What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-02-13 compared with 2024-02-15 · 92 added, 95 removed, 77 unchanged (71% of the section changed)

Cognex Corporation (“the Company” or “Cognex”) invents and commercializes technologies that address some of the most critical manufacturing and distribution challenges.

Founded in 1981, Cognex Corporation (“the Company” or “Cognex”) invents and commercializes technologies that address some of the most critical manufacturing and distribution challenges.

We are a leading global provider of machine vision products and solutions that improve efficiency and quality in a wide range of businesses across attractive industrial end markets.

Our solutions blend physical products and software to capture and analyze visual information, allowing for the automation of manufacturing and distribution tasks for customers worldwide.

Machine vision products are used to automate the manufacturing or distribution and tracking of discrete items, such as mobile phones, electric vehicle batteries, and e-commerce packages, by locating, identifying, inspecting, and measuring them.

Machine vision products are used to automate the manufacturing or distribution and tracking of discrete items, such as mobile phones, automotive components, and e-commerce packages, by locating, identifying, inspecting, and measuring them.

Machine vision is particularly valuable for applications in which human vision is inadequate to meet requirements for size, accuracy, or speed, or in instances where substantial cost savings are obtained through the reduction of labor or improved product quality.

Cognex operates in one segment.

We offer a variety of machine vision products that have similar economic characteristics and are distributed by the same sales channels to the same types of customers.

Cognex sells to customers in nearly all industries in which discrete items are manufactured on an assembly line or moved through a distribution center.

Our largest industries by revenue are the automotive, logistics, and consumer electronics industries, which combined represented approximately 65% of our total revenue in 2023.

Cognex was incorporated in Massachusetts in 1981.

Cognex sells to customers in nearly all industries in which discrete items are manufactured on an assembly line or moved through a distribution center or warehouse.

Our largest industries by revenue are the logistics, automotive, and consumer electronics industries, which combined represented approximately 60% of our total revenue in 2024.

Our Industry and Market Opportunity

Machine vision is used in a variety of industries where technology is widely recognized as an important component of automated production, distribution, and quality assurance.

Virtually every manufacturer or logistics provider can achieve better quality and efficiency by using machine vision.

This results in a broad base of customers across a variety of industries, including automotive, logistics, consumer electronics, medical-related, semiconductor, consumer products, and food and beverage.

Cognex is one of the leading machine vision companies in the world.

Our competitors include other vendors of machine vision systems, controllers, and components;

manufacturers of image processing systems, sensors, and components;

and system integrators.

We also compete with internal engineering departments of current or prospective customers, as well as open-source tools available for free from various companies.

Cognex’s ability to compete depends on our ability to design new products and functionality that meet evolving customer requirements, and then to manufacture and sell those high-quality products in a timely manner.

The primary competitive factors affecting the choice of a machine vision system include product functionality and performance, ease of use, vendor reputation, price, and post-sales support.

The importance of each of these factors varies depending on the specific needs of the customer.

Our Business Strategies

Expansion of market position

Our goal is to expand our position as a leading worldwide machine vision provider by growing in our core markets, as well as expanding into new markets and with new customers.

We continue to invest in our core markets, such as automotive, logistics, and consumer electronics where we are a leading provider of vision and ID products for factory and warehouse automation.

Within these markets, we are

Table of Content

making significant investments to focus on what we believe to be the fastest-growing applications and use cases.

In the logistics market, we are moving beyond barcode reading into more complex applications in distribution centers and parcel and post warehouses.

In the automotive market, we are developing new solutions for fast-growing electric vehicle and battery manufacturers and suppliers.

We reach a broad base of customers through our worldwide direct sales force that sells primarily to large, strategic customers, as well as through our network of distributors and integrators that sell primarily to smaller customers who may be more geographically remote or may require supplemental technical support or integration assistance.

Our “Emerging Customer” sales initiative is expanding our sales force to reach customers new to factory automation or new to Cognex, who have yet to fully benefit from all that machine vision can offer.

We believe these potential customers are increasingly looking for automation solutions that are easy to implement, easy to use, and provide the best technology.

