assets" and "Operating lease liabilities" on the Consolidated Balance Sheets on the commencement date.

The weighted-average discount rate was 3.3 % for the leases outstanding as of both April 2, 2023 and December 31, 2022.

The weighted-average remaining lease term was 7.6 and 7.8 years for the leases outstanding as of April 2, 2023 and December 31, 2022, respectively.

This lease commenced during the first quarter of 2022, and therefore the Company recorded approximately $ 9,271,000 , which does not reflect an estimated extension period, within "Operating lease assets" and "Operating lease liabilities" on the Consolidated Balance Sheets on the commencement date.

The weighted-average discount rate was 5.3 % and 3.3 % for the leases outstanding as of July 2, 2023 and December 31, 2022, respectively.

The weighted-average remaining lease term was 11.0 and 7.8 years for the leases outstanding as of July 2, 2023 and December 31, 2022, respectively.

The changes in the carrying value of goodwill were as follows (in thousands):

1 unchanged sentence

Foreign exchange rate changes ( 1,048 )

Balance as of April 2, 2023 $ 242,041

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Balance as of July 2, 2023 $ 241,582

Intangible Assets

5 unchanged sentences

Non-compete agreements 340 ( 205 ) 135

Balance as of April 2, 2023 $ 34,195 $ ( 22,723 ) $ 11,472

Balance as of July 2, 2023 $ 34,195 $ ( 23,466 ) $ 10,729

Value Accumulated

4 unchanged sentences

Balance as of December 31, 2022 $ 34,195 $ ( 21,781 ) $ 12,414

As of April 2, 2023, estimated future amortization expense related to intangible assets was as follows (in thousands):

As of July 2, 2023, estimated future amortization expense related to intangible assets was as follows (in thousands):

Year Ended December 31, Amount

1 unchanged sentence

Thereafter 543

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Warranty Obligations

8 unchanged sentences

Fulfillment of warranty obligations ( 1,537 )

Balance as of April 2, 2023 $ 4,074

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Balance as of July 2, 2023 $ 4,001

Commitments and Contingencies

As of April 2, 2023, the Company had outstanding purchase orders totaling $ 47,486,000 to procure inventory from various vendors.

As of July 2, 2023, the Company had outstanding purchase orders totaling $ 40,388,000 to procure inventory from various vendors.

Certain of these purchase orders may be canceled by the Company, subject to cancellation penalties.

These purchase commitments relate primarily to expected sales in the next twelve months.

A significant portion of the Company's outstanding inventory purchase orders as of April 2, 2023, as well as additional preauthorized commitments to procure strategic components based on the Company's expected customer demand, are placed with the Company's primary contract manufacturer for the Company's assembled products.

A significant portion of the Company's outstanding inventory purchase orders as of July 2, 2023, as well as additional preauthorized commitments to procure strategic components based on the Company's expected customer demand, are placed with the Company's primary contract manufacturer for the Company's assembled products.

The Company has the obligation to purchase any non-cancelable and non-returnable components that have been purchased by the contract manufacturer with the Company's preauthorization, when these components have not been consumed within the period defined in the terms of the Company's agreement with this contract manufacturer.

8 unchanged sentences

These economic hedges are not designated as hedging instruments for hedge accounting treatment.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company had the following outstanding forward contracts (in thousands):

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

Currency Notional

2 unchanged sentences

Euro 32,500 $ 35,371 60,000 $ 64,174

Chinese Renminbi 70,000 9,665 55,000 7,619

Mexican Peso 120,000 6,979 185,000 9,480

Hungarian Forint 1,950,000 5,671 1,590,000 4,238

Japanese Yen 600,000 4,536 700,000 5,281

British Pound 3,540 4,467 3,445 4,161

Japanese Yen 600,000 4,159 700,000 5,281

Canadian Dollar 1,750 1,321 1,730 1,278

Chinese Renminbi — — 55,000 7,619

Swiss Franc — — 1,120 1,218

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Information regarding the fair value of the outstanding forward contracts was as follows (in thousands):

1 unchanged sentence

Balance Fair Value Balance Fair Value

Location April 2, 2023 December 31, 2022 Sheet

Location April 2, 2023 December 31, 2022

Location July 2, 2023 December 31, 2022 Sheet

Location July 2, 2023 December 31, 2022

Derivatives Not Designated as Hedging Instruments:

2 unchanged sentences

Asset Derivatives Liability Derivatives

April 2, 2023 December 31, 2022 April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022 July 2, 2023 December 31, 2022

Gross amounts of recognized assets $ 118 $ 27 Gross amounts of recognized liabilities $ 31 $ 479

2 unchanged sentences

Information regarding the effect of derivative instruments on the consolidated financial statements was as follows (in thousands):

Location in Financial Statements Three-months Ended

April 2, 2023 April 3, 2022

Location in Financial Statements Three-months Ended Six-months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Derivatives Not Designated as Hedging Instruments:

4 unchanged sentences

The following table summarizes disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands):

Three-months Ended

April 2, 2023 April 3, 2022

Three-months Ended Six-months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Americas $ 82,297 $ 91,551 $ 162,911 $ 218,210

4 unchanged sentences

The following table summarizes disaggregated revenue information by revenue type (in thousands):

Three-months Ended

April 2, 2023 April 3, 2022

Three-months Ended Six-months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Standard products and services $ 194,944 $ 221,474 $ 385,727 $ 479,354

2 unchanged sentences

Costs to Fulfill a Contract

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 20,219,000 and $ 14,578,000 as of April 2, 2023 and December 31, 2022, respectively.

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $ 18,951,000 and $ 14,578,000 as of July 2, 2023 and December 31, 2022, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities

3 unchanged sentences

Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition.

The following table summarizes the allowance for credit losses activity for the three-month period ended April 2, 2023 (in thousands):

The following table summarizes the allowance for credit losses activity for the six-month period ended July 2, 2023 (in thousands):

Balance as of December 31, 2022 $ 730

2 unchanged sentences

Foreign exchange rate changes ( 1 )

Balance as of April 2, 2023 $ 1,001

Balance as of July 2, 2023 $ 602

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the deferred revenue and customer deposits activity for the three-month period ended April 2, 2023 (in thousands):

The following table summarizes the deferred revenue and customer deposits activity for the six-month period ended July 2, 2023 (in thousands):

Balance as of December 31, 2022 $ 40,787

3 unchanged sentences

Foreign exchange rate changes ( 708 )

Balance as of April 2, 2023 $ 57,805

Balance as of July 2, 2023 $ 43,439

As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations, as our contracts have an original expected duration of less than one year.

1 unchanged sentence

The Company’s stock-based awards that result in compensation expense consist of stock options, restricted stock units ("RSUs"), and performance restricted stock units ("PRSUs").

As of April 2, 2023, the Company had 12,116,000 shares available for grant under its stock plans.

In May 2023, the shareholders of the Company approved the Cognex Corporation 2023 Stock Option and Incentive Plan (the “2023 Plan”).

The 2023 Plan permits awards of stock options (both incentive and non-qualified options), stock appreciation rights, RSUs, and PRSUs.

Up to 8,100,000 shares of common stock (subject to adjustment in the event of stock splits and other similar events) may be issued pursuant to awards granted under the 2023 Plan.

In connection with the approval of the 2023 Plan, no further awards will be made under the Cognex Corporation 2001 General Stock Option Plan, as amended and restated (the “2001 Plan”), and the Cognex Corporation 2007 Stock Option and Incentive Plan, as amended and restated (the “2007 Plan”).

With the approval of the 2023 Plan, the 10,610,800 shares of common stock subject to awards granted under the 2001 Plan and the 2007 Plan that were outstanding as of May 3, 2023 may become eligible for issuance under the 2023 Plan if such awards are forfeited, cancelled or otherwise terminated (other than by exercise) (the “Carryover Shares”).

As of July 2, 2023, forfeits, cancellations, and other terminations from the 2001 Plan and the 2007 Plan have resulted in 147,585 Carryover Shares, raising the authorized total shares that may be issued under the 2023 Plan to 8,247,585 .

As of July 2, 2023, the Company had 8,183,000 shares available for grant under its stock plans.

Stock options are granted with an exercise price equal to the market value of the Company’s common stock at the grant date and generally vest over four or five years based upon continuous service and expire ten years from the grant date.