We expect our Emerging Customer strategy to broaden our reach, increase penetration, and further diversify our customer base.

Growth through innovation

We invest heavily in research and development to maintain our position as a technology leader in machine vision.

We invest in technology that addresses the most challenging vision applications, such as our deep learning vision software that solves complex applications with unpredictable defects and deviations.

We also invest in technology that makes vision easier to use and more affordable, and therefore, available to a broader base of customers, such as our vision sensor products that enable customers with less technical capabilities to use machine vision while minimizing installation and applications support.

Inorganic growth

We plan to drive inorganic growth through expansion in adjacent markets.

We are focusing specifically on markets in which we expect our products and solutions, application expertise, and customer and industry relationships to enable us to provide significant value to end-users.

We seek out selective opportunities in new applications and markets through the acquisition of businesses and technologies that are synergistic with our core markets.

We are selective in choosing businesses and technologies that we believe will enhance long-term growth and profitability.

In the fourth quarter of 2023, we acquired Moritex Corporation, a global provider of premium optical components based in Japan.

With an enterprise value of approximately $270 million, this was Cognex's largest acquisition to-date.

We plan to continue to seek acquisition opportunities to expand our product lines, customer base, distribution network, and technical talent.

Sustainable profitability

We prioritize choosing growth opportunities that we believe will maintain our gross margin percentages, which have averaged in the low to mid-70 percent range in the past several years and reflect the value that we believe our customers place on our innovative products.

Our relatively high gross margins have the potential to provide us with strong incremental profit margins, leading to high operating leverage in our financial model.

Our strong and unique corporate culture reinforces our values of customer first and innovation, and enables us to attract and retain smart, enthusiastic, and creative talent who are motivated to solve the most challenging vision tasks for customers.

This results in a broad base of customers across a variety of industries, including logistics, automotive, consumer electronics, semiconductor, consumer products, medical-related, and food and beverage.

Our End Markets

The logistics industry demands high-speed, efficient throughput combined with end-to-end supply chain traceability.

Consumers expect fast and cost-effective fulfillment.

Retail distributors, e-commerce platforms, and parcel processing customers face an ongoing tight labor market, increased demand, and increased costs.

To address these challenges, organizations are increasingly deploying automated traceability , dimensioning , and detection solutions featuring Cognex machine vision, including barcode reading and AI-enabled vision technology, either directly or with the help of partners, such as an original equipment manufacturer ("OEM"), machine builder, or system integrator.

We believe our e-commerce logistics business is differentiated by the high performance of our barcode reading and that potential growth will be driven by retailers investing in online fulfillment.

From an automation perspective, the logistics industry is still in its early stages with a large reliance on human labor and a low rate of robotic automation.

Today, most applications in logistics are centered around barcode reading.

Beyond barcode reading, we expect vision applications in logistics to grow quickly and become a more substantial part of our business.

Vision applications include tasks such as inspecting packages for damage, object and symbol recognition, and dimensioning.

Geographically, our logistics business started primarily in the United States, but has diversified into Europe and Asia, where we believe customers are beginning to catch up with the United States in logistics automation technology and are reducing share with local incumbent suppliers.

Leading e-commerce players invested significantly in late 2020 through early 2022, then took a post-pandemic “time out” to absorb

Table of Content

excess capacity from early 2022 into 2023, and began investing at a steadier pace in 2024.

We believe that logistics has the potential to be our highest-growth end market over the mid to long-term.

The automotive market has been one of our largest markets for the past twenty years.

2 unchanged sentences

For example, innovations in safety, driver assist, and entertainment features increase the number of items to be placed, tracked, measured, and inspected by machine vision.

We also anticipate a multi-year wave of investment in Electric Vehicle (“EV”) manufacturing equipment, particularly related to battery manufacturing and inspection.

We also anticipate a multi-year wave of investment in hybrid and electric vehicle (“EV”) manufacturing equipment, particularly related to battery manufacturing and inspection.