2 unchanged sentences

Participants are not entitled to dividends on stock options, RSUs, or PRSUs.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Stock Options

The following table summarizes the Company’s stock option activity for the three-month period ended April 2, 2023:

The following table summarizes the Company’s stock option activity for the six-month period ended July 2, 2023:

(in thousands) Weighted-

3 unchanged sentences

Outstanding as of December 31, 2022

8,467 $ 51.56

Granted 1,266 47.28

1 unchanged sentence

Forfeited or expired ( 515 ) 58.22

Outstanding as of April 2, 2023 9,308 $ 51.16 6.53 $ 37,312

Exercisable as of April 2, 2023 5,433 $ 47.45 5.12 $ 33,531

Options vested or expected to vest as of April 2, 2023 (1) 8,735 $ 50.90 6.37 $ 36,643

Outstanding as of July 2, 2023

8,919 $ 51.16 6.31 $ 70,411

Exercisable as of July 2, 2023

5,213 $ 47.62 4.90 $ 52,631

Options vested or expected to vest as of July 2, 2023 (1) 8,416 $ 50.95 6.17 $ 67,670

(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future.

Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The fair values of stock options granted in each period presented were estimated using the following weighted-average assumptions:

Three-months Ended

April 2, 2023 April 3, 2022

Three-months Ended Six-months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Risk-free rate 3.5 % 1.9 % 3.9 % 1.9 %

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The expected term was derived from the binomial lattice model from the impact of events that trigger exercises over time.

The weighted-average grant-date fair values of stock options granted during the three-month periods ended April 2, 2023 and April 3, 2022 were $ 17.79 and $ 22.45 , respectively.

The total intrinsic values of stock options exercised for the three-month periods ended April 2, 2023 and April 3, 2022 were $ 3,439,000 and $ 2,615,000 , respectively.

The total fair values of stock options vested for the three-month periods ended April 2, 2023 and April 3, 2022 were $ 31,181,000 and $ 25,535,000 , respectively.

The weighted-average grant-date fair values of stock options granted during the three-month and six-month periods ended July 2, 2023 were $ 20.09 and $ 17.86 , respectively, and during the three-month and six-month periods ended July 3, 2022 were $ 18.21 and $ 22.33 , respectively.

The total intrinsic values of stock options exercised for the three-month and six-month periods ended July 2, 2023 were $ 2,123,000 and $ 5,562,000 , respectively, and for the three-month and six-month periods ended July 3, 2022 were $ 934,000 and $ 3,099,000 , respectively.

The total fair values of stock options vested for the three-month and

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

six-month periods ended July 2, 2023 were $ 892,000 and $ 32,073,000 , respectively, and for the three-month and six-month periods ended July 3, 2022 were $ 1,188,000 and $ 26,723,000 , respectively.

Restricted Stock Units (RSUs)

The following table summarizes the Company's RSUs activity for the three-month period ended April 2, 2023:

The following table summarizes the Company's RSUs activity for the six-month period ended July 2, 2023:

(in thousands) Weighted-Average

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Nonvested as of December 31, 2022

1,269 $ 61.74

Granted 663 46.86

1 unchanged sentence

Forfeited or expired ( 65 ) 61.52

Nonvested as of April 2, 2023 1,419 $ 55.69

Nonvested as of July 2, 2023

1,385 $ 55.44

The fair value of RSUs is determined based on the observable market price of the Company's stock on the grant date less the present value of expected future dividends.

The weighted-average grant-date fair values of RSUs granted during the three-month periods ended April 2, 2023 and April 3, 2022 were $ 46.61 and $ 63.96 , respectively.

There were 453,000 and 54,000 RSUs that vested during the three-month periods ended April 2, 2023 and April 3, 2022, respectively.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The weighted-average grant-date fair values of RSUs granted during the three-month and six-month periods ended July 2, 2023 were $ 52.53 and $ 46.86 , respectively, and during the three-month and six-month periods ended July 3, 2022 were $ 45.25 and $ 63.37 , respectively.

There were 29,000 and 482,000 RSUs that vested during the three-month and six-month periods ended July 2, 2023, respectively, and 20,000 and 74,000 that vested during the three-month and six-month periods ended July 3, 2022, respectively.

Performance Restricted Stock Units (PRSUs)

The following table summarizes the Company's PRSUs activity for the three-month period ended April 2, 2023:

The following table summarizes the Company's PRSUs activity for the six-month period ended July 2, 2023:

(in thousands) Weighted-Average

3 unchanged sentences

Forfeited or expired — —

Nonvested as of April 2, 2023 79 $ 52.23

Nonvested as of July 2, 2023

The fair value of PRSUs is calculated using the Monte Carlo simulation model to estimate the probability of satisfying the service and market conditions stipulated in the award grant.

There were 46,000 and 33,000 PRSUs granted during the three-month periods ended April 2, 2023 and April 3, 2022, respectively.

No PRSUs vested during the three-month periods ended April 2, 2023 and April 3, 2022.

There were 0 and 46,000 PRSUs granted during the three-month and six-month periods ended July 2, 2023, respectively, and 0 and 33,000 PRSUs granted during the three-month and six-month periods ended July 3, 2022, respectively.

No PRSUs vested during the three-month and six-month periods ended July 2, 2023 and July 3, 2022.

Stock-Based Compensation Expense

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This resulted in a decrease to compensation expense of $ 234,000 in 2023 and an increase to compensation expense of $ 1,536,000 in 2022.

As of April 2, 2023, total unrecognized compensation expense, net of estimated forfeitures, related to non-vested equity awards, including stock options, RSUs, and PRSUs, was $ 86,841,000 , which is expected to be recognized over a weighted-average period of 2.4 years.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended April 2, 2023 were $ 16,579,000 and $ 2,308,000 , respectively.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended April 3, 2022 were $ 15,056,000 and $ 2,319,000 , respectively.

No compensation expense was capitalized as of April 2, 2023 or December 31, 2022.

As of July 2, 2023, total unrecognized compensation expense, net of estimated forfeitures, related to non-vested equity awards, including stock options, RSUs, and PRSUs, was $ 76,162,000 , which is expected to be recognized over a weighted-average period of 2.2 years.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended July 2, 2023 were $ 12,574,000 and $ 1,892,000 , respectively, and for the six-month period ended July 2, 2023 were $ 29,153,000 and $ 4,200,000 , respectively.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended July 3, 2022 were $ 12,997,000 and $ 2,044,000 , respectively, and for the six-month period ended July 3, 2022 were $ 28,053,000 and $ 4,363,000 , respectively.

No compensation expense was capitalized as of July 2, 2023 or December 31, 2022.

The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands):

Three-months Ended

April 2, 2023 April 3, 2022

Three-months Ended Six-months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Cost of revenue $ 441 $ 482 $ 1,062 $ 1,045

2 unchanged sentences

$ 12,574 $ 12,997 $ 29,153 $ 28,053

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Stock Repurchase Program

On March 12, 2020, the Company's Board of Directors authorized the repurchase of $ 200,000,000 of the Company's common stock.

Under this March 2020 program, in addition to repurchases made in prior years, the Company repurchased 1,677,000 shares at a cost of $ 117,000,000 during the three-month period ended April 3, 2022, which completed purchases under this program.

Under this March 2020 program, in addition to repurchases made in prior years, the Company repurchased 1,677,000 shares at a cost of $ 117,000,000 during the six-month period ended July 3, 2022, which completed purchases under this program.

On March 3, 2022, the Company's Board of Directors authorized the repurchase of an additional $ 500,000,000 of the Company's common stock.

Under this March 2022 program, the Company repurchased 202,000 shares at a cost of $ 13,405,000 during the three-month period ended April 3, 2022.

Under this same March 2022 program, in addition to purchases made during the prior year, the Company repurchased 479,000 shares at a total cost of $ 24,178,000 during the three-month period ended April 2, 2023 leaving a remaining balance of $ 388,508,000 as of April 2, 2023.

Under this March 2022 program, the Company repurchased 590,000 shares at a cost of $ 37,317,000 during the six-month period ended July 3, 2022.

Under this same March 2022 program, in addition to repurchases made in the prior year, the Company repurchased 966,000 shares at a total cost of $ 49,163,000 during the six-month period ended July 2, 2023 leaving a remaining balance of $ 363,523,000 as of July 2, 2023.

The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements.

The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

The Company's effective tax rate was 2 % for the three-month period ended April 2, 2023, and 23 % for the three-month period ended April 3, 2022.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company's effective tax rate was 15 % and 12 % for the three-month and six-month periods ended July 2, 2023, respectively, and 9 % and 17 % for the three-month and six-month periods ended July 3, 2022, respectively.