Cognex works closely with the major EV battery manufacturers who we believe produce the majority of the world’s automotive batteries.

1 unchanged sentence

We expect our existing relationships and proven offerings to position us to capture a significant share of this growth.

These anticipated trends may offset expected reductions in traditional powertrain investments on internal combustion engine vehicles, leading to growth in the automotive market.

Table of Content

We are also well positioned to continue to support traditional powertrain investments on internal combustion engine vehicles, supporting long-term growth in the automotive market.

Consumer Electronics

Today, electronic components and devices are difficult to manufacture without machine vision.

Machine vision has made it possible to achieve the density of today’s integrated circuits and to manufacture them cost-effectively.

Electronics producers and leading OEMs rely on Cognex machine vision , including AI-enabled vision technology, 3D vision , and barcode reading, to build, inspect, and track semiconductors, printed circuit boards, electronic hardware, and consumer devices.

We anticipate major investments in new generations of consumer electronics.

A significant amount of visual inspection in consumer electronics is still done manually by humans.

As labor becomes more costly and increasingly scarcer, these customers are looking for productivity initiatives to automate these processes.

We also expect leading companies in this space to continue to grow based on new technologies that we expect to succeed and build on the smartphone.

A significant amount of visual inspection in consumer electronics is still performed manually by humans.

As labor becomes more costly and scarce, these customers are looking for productivity initiatives to automate their processes.

We also expect leading companies in this space to continue to grow based on new technologies and the devices that incorporate them.

We believe new devices will be difficult to manufacture on a large scale, and therefore will require more innovative vision products in that process.

Cognex has close relationships with the largest and most sophisticated companies in the consumer electronics market, and we expect to be a partner of choice as they bring new technologies to market.

We believe our e-commerce logistics business is differentiated by the high performance of our bar-code reading and that potential growth will be driven by retailers investing in online fulfillment.

From an automation perspective, the logistics industry is still in its early stages with a large reliance on human labor and a low rate of robotic automation.

Beyond barcode reading, we expect vision applications in logistics to grow quickly and become a more substantial business for us.

Vision applications include tasks such as inspecting packages for damage, object and symbol recognition, and dimensioning.

Geographically, our current logistics business is primarily within the United States, but, over the long term, we expect to realize the highest rates of growth in Europe and Asia, where we believe customers are beginning to catch up with the United States in logistics automation technology and are moving away from local incumbent suppliers.

Leading e-commerce players have taken a post-pandemic “time out” to absorb excess capacity since early 2022, but we currently continue to expect logistics to be our highest-growth end market over the mid to long-term.

Medical-Related

Cognex has an established customer base of life science equipment suppliers.

Our products are specified in over 100 different machine designs, many of which are in the process of obtaining regulatory approval.

As they launch, we believe they will provide the opportunity to deliver many years of recurring revenue.

Applications in this market include lab automation and medical device inspection applications.

During the COVID pandemic, we saw demand for machine vision grow from manufacturers of diagnostic tests, vaccines, and protective equipment.

Cognex has close relationships with the largest and most sophisticated companies in the consumer electronics market, and we expect to be a partner of choice as they bring new products to market.

Semiconductor

Machine vision has made it possible to achieve the density in today’s integrated circuits and to manufacture them cost-effectively.

Semiconductor manufacturers rely on Cognex machine vision, including AI-based technology, to ensure precise alignment of wafers during masking and etching processes, increase traceability of wafers and die as they move through the front and back-end processes, and improve product quality through advanced inspection procedures.

As AI continues to drive demand for high-end logic process chips with our OEM customers, the overall semiconductor market has the potential for outsized growth in the coming years.

The number of end markets that can benefit from machine vision applications is expanding.

Other end market uses of Cognex machine vision include semiconductor manufacturers identifying defects, regulated manufacturers reducing counterfeiting, food producers improving food safety, and manufacturers using 3D measurement for robotic guidance.

Other end market uses of Cognex machine vision include regulated manufacturers reducing counterfeiting, food producers improving food safety, and manufacturers using 3D measurement for robotic guidance.

Our Business Strategies

Historically, Cognex has been a leader in providing the most powerful machine vision technology to the most sophisticated customers and solving their most challenging automation problems.

There are thousands of such customers and we believe our market share with these customers is high.

There is also a much larger segment of customers with less complex applications and less automation engineering capacity who are looking for more standardized products that are easy to implement and easy to use.

Our goal is to expand our business with these customers by offering tailored products and increasing our sales coverage.

Table of Content

Growth through innovation

We invest heavily in research and development to maintain our position as a technology leader in machine vision.

We continue to introduce products embedded with artificial intelligence ("AI") technology that augments rule-based machine vision with image-based analysis.

We invest in technology that makes vision easier to use and more affordable, and therefore, available to a broader base of customers, such as our edge learning products that enable customers with less technical capabilities to use machine vision while minimizing installation and applications support.

We also continue to invest in technology that addresses the most challenging vision applications, such as our deep learning vision software that solves complex applications with unpredictable defects and deviations.

Increase of sales coverage

We reach a broad base of customers through our worldwide direct sales force that sells primarily to large customers, as well as through our network of distributors and integrators that sell primarily to smaller customers who may be more geographically remote or may require integration assistance or supplemental technical support.

In 2023, we began investing more aggressively to expand our direct sales force to reach customers new to factory automation or new to Cognex, who have yet to fully benefit from all that machine vision can offer.

We are doing so by adding a new sales engineer profile to our team, ambitious recent college graduates, and are investing in their onboarding and training.

These entry-level sales personnel are enabling us to broaden and deepen our sales coverage, make many more, shorter sales calls, and reach more customers.

We expect this sales investment to expand our reach, increase penetration, and further diversify our customer base.

Expansion of market position

We continue to invest in our core markets, such as logistics, automotive, and consumer electronics, where we are a leading provider of vision and ID products for warehouse and factory automation.

Within these markets, we are making significant investments to focus on what we believe to be the fastest-growing applications and use cases.

In the logistics market for example, we are moving beyond barcode reading into more complex applications in distribution centers and parcel and post warehouses.

Inorganic growth

We plan to drive inorganic growth through deeper penetration of our served machine vision market and expansion in adjacent markets.

We seek out selective opportunities in new applications and markets through the acquisition of businesses and technologies that are synergistic with our core markets.

We are selective in choosing businesses and technologies that we believe will enhance long-term growth and profitability.

In the fourth quarter of 2023, we acquired Moritex Corporation, a global provider of premium optical components based in Japan.

With an enterprise value of approximately $270 million, this was Cognex's largest acquisition to-date.

We plan to continue to seek high-return, EPS-accretive acquisition opportunities to expand our product lines, customer base, distribution network, and technical talent.

Products and Technology

Cognex offers a full range of machine vision systems and sensors, vision software, and industrial image-based barcode readers designed to meet customer needs at different performance and price points.

Cognex offers a full range of machine vision systems and sensors, vision software, and barcode readers designed to meet customer needs at different performance and price points.

Our products range from deep learning solutions that solve complex applications with unpredictable defects and deviations, to lower-cost vision sensors that conduct simple presence/absence inspections.

Our products have a variety of physical forms, depending on the user's needs.

For example, customers can purchase vision software to use with their own camera and processor, or they can purchase a standalone unit that combines camera, processor, and software into a single package.

For example, customers can purchase vision software to use with their own camera and processor, or they can purchase a standalone system that combines imager, processor, and software into a single package.

Vision Systems and Sensors

2 unchanged sentences

In-Sight® vision systems and sensors include our 2D and 3D vision systems, as well as our In-Sight SnAPP™ sensor.

These products leverage various forms of artificial intelligence, including rule-based coding, as well as deep learning and edge learning technology leveraging pre-trained models powered by neural networks.

Our product portfolio meets the varying price and performance requirements of our broad base of industrial customers.

These products leverage various forms of AI, including rule-based coding, as well as deep learning and edge learning technology leveraging pre-trained models powered by neural networks.

Our product portfolio meets the

Table of Content

varying price and performance requirements of our broad base of industrial customers.

Our deep learning-based systems automate and solve complex inline inspections that typically require human judgment for defect detection, optical character recognition ("OCR"), assembly verification, or classification.

Similar to our deep learning-based systems, our edge learning-based systems use pre-trained models, but on simpler applications that prioritize ease of use and have a broader appeal with easier and faster implementation and training.

Table of Content

Vision Software

2 unchanged sentences

Its QuickBuild™ prototyping environment allows customers to build complete vision applications with the simplicity of a graphical flowchart-based programming interface.

Industrial Image-Based Barcode Readers

Cognex industrial image-based barcode readers quickly and reliably read 1D, 2D, label-based, and direct part mark (DPM) codes found in nearly every industry including automotive, logistics, consumer products, and medical-related.

Barcode Readers

Cognex industrial image-based barcode readers quickly and reliably read 1D, 2D, label-based, and direct part mark ("DPM") codes found in nearly every industry including logistics, automotive, consumer products, and medical-related.

The DataMan® product line, which includes fixed-mount and handheld models, as well as barcode verifiers, help organizations optimize performance, increase throughput, and control traceability.

2 unchanged sentences

Cameras are available in both area scan and line scan formats to address a wide variety of applications.

Lenses and lighting are also available in both embedded and component formats to provide high-quality image acquisition, including a portfolio of premium optical components that were added to the Company's vision accessory portfolio with the acquisition of Moritex Corporation in the fourth quarter of 2023.

From value solutions to high-performance hardware, Cognex offers industrial cameras, lenses, lighting, vision controllers, frame grabbers, and I/O cards to meet any requirement.

Lenses and lighting are also available in both embedded and component formats to provide high-quality image acquisition, including a range of premium optical components that were added to the Company's vision accessory portfolio with the acquisition of Moritex Corporation in the fourth quarter of 2023.

From value solutions to high-performance hardware, Cognex offers industrial cameras, lenses, lighting, vision controllers, frame grabbers, and I/O cards to meet customer requirements.

Research, Development, and Engineering

7 unchanged sentences

While our intellectual property rights are important to our success, we believe that our business as a whole is not materially dependent on any particular patent, trademark, copyright, or other intellectual property right.

Most of Cognex’s hardware products are manufactured utilizing third-party contractors, whereby the majority of component procurement, system assembly, and initial testing are performed by electronics manufacturing services suppliers.

With the acquisition of Moritex Corporation in the fourth quarter of 2023, Cognex began in-house manufacturing of optical components, such as lenses and lighting.

Cognex’s primary contract manufacturer is located in Indonesia.

Our contract manufacturers use specified components sourced from vendor lists approved by Cognex and assembly/test processes created and controlled by Cognex.

Most of Cognex’s hardware products, including our vision systems, vision sensors, and barcode readers, are manufactured utilizing third-party contractors, whereby the majority of component procurement, system assembly, and initial testing are performed by electronics manufacturing services suppliers.

Cognex’s primary contract manufacturers are located in Indonesia and Malaysia.

We purchase assembled goods from our contract manufacturers, who use specified components sourced from vendor lists approved by Cognex and assembly/test processes created and controlled by Cognex.

After the completion of initial testing, assembled products from our contract manufacturers are routed to our distribution centers where trained Cognex personnel load Cognex software onto the products, provide additional assembly and image alignment as needed, and perform quality control procedures.

Cognex ships finished products for customers located in the Americas from our Southborough, Massachusetts distribution center, for customers located in Europe from our Cork, Ireland distribution center, and for customers located in Asia from our Singapore distribution center that became operational during the fourth quarter of 2023.

Sales Channels and Support Services

Cognex sells its products through a worldwide direct sales force that primarily focuses on the development of strategic accounts which generate or are expected to generate significant sales volume, as well as through a global network of distribution and integration partners.

Our distribution partners provide sales and local support to help Cognex reach the many prospects for our products in factories around the world, and our integration partners are

Cognex manufactures optical components, including our lenses and lighting, at our in-house production plants located in China and Vietnam that are then stocked in our distribution centers.

Cognex ships finished products for customers located in the Americas from our Southborough, Massachusetts distribution center, for

Table of Content

experts in vision and complementary technologies that can provide turnkey solutions for complex automation projects using vision.

customers located in Europe from our Cork, Ireland distribution center, and for customers located in Asia from our Singapore distribution center.

Sales Channels and Support Services

Cognex sells its products through a worldwide direct sales force that primarily focuses on the development of strategic accounts that generate or are expected to generate significant sales volume, as well as through a global network of distribution and integration partners.

Our distribution partners provide sales and local support to help Cognex reach the many prospects for our products in factories around the world, and our integration partners are experts in vision and complementary technologies that can provide turnkey solutions for complex automation projects using vision.

Through each of these channels, sales engineers call directly on targeted accounts, with the assistance of application engineers, and manage the activities of our distribution and integration partners within their territories in order to provide an advantageous sales model for our products.

In 2023, we began ramping up an Emerging Customer sales force that primarily focuses on selling into accounts which are new to machine vision or Cognex.

In 2023, we began investing more aggressively to expand our direct sales force to include entry-level sales personnel to sell our easier-to-deploy and easier-to-use products.

Sales to customers based outside of the United States represented approximately 67% of our total revenue in 2024, with approximately 24% from customers based in Europe, approximately 18% from customers based in Greater China, and approximately 25% from customers based in other regions outside the United States.

2 unchanged sentences

Dollars in other territories, and sales to customers based in other regions are denominated in U.S.

Dollars, Korean Won, Japanese Yen, Mexican Pesos, and Indian Rupee.

Dollars, Japanese Yen, Korean Won, Indian Rupee, and Mexican Pesos.

Cognex’s service offerings represent less than 10% of our total revenue and include maintenance and support, consulting, and training services.

3 unchanged sentences

Training services include a variety of product courses that are available at our offices worldwide, at customer facilities, and online.

Cognex is one of the leading machine vision companies in the world.

Our competitors include other vendors of machine vision systems, controllers, and components;

manufacturers of image processing systems, sensors, and components;

and system integrators.

We also compete with internal engineering departments of current or prospective customers, as well as open-source tools available for free from various companies, including tools using AI.

Human Capital

6 unchanged sentences

Of our 2,914 Cognoids, 1,949 are based outside of the United States.

Culture and Values

We pride ourselves on having a unique culture that exemplifies our motto of Work Hard, Play Hard, Move Fast .

5 unchanged sentences

We believe these efforts align with our stockholders’ long-term interests and better position Cognex to continue to operate as a leader in the machine vision industry.

Diversity, Equity, Inclusion, and Belonging

While we are incredibly proud of our culture, we continue to listen, learn, and grow.

We are excited about the opportunities to continue to build an organization that reflects the best of the world around us.

As a multi-national company where over half our Cognoids live outside the United States, diversity means different things to different groups.

We are building strategies and plans to continue to enhance our diversity, equity, inclusion, and belonging (DEIB) initiatives.

One specific place where this evolution is visible is through the launch of our DEIB Council.

The Council is led by our Chief Culture Officer and is comprised of over thirty volunteer Cognoids representing a broad cross-section of functions, geographies, and backgrounds.

Table of Content

Regulatory Compliance

Cognex’s capital expenditures, earnings, and competitive position are not materially affected by compliance with federal, state, and local environmental provisions, which have been enacted or adopted to regulate the distribution of materials into the environment.

Table of Content

Available Information

2 unchanged sentences

Cognex’s reports filed with, or furnished to, the SEC are also available at the SEC’s website at www.sec.gov.

Cognex has used, and intends to continue to use, its investor relations website as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

Cognex has used, and intends to continue to use, its investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

Information contained on our website is not a part of, or incorporated by reference into, this Annual Report on Form 10-K or in any other document or report that Cognex files with the SEC, and any references to Cognex's website are intended to be inactive textual references only.

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-K

Item 1. Business