The Company has defined its major tax jurisdictions as the United States, Ireland, China, and Korea, and within the United States, Massachusetts.

1 unchanged sentence

federal statutory corporate tax rate of 21 %.

These foreign tax rate differences resulted in a net decrease to the effective tax rate for both the three-month periods ended April 2, 2023 and April 3, 2022.

The Company recorded a net discrete tax benefit totaling $ 3,594,000 for the three-month period ended April 2, 2023, and a net discrete tax expense totaling $ 6,338,000 for the same period in 2022.

Discrete tax items for the three-month period ended April 2, 2023 included (1) an increase in tax expense of $ 1,068,000 related to stock-based compensation;

(2) a decrease in tax expense of $ 2,292,000 for releasing tax reserves on state tax credits;

These foreign tax rate differences resulted in a net decrease to the effective tax rate for both the three-month and six-month periods ended July 2, 2023 and July 3, 2022.

The Company recorded a net discrete tax expense totaling $ 399,000 and a net discrete tax benefit totaling $ 3,195,000 for the three-month and six-month periods ended July 2, 2023, and a net discrete tax benefit totaling $ 2,352,000 and a net discrete tax expense totaling $ 3,986,000 for the same periods in 2022.

Discrete tax items for the six-month period ended July 2, 2023 included (1) an increase in tax expense of $ 1,766,000 related to stock-based compensation;

(2) a net decrease in tax expense of $ 3,051,000 due primarily to the release of tax reserves on state tax credits and foreign audit settlements;

(3) a decrease in tax expense of $ 2,198,000 for adjustments to certain deferred tax assets;

and (4) a decrease in tax expense of $ 172,000 for return-to-provision adjustments.

Discrete tax items for the three-month period ended April 3, 2022 included (1) an increase in tax expense of $ 1,417,000 arising from an Internal Revenue Service (IRS) audit;

(2) an increase in tax expense of $ 1,734,000 to establish a full valuation allowance against deferred tax assets related to foreign tax credits;

and (4) a net increase in tax expense of $ 288,000 for return-to-provision adjustments.

Discrete tax items for the six-month period ended July 3, 2022 included (1) an increase in tax expense of $ 176,000 related to stock-based compensation;

(2) a decrease in tax expense of $ 1,577,000 arising from audit settlements;

(3) an increase in tax expense of $ 2,316,000 to establish a reserve against certain deferred tax assets;

and (4) an increase in tax expense of $ 3,071,000 consisting primarily of transfer pricing and return-to-provision adjustments.

Excluding the impact of these discrete tax items, the Company’s effective tax rate was 16 % for both the three-month periods ended April 2, 2023 and April 3, 2022.

The Company’s reserve for income taxes, including gross interest and penalties, was $ 20,030,000 as of April 2, 2023, which was classified as a non-current liability.

The Company’s reserve for income taxes, including gross interest and penalties, was $ 19,239,000 as of July 2, 2023, which was classified as a non-current liability.

If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period.

Within the United States, the tax years 2019 through 2021 remain open to examination by the IRS, and 2018 through 2021 remain open to examination by various state tax authorities.

The Company is currently under audit by the state of Massachusetts for the years 2020 and 2021.

The tax years 2017 through 2022 remain open to examination by various taxing authorities in other jurisdictions in which the Company operates.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The tax years 2017 through 2022 remain open to examination by various international taxing authorities in other jurisdictions in which the Company operates.

Weighted-Average Shares

Weighted-average shares were calculated as follows (in thousands):

Three-months Ended

April 2, 2023 April 3, 2022

Three-months Ended Six-months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

Basic weighted-average common shares outstanding 172,429 173,507 172,527 173,830

1 unchanged sentence

Weighted-average common and common-equivalent shares outstanding 173,622 174,993 173,791 175,874

Stock options to purchase 6,515,000 and 1,282,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month periods ended April 2, 2023 and April 3, 2022, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

Restricted stock units totaling 10,000 and 20,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month periods ended April 2, 2023 and April 3, 2022, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

No PRSUs were excluded in the calculation of dilutive net income per share for the three-month periods ended April 2, 2023 and April 3, 2022, as PRSUs were not anti-dilutive on a weighted-average basis.

Stock options to purchase 6,890,000 and 6,713,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and six-month periods ended July 2, 2023, respectively, and 4,048,000 and 1,818,000 for the same periods in 2022, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

Restricted stock units totaling 3,000 and 1,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month and six-month periods ended July 2, 2023, respectively, and 480,000 and 21,000 for the same periods in 2022, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

No PRSUs were excluded in the calculation of dilutive net income per share for the three-month and six-month periods ended July 2, 2023, as PRSUs were not anti-dilutive on a weighted-average basis.

PRSUs totaling 33,000 and 0 shares of common stock, on a weighted-average basis, were outstanding during the three-month and six-month periods ended July 3, 2022, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive .

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Loss (Recovery) from Fire

2 unchanged sentences

There was no significant damage to the Company's production equipment.

As a result of the fire, the Company recorded $ 48,339,000 in gross losses in 2022, primarily related to Cognex-owned inventory that was destroyed or deemed to have a net realizable value of zero, and prepayments related to Cognex-designated components that were owned by the contract manufacturer .

Gross losses were reduced by insurance proceeds received from the Company’s insurance carrier of $ 27,560,000 in the fourth quarter of 2022.

Subsequent to the April 2, 2023 balance sheet date, but prior to the date of financial statement issuance, the Company received insurance proceeds of $ 2,500,000 related to a business interruption claim associated with the fire from the Company's insurance carrier.

In the second quarter of 2023, this recovery amount will be presented in the caption “Loss (recovery) from fire” on the Consolidated Statements of Operations.

As of April 2, 2023 and through the date of financial statement issuance, management cannot yet estimate additional recoveries that could be available from the contract manufacturer.

Since the date of the fire, the Company has worked with the contract manufacturer to resume production, maintain standards of product quality, and replenish inventories destroyed by the fire.

The Company has also been working to ramp up an additional contract manufacturer to further mitigate risk, diversify the supply chain, and expand production capacity.

During the three-month period ended July 3, 2022, the Company recorded a net loss related to the fire of $ 17,403,000 , consisting primarily of losses from inventories and other assets of $ 44,903,000 , partially offset by an estimated insurance recovery of $ 27,500,000 .

The net loss is presented in the caption “Loss (recovery) from fire” on the Consolidated Statements of Operations.

The Company received insurance proceeds of $ 27,560,000 from the Company's insurance carrier in the fourth quarter of 2022, and gross losses recorded during 2022 related to the fire were further reduced by the proceeds received in excess of the original estimated insurance recovery.

During the three-month period ended July 2, 2023, the Company recorded a recovery related to the fire of $ 2,500,000 for proceeds received from the Company's insurance carrier in relation to a business interruption claim.

This recovery amount is presented in the caption “Loss (recovery) from fire” on the Consolidated Statements of Operations.

As of July 2, 2023 and through the date of financial statement issuance, management cannot yet estimate additional recoveries that could be available from the contract manufacturer.

Any future, additional recoveries in excess of recognized losses will be treated as gain contingencies and will be recognized when the gain is realized or realizable.

4 unchanged sentences

As of December 31, 2022, the majority of these restructuring actions were completed.

No additional charges were recorded during the three-month period ended April 2, 2023, or are expected to be incurred in future periods in relation to this restructuring plan.

No additional charges were recorded during the three-month and six-month periods ended July 2, 2023, or are expected to be incurred in future periods in relation to this restructuring plan.

The following table summarizes the activity in the Company’s restructuring reserve related to these restructuring activities, which is included in “Accrued expenses” on the Consolidated Balance Sheets (in thousands):

3 unchanged sentences

Foreign exchange rate changes 9 1 10

Balance as of April 2, 2023 $ 838 $ 56 $ 894

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Balance as of July 2, 2023

$ 270 $ 28 $ 298

Subsequent Events

On May 4, 2023, the Company’s Board of Directors declared a cash dividend of $ 0.07 per share.

The dividend is payable on June 2, 2023 to all shareholders of record as of the close of business on May 19, 2023.

On August 3, 2023, the Company’s Board of Directors declared a cash dividend of $ 0.07 per share.

The dividend is payable on September 1, 2023 to all shareholders of record as of the close of business on August 18, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements