What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-02-13 compared with 2024-02-15 · 172 added, 207 removed, 1055 unchanged (26% of the section changed)

19 unchanged sentences

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 13, 2025 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 20 to the consolidated financial statements, the Company has adopted new accounting guidance in 2024 related to the disclosure of segment information in accordance with ASU 2023-07, Segment Reporting (Topic 280).

The adoption was retrospectively applied to 2023 and 2022.

Basis for opinion

11 unchanged sentences

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

1 unchanged sentence

As described further in Notes 1 and 14 to the consolidated financial statements, the Company recognizes revenue from application-specific customer solutions.

For these transactions, revenue is recognized at the point in time when the solution is validated, which is when the Company can objectively determine that the agreed-upon specifications in the contract have been met and the customer will accept the performance obligation in the contract.

For these transactions, revenue is recognized at the point in time when the solution is validated, which is when the Company can reasonably determine that the agreed-upon specifications in the contract have been met and the customer will accept the performance obligation in the contract.

We identified revenue recognition related to application-specific customer solutions as a critical audit matter.

The principal considerations for our determination that revenue recognition related to application-specific customer solutions is a critical audit matter are that evaluating the performance obligations and determining the timing of validation and that the agreed-upon specifications in the contract have been met relies on the use of management judgments and requires a higher degree of auditor judgment in designing, executing and evaluating the results of audit procedures.

Accounting for application-specific customer solutions requires the Company to monitor and evaluate customer contracts on an ongoing basis to determine the point in time at which the solution is validated, the agreed-upon specifications in the contract have been met and revenue can be recognized.

Table of Content

validation and that the agreed-upon specifications in the contract have been met rely on the use of management judgements and require a higher degree of auditor judgment in designing, executing and evaluating the results of audit procedures.

Our audit procedures related to the revenue recognition of application-specific customer solutions included the following, among others.

• We tested the design and operating effectiveness of internal controls related to the monitoring of application-specific customer solutions contracts, determination of validation and the timing of revenue recognition.

• We evaluated management’s significant accounting policies related to these customer contracts, including the determination of the performance obligation, for appropriate revenue recognition based on key terms and provisions.

• We tested the design and operating effectiveness of internal controls related to the monitoring of application-specific customer solution contracts, determination of validation and the timing of revenue recognition.

• For a sample of contracts, we inspected source documents, including the customer contract or purchase order, third-party shipping information, invoice, and evidence of validation or acceptance to evaluate the identification of performance obligations and timing of revenue recognition.

10 unchanged sentences

Cost of revenue 288,721 236,306 284,185

Gross margin 601,241 721,905 759,827

Gross profit 625,794 601,241 721,905

Research, development, and engineering expenses 139,815 139,400 141,133

1 unchanged sentence

Loss (recovery) from fire (Note 22) — ( 8,000 ) 20,779

Restructuring charges (Note 23) — 1,657 —

Restructuring charges — — 1,657

Operating income 115,065 130,702 246,229

113 unchanged sentences

Purchases of property, plant, and equipment ( 15,043 ) ( 23,077 ) ( 19,667 )

Net payments related to business acquisitions ( 257,056 ) ( 5,050 ) —

Net payments related to business acquisitions (Note 21) ( 1,444 ) ( 257,056 ) ( 5,050 )

Net cash provided by (used in) investing activities ( 38,969 ) 32,273 ( 4,454 )

25 unchanged sentences

Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — 182 182

Foreign currency translation adjustment, net of tax of $0 — — — — ( 6,753 ) ( 6,753 )

Foreign currency translation adjustment — — — — ( 4,385 ) ( 4,385 )

Balance as of December 31, 2022 172,631 $ 345 $ 979,167 $ 528,179 $ ( 69,297 ) $ 1,438,394

6 unchanged sentences

Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — 1,954 1,954

Foreign currency translation adjustment, net of tax of $0 — — — — ( 4,385 ) ( 4,385 )

Foreign currency translation adjustment — — — — 11,500 11,500

Balance as of December 31, 2023 171,599 $ 343 $ 1,037,202 $ 512,543 $ ( 45,336 ) $ 1,504,752

6 unchanged sentences

Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — 8 8

Foreign currency translation adjustment, net of tax of $0 — — — — 11,500 11,500

Foreign currency translation adjustment — — — — ( 31,258 ) ( 31,258 )

Balance as of December 31, 2024 170,434 $ 341 $ 1,090,638 $ 499,303 $ ( 72,777 ) $ 1,517,505

9 unchanged sentences

Actual results could differ from those estimates.

Significant estimates and judgments include those related to revenue recognition, income taxes, and business combinations.

Significant estimates and judgments include those related to revenue recognition and income taxes.

Basis of Consolidation

22 unchanged sentences

If the present value of the cash flows expected to be collected from the security is less than the amortized cost basis of the security, then a credit loss exists and an allowance against the security for credit losses is recorded.

The allowance is limited to the amount by which fair value is below amortized cost, recognizing that the investment could

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

allowance is limited to the amount by which fair value is below amortized cost, recognizing that the investment could be sold at fair value.

be sold at fair value.

Credit losses continue to be remeasured in subsequent reporting periods.

23 unchanged sentences

Property, plant, and equipment are stated at cost and depreciated using the straight-line method over the assets’ estimated useful lives.

Buildings’ original useful lives are 39 years, building improvements’ useful lives are ten years , and the useful lives of computer hardware and software, manufacturing test equipment, and furniture and fixtures range from two to ten years .

Buildings’ original useful lives are 39 years, building improvements’ useful lives range from five to ten years , and the useful lives of computer hardware and software, manufacturing test equipment, and furniture and fixtures range from two to ten years .

Land that is leased or granted, as well as leasehold improvements, are depreciated over the shorter of the estimated useful lives or the remaining terms of the leases.

36 unchanged sentences

The lease liability equals the present value of the future cash payments discounted using the Company's incremental borrowing rate.

The Company’s incremental borrowing rate is the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments over a similar term, which, through year ended December 31, 2023, was estimated using the Secured Overnight Financing Rate (SOFR) plus a 2% credit risk spread.

The Company’s incremental borrowing rate is the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments over a similar term which was estimated using the Secured Overnight Financing Rate (SOFR) plus a 2% credit risk spread.

Operating lease expense equals the total cash payments recognized on a straight-line basis over the lease term.

7 unchanged sentences

Factors that management considers in this assessment include general economic and industry conditions, overall financial performance (both current and projected), changes in strategy, changes in the composition or carrying amount of net assets, and market capitalization.

If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company would proceed to perform a quantitative impairment test.

If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company proceeds to perform a quantitative impairment test.

Under this quantitative analysis, the fair value of the reporting unit is compared with its carrying value, including goodwill.

5 unchanged sentences

Intangible assets are either amortized in relation to the relative cash flows anticipated from the intangible asset or using the straight-line method, depending on facts and circumstances.

The useful lives of customer relationships range from five to fifteen years , completed technologies from five to nine years , non-compete agreements from three to seven years , and trademarks for three years .

The useful lives of customer relationships range from five to fifteen years , completed technologies from five to nine years , non-compete agreements from six to seven years , and trademarks for three years .

In-process technology is an indefinite-lived intangible asset until the technology is completed, at which point it is amortized over its estimated useful life.

45 unchanged sentences

The Company updates its estimate of variable consideration at the end of each reporting period to reflect changes in facts and circumstances.

The Company typically does not grant customers the explicit right to return product.

However, from time to time, the Company may allow a customer to return a product.

The Company records revenue net of estimated returns.

As a practical expedient, the Company estimates the transaction price using the expected value based on its history of return experience using a portfolio approach in which the Company’s total revenue is reduced by an estimate of total customer returns.

6 unchanged sentences

Revenue for services, which are not material, is typically recognized over the time the service is provided.

Revenue for application-specific customer solutions is recognized at the point in time when the solution is validated, which is the point in time when the Company can objectively determine that the agreed-upon specifications in the

Revenue for application-specific customer solutions is recognized at the point in time when the solution is validated, which is the point in time when the Company can reasonably determine that the agreed-upon specifications in the contract have been met and the customer should reasonably accept the performance obligations in the

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

contract have been met and the customer should reasonably accept the performance obligations in the arrangement.

Although the customer may have taken legal title and physical possession of the goods when they arrived at the customer’s designated site, the significant risks and rewards of ownership transfer to the customer only upon validation.

1 unchanged sentence

In certain instances, an arrangement may include customer-specified acceptance provisions or performance guarantees that allow the customer to accept or reject delivered products that do not meet the customer’s requirements.

If the Company can objectively determine that control of a good or service has been transferred to the customer in accordance with the agreed-upon requirements in the contract, then customer acceptance is a formality.

If the Company can reasonably determine that control of a good or service has been transferred to the customer in accordance with the agreed-upon requirements in the contract, then customer acceptance is a formality.

If acceptance provisions are presumed to be substantive, then revenue is deferred until customer acceptance.

For the Company’s standard products and services, revenue recognition and billing typically occur at the same time.

For application-specific customer solutions, however, the agreement with the customer may provide for billing terms which differ from revenue recognition criteria, resulting in either deferred revenue or unbilled revenue.

For application-specific customer solutions, however, the agreement with the customer may provide for billing terms which differ from the timing of revenue recognition, resulting in either deferred revenue or unbilled revenue.

Credit assessments are performed to determine payment terms, which vary by region, industry, and customer.

1 unchanged sentence

When credit is granted to customers, payment is typically due 30 to 90 days from billing.

The Company's contracts have an original expected duration of less than one year, and therefore as a practical expedient, the Company has elected to ignore the impact of the time value of money on a contract and to expense sales commissions.

The Company's contracts typically have an original expected duration of less than one year, and therefore as a practical expedient, the Company has elected to ignore the impact of the time value of money on such contracts and to expense sales commissions.

The Company recognizes an asset for costs to fulfill a contract if the costs relate directly to the contract and to future performance, and the costs are expected to be recovered.

26 unchanged sentences

The Company recognizes a tax position in its financial statements when that tax position, based solely upon its technical merits, is more likely than not to be sustained upon examination by the relevant taxing authority.

Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statutes of limitations.

Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard, are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statutes of limitations.

Derecognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.

Only the portion of the liability that is expected to be paid within one year is classified as a current liability.

As a result, liabilities expected to be resolved without the payment of cash (e.g., resolution due to the expiration of the statutes of limitations) or are not expected to be paid within one year are not classified as current.

The portion of the liability that is expected to be paid within one year is classified as a current liability.

It is the Company’s policy to record estimated interest and penalties as income tax expense and tax credits as a reduction in income tax expense.

1 unchanged sentence

Valuation allowances are provided if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for the impact of the Global Intangible Low-Taxed Income (GILTI) tax in deferred taxes.

The Company accounts for the impact of Global Intangible Low-Taxed Income (GILTI) tax in deferred taxes.

Sales tax in the United States and similar taxes in other jurisdictions that are collected from customers and remitted to government authorities are presented on a gross basis (i.e., a receivable from the customer with a corresponding payable to the government).

33 unchanged sentences

Management is responsible for determining the appropriate valuation model and estimated fair values, and in doing so, considers a number of factors, including information provided by an outside valuation advisor.

Management bases the fair value of assets, including identifiable intangible assets acquired and liabilities assumed, on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use.

Management bases the fair value of assets, including identifiable intangible assets acquired, on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use.

Goodwill is recognized as of the acquisition date as the excess of the consideration transferred over the net amount of assets acquired and liabilities assumed.

Transaction costs are expensed as incurred.

Restructuring Charges

One-time employee termination benefits associated with restructuring activities exist at the date the plan of termination has been communicated to employees (the “communication date”) and all of the following criteria are met:

(1) management, having the authority to approve the action, has committed to the plan of termination, (2) the plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and the expected completion date, (3) the plan establishes the terms of the benefit arrangement in sufficient detail, and (4) actions required to complete the plan indicate it is unlikely that significant changes to the plan will be made.

If employees are not required to render service until they are terminated in order to receive the termination benefits or will not be retained to render service beyond a minimum retention period, a liability for the termination benefits is recognized and measured at fair value at the communication date.

Otherwise, a liability is measured initially at the communication date based on the fair value of the liability as of the termination date and recognized ratably over the future service period.

Changes to the fair value of the liability are recorded as restructuring adjustments.

Closures of leased offices as part of a restructuring activity prior to the end of the contractual lease term are treated as abandoned right-to-use assets when the Company ceases to use the property for economic benefit and lacks

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

either the intent or ability to sublease.

The lease asset is written down to zero as of the abandonment date.

Estimates of contract termination costs assume the Company will be obligated to pay the remaining rent over the contract period, and the lease liability continues to be recorded on the balance sheet.

Subsequent negotiations that result in early contract terminations are recorded as favorable restructuring adjustments.

Other associated costs as part of a restructuring activity include costs to consolidate facilities, costs to relocate employees, and legal fees incurred to research local statutory requirements and prepare termination agreements.

These costs are recognized in the period in which the liability is incurred, which generally corresponds to the period in which the services are rendered.

New Pronouncements

Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

The amendments in this ASU apply to all public entities, including public entities with a single reportable segment, that are required to report segment information in accordance with Topic 280, Segment Reporting.

The amendments require public business entities to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance.

Additionally, the amendments require disclosure of significant segment expenses and other segment items, as well as incremental qualitative disclosures.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023 and should be applied on a retrospective basis.

The Company adopted ASU 2023-07 in 2024.

Refer to Note 20 for related disclosures.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740):

6 unchanged sentences

Management does not expect ASU 2023-09 to have a material impact on the Company's financial statements and disclosures.

Accounting Standards Update (ASU) 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

Additionally, the amendments require disclosure of significant segment expenses and other segment items, as well as incremental qualitative disclosures.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023.

The amendments in the ASU should be applied on a retrospective basis.

We did not early adopt ASU 2023-07.

Management does not expect ASU 2023-07 to have a material impact on the Company's financial statements and disclosures.

Accounting Standards Update (ASU) 2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting", (ASU) 2021-01, "Reference Rate Reform (Topic 848):

Scope", and Accounting Standards Update (ASU) 2022-06, "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848"

The amendments in these ASUs apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

Together, the ASUs provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2024, except for hedging relationships existing as of December 31, 2024 that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

The amendments in these ASUs are effective for all entities as of March 12, 2020 through December 31, 2024.

Management adopted Topic 848 on January 1, 2023, and now uses the Secured Overnight Financing Rate (SOFR).

The adoption did not have a material impact on the Company's financial statements and disclosures.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Standards Update (ASU) 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)

ASU 2024-03 aims to enhance transparency for users of financial statements by requiring public business entities to disaggregate specific expense categories.

ASU 2024-03 mandates disclosures in the notes to financial statements detailing the composition and trends of key expense categories within major income statement captions.

These enhanced disclosures are intended to help investors more effectively assess the entity’s performance, understand its cost structure, and make more accurate forecasts of future cash flows.

For public business entities, ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

The adoption will result in disclosure changes only.

Fair Value Measurements

20 unchanged sentences

The market participants are generally large commercial banks.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Non-financial Assets that are Measured at Fair Value on a Non-recurring Basis

2 unchanged sentences

The Company did not record impairment charges related to non-financial assets in 2024, 2023, or 2022.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash, Cash Equivalents, and Investments

4 unchanged sentences

Corporate bonds 55,742 124,851

Asset-backed securities 3,551 26,890

Sovereign bonds 990 —

Agency bonds — 15,858

Treasury notes 2,487 —

Municipal bonds — 624

Sovereign bonds 990 990

Asset-backed securities 737 3,551

Current investments 59,956 129,392

5 unchanged sentences

$ 586,948 $ 576,277

The Company’s cash balance included foreign bank balances totaling $ 173,614,000 and $ 160,611,000 as of December 31, 2023 and 2022, respectively.

Corporate bonds consist of debt securities issued by both domestic and foreign companies;

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

sovereign bonds consist of direct debt issued by foreign governments;

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

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

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

sovereign bonds consist of direct debt issued by foreign governments;

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

All of the Company's securities as of December 31, 2024 and 2023 were denominated in U.S.

The Company’s cash balance included foreign bank balances totaling $ 156,027,000 and $ 173,614,000 as of December 31, 2024 and 2023, respectively.

Accrued interest receivable is included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheets and amounted to $ 4,144,000 and $ 3,169,000 as of December 31, 2024 and 2023, respectively.

2 unchanged sentences

Corporate bonds $ 56,472 $ 3 $ ( 733 ) $ 55,742

Asset-backed securities 3,637 — ( 86 ) 3,551

Treasury notes 2,501 — ( 14 ) 2,487

Sovereign bonds 1,013 — ( 23 ) 990

Asset-backed securities 739 — ( 2 ) 737

Corporate bonds 288,332 408 ( 3,566 ) 285,174

1 unchanged sentence

Asset-backed securities 13,131 — ( 554 ) 12,577

Sovereign bonds 1,037 — ( 58 ) 979

$ 405,758 $ 413 $ ( 5,317 ) $ 400,854

4 unchanged sentences

Asset-backed securities 3,637 — ( 86 ) 3,551

Agency bonds 16,143 — ( 285 ) 15,858

Treasury notes 11,602 — ( 270 ) 11,332

Municipal bonds 635 — ( 11 ) 624

Sovereign bonds 1,012 — ( 22 ) 990

Corporate bonds 189,326 506 ( 5,867 ) 183,965

27 unchanged sentences

Corporate bonds $ 30,770 $ ( 359 ) $ 226,643 $ ( 8,807 ) $ 257,413 $ ( 9,166 )

Asset-backed securities 47,582 ( 2,299 ) 2,495 ( 126 ) 50,077 ( 2,425 )

Treasury notes 20,725 ( 153 ) 2,441 ( 60 ) 23,166 ( 213 )

Agency bonds 15,858 ( 285 ) — — 15,858 ( 285 )

Asset-backed securities 17,062 ( 1,049 ) 2,252 ( 47 ) 19,314 ( 1,096 )

Sovereign bonds — — 1,968 ( 80 ) 1,968 ( 80 )

Municipal bonds 624 ( 11 ) — — 624 ( 11 )

$ 68,557 $ ( 1,561 ) $ 233,304 $ ( 8,994 ) $ 301,861 $ ( 10,555 )

24 unchanged sentences

$ 157,527 $ 162,285

In connection with the acquisition of Moritex Corporation in the fourth quarter of 2023 (refer to Note 21), the Company recorded inventories with a fair value of $ 22,788,000 on the acquisition date.

The Company recorded provisions for excess and obsolete inventories of $ 3,775,000 and $ 3,084,000 in 2023 and 2022, respectively, which reduced the carrying value of the inventories to their net realizable value.

Property, Plant, and Equipment

10 unchanged sentences

$ 98,445 $ 105,849

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In connection with the acquisition of Moritex Corporation in the fourth quarter of 2023 (refer to Note 21), the Company recorded property, plant and equipment with a fair value of $ 19,876,000 on the acquisition date.

The Company disposed of property, plant, and equipment with a cost basis of $ 12,421,000 and accumulated depreciation of $ 12,184,000 in 2023, net of proceeds of $ 8,000 , resulting in a loss of $ 229,000 .

The Company disposed of property, plant, and equipment with a cost basis of $ 9,580,000 and accumulated depreciation of $ 9,492,000 in 2024, resulting in a loss of $ 88,000 .

Of this loss, $ 735,000 related to production equipment destroyed as a result of the fire at the Company's primary contract manufacturer's plant in Indonesia on June 7, 2022 and is included in "Non-cash impact of charges related to fire (Note 22)" on the Consolidated Statements of Cash Flows.

The Company's leases are primarily leased properties across different worldwide locations where the Company conducts its operations.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company's leases are primarily leased properties across different worldwide locations where the Company conducts its business.

All of these leases are classified as operating leases.

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

As of December 31, 2023, there were no options to terminate and twenty-eight options to extend that were accounted for in the determination of the lease term for the Company's outstanding leases.

As of December 31, 2024, there were no options to terminate and twenty options to extend that were accounted for in the determination of the lease term for the Company's outstanding leases.

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

Lease costs associated with variable payments were $ 1,175,000 in 2023, $ 1,009,000 in 2022, and $ 1,253,000 in 2021.

There were no restrictions or covenants for the outstanding leases as of December 31, 2024.

8 unchanged sentences

The discounted present value of the future lease cash payments resulted in a lease liability of $ 70,217,000 and $ 78,601,000 as of December 31, 2024 and 2023, respectively.

In connection with the acquisition of Moritex Corporation in the fourth quarter of 2023 (refer to Note 21), the Company assumed multiple lease agreements, the most significant of which is for a 22,000 square-foot building in Vietnam that serves as a production plant for optical components.

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 an 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 $ 29,639,000 , 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 December 31, 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 was payable in 2023 and which reflects an estimated extension

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

period of five years .

The Company leases a building in Singapore that serves as a distribution center for customers in Asia.

The lease contains two components:

an 88,000 square-foot premises that had a commencement date in June of 2023 and a second 27,000 square-foot premises that does not commence until the fourth quarter of 2025.

Accordingly, the second component of the lease has not yet been recorded on the Consolidated Balance Sheets, nor has it created any significant rights and obligations as of December 31, 2024.

This second lease component has an original term of eight years and the Company has the right and option to extend this term by an additional five years, commencing upon the expiration of the original term.

Future payment obligations associated with this lease component total $ 13,145,000 , $ 160,000 of which is payable in 2025 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.

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 , 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 Company has entered into a lease for a 6,500 square-foot building in Aachen, Germany for a term of ten years .

The commencement date for this lease is expected to be in the second quarter of 2025, and therefore it has not yet been recorded on the Consolidated Balance Sheets, nor has it created any significant rights and obligations as of December 31, 2024.

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 term.

Future payment obligations associated with this lease total $ 8,763,000 , $ 483,000 of which is payable in 2025.

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

The weighted-average discount rate was 5.9 % and 5.7 % for the leases outstanding as of December 31, 2024 and December 31, 2023, respectively.

The weighted-average remaining lease term was 9.9 years and 10.5 years for the leases outstanding as of December 31, 2024 and 2023, respectively.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Balance as of December 31, 2022 $ 242,630

Acquisition of SAC Sirius Advanced Cybernetics GmbH (refer to Note 21) 2,359

Acquisition of Moritex Corporation (refer to Note 21) 145,047

Foreign exchange rate changes 5,504

Balance as of December 31, 2023 393,181

Acquisition of Moritex Corporation (refer to Note 21) 145,047

Moritex Corporation measurement period adjustments (refer to Note 21) 6,478

Foreign exchange rate changes ( 14,722 )

14 unchanged sentences

Amortization Net

Completed technologies $ 28,017 $ ( 17,744 ) $ 10,273

Customer relationships $ 75,965 $ ( 5,352 ) $ 70,613

Completed technologies 62,123 ( 20,745 ) 41,378

Trademarks 903 ( 50 ) 853

Non-compete agreements 340 ( 232 ) 108

Balance as of December 31, 2023 $ 139,331 $ ( 26,379 ) $ 112,952

In connection with the acquisition of Moritex Corporation in the fourth quarter of 2023 (refer to Note 21), the Company acquired customer relationships valued at $ 66,900,000 with an estimated useful life of fifteen years , completed technologies valued at $ 32,300,000 with an estimated useful life of nine years , and trademarks valued at $ 850,000 with an estimated useful life of three years .

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In connection with the acquisition of SAC Sirius Advanced Cybernetics GmbH ("SAC") in the fourth quarter of 2022, (refer to Note 21), the Company acquired completed technologies valued at $ 3,800,000 with an estimated useful life of 7 years.

In 2022, the Company retired approximately $ 43,280,000 of intangible assets primarily related to distribution networks and customer relationships that were fully amortized and had a net carrying value of zero on the Consolidated Balance Sheets.

The Company did not record impairment charges related to intangible assets in 2024, 2023, or 2022.

3 unchanged sentences

Thereafter 45,672

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

Foreign retirement obligations $ 12,835 $ 7,191

Incentive compensation $ 18,735 $ 10,645

Foreign retirement obligations 10,445 12,835

Warranty obligations 5,140 4,244

Salaries and payroll taxes 5,123 8,774

Vacation 3,945 5,827

Warranty obligations 4,244 4,375

Deferred payments related to Sualab Co., Ltd.

acquisition (1)

Other 28,372 30,049

$ 71,760 $ 72,374

(1) The total consideration for the Company's 2019 acquisition of Sualab Co., Ltd.

included deferred payments, contingent upon the continued employment of key talent, of $ 24,040,000 that was paid fully in October 2023.

The deferred payments were recorded as compensation expense over the four-year period.

The changes in the warranty obligation were as follows (in thousands):

5 unchanged sentences

Fulfillment of warranty obligations ( 3,078 )

Foreign exchange rate changes 7

Balance as of December 31, 2023 4,244

3 unchanged sentences

Balance as of December 31, 2024 $ 5,140

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

8 unchanged sentences

While we cannot predict the outcome of these matters, we believe that any liability arising from them will not have a material adverse effect on our financial position, liquidity, or results of operations.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Indemnification Provisions

12 unchanged sentences

Derivative Instruments

The Company’s foreign currency risk management strategy is principally designed to mitigate the potential financial impact of changes in the value of transactions and balances denominated in foreign currencies resulting from changes in foreign currency exchange rates.

The Company’s foreign currency risk management strategy is designed to mitigate the potential financial impact of changes in the value of transactions and balances denominated in foreign currencies resulting from changes in foreign currency exchange rates.

The Company enters into economic hedges utilizing foreign currency forward contracts with maturities that do not exceed approximately three months to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and payables.

1 unchanged sentence

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

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additionally, during 2023, the Company entered into a foreign currency forward contract to exchange U.S.

Dollars for ¥ 40,000,000,000 to hedge the Japanese Yen purchase price of the acquisition of Moritex Corporation (refer to Note 21).

Upon the settlement of this contract, the Company recorded a foreign currency loss of $ 8,456,000 , which was recorded in "Foreign currency gain (loss)" on the Consolidated Statements of Operations.

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

2 unchanged sentences

Derivatives Not Designated as Hedging Instruments:

Euro 40,000 $ 44,302 60,000 $ 64,174

Singapore Dollar 40,000 $ 29,457 39,700 $ 30,136

Mexican Peso 145,000 8,505 185,000 9,480

Euro 25,000 26,029 40,000 44,302

Chinese Renminbi 95,000 12,990 50,000 7,025

Mexican Peso 220,000 10,701 145,000 8,505

Hungarian Forint 2,360,000 5,951 2,240,000 6,466

1 unchanged sentence

Japanese Yen 2,000,000 3,750 600,000 4,255

Canadian Dollar 1,470 1,112 1,730 1,278

Swiss Franc 2,200 2,432 — —

Canadian Dollar 2,000 1,390 1,470 1,112

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

11 unchanged sentences

Net amount of assets presented $ 324 $ 151 Net amount of liabilities presented $ 211 $ 106

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

Gains (losses) recognized in current operations Foreign currency gain (loss) $ 1,945 $ ( 10,023 ) $ 9,823

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

15 unchanged sentences

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheets and amounted to $ 10,705,000 and $ 13,265,000 as of December 31, 2024 and 2023, respectively.

The amount of amortization during 2024 related to costs deferred as of December 31, 2023 amounted to $ 12,512,000

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.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes changes in the allowance for credit losses (in thousands):

8 unchanged sentences

Balance as of December 31, 2024 $ 827

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the deferred revenue and customer deposits activity (in thousands):

2 unchanged sentences

Recognition of revenue deferred in prior period ( 20,987 )

Returned customer deposit ( 9,205 )

Foreign exchange rate changes ( 608 )

2 unchanged sentences

Recognition of revenue deferred in prior period ( 28,108 )

Returned customer deposit ( 9,205 )

Foreign exchange rate changes ( 380 )

Balance as of December 31, 2024 $ 25,035

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

The remaining unsatisfied performance obligations for our contracts that have an original expected duration of more than one year, primarily related to extended warranties, is not material.

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

The remaining unsatisfied performance obligations for contracts that have an original expected duration of more than one year, primarily related to extended hardware warranties, are not material.

Shareholders’ Equity

1 unchanged sentence

The Company has 400,000 shares of authorized but unissued $ .01 par value preferred stock.

On April 25, 2018, the Company's shareholders approved an amendment to the Company's Articles of Organization to increase the authorized number of shares of $ .002 par value common stock from 200,000,000 to 300,000,000 .

The Company has 300,000,000 shares of authorized $ .002 par value common stock.

Each outstanding share of common stock entitles the record holder to one vote on all matters submitted to a vote of the Company’s shareholders.

1 unchanged sentence

Stock Repurchases

In October 2018, the Company's Board of Directors authorized the repurchase of $ 200,000,000 of the Company's common stock.

Under this October 2018 program, in addition to repurchases made in prior years, the Company repurchased 957,000 shares at a cost of $ 78,652,000 in 2021, which completed purchases under the October 2018 program.

In March 2020, the Company's Board of Directors authorized the repurchase of an additional $ 200,000,000 of the Company's common stock.

Under this March 2020 program, the Company repurchased 1,060,000 shares, including 5,000 shares that were repurchased in 2021 and settled in 2022, at a cost of $ 83,000,000 in 2021, and 1,677,000 shares at a cost of $ 117,000,000 in 2022, which completed purchases under the March 2020 program.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In March 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 in 2022, which completed purchases under the March 2020 program.

In March 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 1,682,000 shares at a cost of $ 87,314,000 in 2022 and 1,723,000 shares at a cost of $ 79,794,000 in 2023, leaving a remaining balance of $ 332,892,000 .

Under this March 2022 program, the Company repurchased 1,682,000 shares at a cost of $ 87,314,000 in 2022, 1,723,000 shares at a cost of $ 79,794,000 in 2023, and 1,711,000 shares at a cost of $ 67,085,000 in 2024, leaving a remaining balance of $ 265,807,000 as of December 31, 2024.

The 2023 repurchase included $ 446,000 of buyback Excise Tax in accordance with the Inflation Reduction Act of 2022.

4 unchanged sentences

Future dividends will be declared at the discretion of the Company's Board of Directors and will depend on such factors as the Board deems relevant, including, among other things, the Company's ability to generate positive cash flow from operations.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

11 unchanged sentences

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

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

21 unchanged sentences

In connection with these exercises, the tax benefit (expense) realized by the Company was $( 4,021,000 ) in 2024, $( 4,691,000 ) in 2023, and $ 2,548,000 in 2022.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

16 unchanged sentences

The total fair value of stock options vested was $ 29,309,000 in 2024, $ 34,751,000 in 2023, and $ 41,497,000 in 2022.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units (RSUs)

15 unchanged sentences

In connection with these vested RSUs, the tax benefit (expense) realized by the Company was $( 7,401,000 ) in 2024, $( 3,229,000 ) in 2023, and $( 1,049,000 ) in 2022.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Performance Restricted Stock Units (PRSUs)

7 unchanged sentences

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

The weighted average grant-date fair value of PRSUs granted was $ 44.86 in 2023 and $ 62.49 in 2022.

No PRSUs were granted in 2021.

The weighted average grant-date fair value of PRSUs granted was $ 39.05 in 2024, $ 44.86 in 2023, and $ 62.49 in 2022.

No PRSUs vested in 2024, 2023, and 2022.

4 unchanged sentences

Each year during the first quarter, the Company revises its forfeiture rate based on updated estimates of employee turnover.

This resulted in a decrease to compensation expense of $ 234,000 in 2023, an increase to compensation expense of $ 1,536,000 in 2022, and a decrease to compensation expense of $ 255,000 in 2021.

This resulted in a decrease to compensation expense of $ 1,832,000 in 2024, a decrease to compensation expense of $ 234,000 in 2023, and an increase to compensation expense of $ 1,536,000 in 2022.

As of December 31, 2024, total unrecognized compensation expense, net of estimated forfeitures, related to non-vested stock-based awards, including stock options, RSUs, and PRSUs, was $ 51,147,000 , which is expected to be recognized over a weighted-average period of 1.5 years.

1 unchanged sentence

No compensation expense was capitalized in 2024, 2023, or 2022.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

14 unchanged sentences

Foreign income before taxes was $ 96,236,000 in 2024, $ 119,309,000 in 2023, and $ 202,149,000 in 2022.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income tax expense consisted of the following (in thousands):

10 unchanged sentences

$ 25,318 $ 22,114 $ 35,170

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the U.S.

11 unchanged sentences

Discrete tax expense related to employee stock-based compensation 2 1 —

Discrete tax benefit for audit settlements 1 — ( 1 )

Discrete tax expense for foreign earnings not indefinitely reinvested 1 — —

Discrete tax expense related to tax return filings — 2 2

3 unchanged sentences

Discrete tax benefit for release of valuation allowance — ( 4 ) ( 1 )

Discrete tax benefit for audit settlements — ( 1 ) —

Income tax expense 19 % 16 % 14 %

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in gross amounts of unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):

3 unchanged sentences

Additions as a result of tax positions taken in the current period 505

Reductions relating to settlements with taxing authorities ( 2,329 )

Reductions as a result of the expiration of the applicable statutes of limitations ( 1,072 )

13 unchanged sentences

The Company’s reserve for income taxes, including gross interest and penalties, was $ 28,733,000 as of December 31, 2024, of which $ 26,365,000 was classified as a non-current liability and $ 2,368,000 was classified as an offset to deferred tax assets.

The Company's reserve for income taxes, including interest and penalties, was $ 15,866,000 as of December 31, 2022, which was classified as a non-current liability.

The Company's reserve for income taxes, including gross interest and penalties, was $ 29,053,000 as of December 31, 2023, of which $ 26,685,000 was classified as a non-current liability and $ 2,368,000 was classified as an offset to deferred tax assets.

The amount of gross interest and penalties included in these balances was $ 4,997,000 and $ 3,339,000 as of December 31, 2024 and 2023, respectively.

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.

As a result of the

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

expiration of certain statutes of limitations, there is a potential that a portion of these reserves could be released, which would decrease income tax expense by approximately $ 650,000 to $ 1,000,000 over the next twelve months.

As a result of the expiration of certain statutes of limitations, there is a potential that a portion of these reserves could be released, which would decrease income tax expense by approximately $ 2,000,000 to $ 4,000,000 over the next twelve months.

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

2 unchanged sentences

These differences resulted in a favorable impact to the effective tax rate of 4 percentage points for 2024, 6 percentage points for 2023, and 7 percentage points for 2022.

Management has determined that earnings from its legal entity in China will be indefinitely reinvested to provide local funding for growth, and that earnings from all other jurisdictions will not be indefinitely reinvested.

Management has determined that earnings from its legal entities in China will be indefinitely reinvested to provide local funding for growth, and that earnings from all other jurisdictions will not be indefinitely reinvested.

In 2024, the Company recorded a non-current deferred tax liability of $ 1,400,000 with respect to earnings that are not indefinitely reinvested.

In 2023, the Company qualified for a tax holiday in China, which is renewed every three years.

The tax effect of this benefit, derived from the tax holiday, on basic and diluted earnings per share for 2023 was not material.

The tax effect of this benefit on basic and diluted earnings per share for 2024 was not material.

Within the United States, the tax years 2020 through 2023 remain open to examination by the Internal Revenue Service ("IRS") and various state taxing authorities.

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

The Company is under audit by the Commonwealth of Massachusetts for the returns filed for tax years 2020 and 2021.

In addition, the Company is under audit in Ireland for the returns filed for tax years 2019 through 2020.

The tax years 2013 through 2023 remain open to examination by various taxing authorities in foreign jurisdictions in which the Company operates.

Management believes the Company is adequately reserved for these audits.

2 unchanged sentences

Interest and penalties included in income tax expense were $ 2,145,000 in 2024, $ 1,032,000 in 2023, and $ 229,000 in 2022.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash paid for income taxes totaled $ 59,849,000 in 2024, $ 56,618,000 in 2023, and $ 57,016,000 in 2022.

3 unchanged sentences

Intangible asset in connection with change in tax structure $ 369,474 $ 375,360

Capitalization of R&D expenses 35,948 28,521

Stock-based compensation expense 22,428 20,916

4 unchanged sentences

Foreign net operating losses 1,306 339

Capitalization of R&D expenses 28,521 16,889

Other 4,624 5,514

3 unchanged sentences

Deferred tax liabilities:

Amortization $ ( 28,685 ) $ ( 2,762 )

GILTI tax basis differences in connection with change in tax structure $ ( 254,213 ) $ ( 274,327 )

Amortization ( 29,008 ) ( 28,685 )

Reserve for unremitted foreign earnings ( 1,400 ) —

$ ( 284,621 ) $ ( 303,012 )

Net deferred taxes $ 175,011 $ 153,523

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Change in Tax Structure and Global Intangible Low-Taxed Income Tax

4 unchanged sentences

Other Deferred Tax Assets and Liabilities

As of December 31, 2022, the Company recorded a deferred tax asset resulting from the capitalization of research and development expenditures.

Beginning in 2022, the Tax Cuts and Jobs Act eliminates the option to deduct research and development expenditures in the period incurred and requires taxpayers to capitalize and amortize such expenditures over five or fifteen years, as applicable, pursuant to Section 174 of the Internal Revenue Code.

Accordingly, the Company recorded deferred tax assets resulting from the capitalization of research and development expenditures.

As of December 31, 2024, the Company had foreign net operating loss carryforwards of $ 1,306,000 , state tax credit carryforwards of $ 7,619,000 that will begin to expire for the 2031 tax return, and foreign tax credit carryforwards of $ 2,567,000 .

As of December 31, 2023, the Company had foreign net operating loss carryforwards of $ 1,720,000 , state tax credit carryforwards of $ 8,740,000 , and foreign tax credit carryforwards of $ 943,000 .

As of December 31, 2024, the Company had a valuation allowance for foreign net operation loss carryforwards of $ 599,000 and a valuation allowance for foreign tax credits of $ 1,916,000 that were not considered to be realized.

As of December 31, 2023, the Company had a valuation allowance for foreign tax credits of $ 943,000 that was not considered to be realized.

Should these credits be utilized in a future period, the reserve associated with these credits would be reversed in the period when it is determined that the credits can be utilized to offset future income tax liabilities.

As of December 31, 2023, the Company released the valuation allowance for state research and development tax credits of $ 5,427,000 , as these credits are expected to be utilized to offset future state income tax liabilities.

While the deferred tax assets, net of valuation allowance, are not assured of realization, management has evaluated the realizability of these deferred tax assets and has determined that it is more likely than not that these assets will be realized.

Should these credits be utilized in a future period, the reserve associated with these

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

credits would be reversed in the period when it is determined that the credits can be utilized to offset future income tax liabilities.

While the deferred tax assets, net of valuation allowance, are not assured of realization, management has evaluated the realizability of these deferred tax as sets and has determined that it is more likely than not that these assets will be realized.

In reaching this conclusion, we have evaluated certain relevant criteria including the Company’s historical profitability, current projections of future profitability, and the lives of tax credits, net operating losses, and other carryforwards.

9 unchanged sentences

Restricted stock units totaling 365 and 26,079 that will be settled in shares of common stock to the extent they vest, on a weighted-average basis, were outstanding in 2023 and 2022, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive.

No restricted stock units were excluded in the calculation of dilutive net income per share in 2024.

No PRSUs were excluded in the calculation of dilutive net income per share in 2024, 2023, and 2022 as PRSUs were not anti-dilutive on a weighted-average basis.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Segment and Geographic Information

1 unchanged sentence

The Company has a single, company-wide management team that administers operations as a whole rather than as discrete operating segments.

The Company’s chief operating decision maker is the chief executive officer, who makes decisions to allocate resources and assesses performance at the corporate level, without regard to geography, product line, or end market.

The Company’s chief operating decision maker is the chief executive officer, who assesses performance and allocates resources at the corporate level, as compared to the geography, product line, or end market levels.

The Company offers 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.

13 unchanged sentences

Revenue from this customer was not greater than 10% of total revenue in 2023.

Accounts receivable from this customer was not greater than 10% of total accounts receivable as of December 31, 2023 or December 31, 2022.

Accounts receivable from this customer was 10 % of total accounts receivable as of December 31, 2024 and was not greater than 10% of total accounts receivable as of December 31, 2023.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue from a second customer accounted for 11 % of total revenue in 2022.

1 unchanged sentence

Accounts receivable from this customer was not greater than 10% of total accounts receivable as of December 31, 2024 or December 31, 2023.

The measure of segment profit or loss for the Company's single segment is net income.

Segment expenses were disaggregated based on the information the chief operating decision maker uses to assess performance and allocate resources considering both quantitative and qualitative factors.

The following table summarizes significant segment expenses, which represents the difference between segment revenue and segment net income, (in thousands):

Year Ended December 31,

2024 2023 2022

Revenue $ 914,515 $ 837,547 $ 1,006,090

Cost of revenue (1) 288,721 236,306 284,185

Gross profit 625,794 601,241 721,905

Research, development, and engineering expenses

Salaries and fringe benefits 79,544 78,762 76,448

Incentive compensation (2) 4,711 1,446 3,447

Stock-based compensation 14,628 16,480 17,693

Depreciation and amortization 3,229 3,056 2,649

Other segment expenses (3) 37,703 39,656 40,896

Total research, development, and engineering expenses 139,815 139,400 141,133

Selling, general, and administrative expenses

Salaries and fringe benefits 179,898 166,612 150,696

Incentive compensation (2) 45,565 35,513 40,716

Stock-based compensation 35,849 36,309 34,796

Depreciation and amortization 16,936 11,759 10,702

Other segment expenses (3) 92,666 88,946 75,197

Total selling, general, and administrative expenses 370,914 339,139 312,107

Loss (recovery) from fire — ( 8,000 ) 20,779

Restructuring charges — — 1,657

Operating income 115,065 130,702 246,229

Foreign currency gain (loss) 1,531 ( 10,039 ) ( 1,837 )

Investment income 13,971 14,093 6,715

Other income (expense) 922 592 ( 412 )

Income before income tax expense 131,489 135,348 250,695

Income tax expense 25,318 22,114 35,170

Net income $ 106,171 $ 113,234 $ 215,525

(1) Cost of revenue includes depreciation and amortization expense (including amortization of acquired technologies) of $ 12,524,000 , $ 7,065,000 , and $ 6,270,000 for 2024, 2023, and 2022, respectively.

(2) Incentive compensation includes company bonus and sales commissions.

(3) Other segment expenses include outside services, prototyping materials, sales demonstration equipment, travel and entertainment, marketing programs, and rent, among other less significant expenses.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business Combinations

2 unchanged sentences

Dollars based on the closing date foreign exchange rate.

The cash-free, debt-free enterprise value was adjusted by cash acquired, debt assumed, and final working capital balances to arrive at total consideration to be allocated to assets acquired and liabilities assumed of ¥ 44,376,245,000 ($ 296,138,000 based on the closing date foreign exchange rate), of which ¥ 44,227,414,000 ($ 295,144,000 ) was paid in cash on the closing date and ¥ 148,831,000 ($ 994,000 ) is expected to be paid in the first quarter of 2024 as a final purchase price adjustment based on the closing balance sheet.

The cash-free, debt-free enterprise value was adjusted by cash acquired, debt assumed, and final working capital balances to arrive at total consideration to be allocated to assets acquired and liabilities assumed of ¥ 44,376,245,000 ($ 296,138,000 based on the closing date foreign exchange rate), of which ¥ 44,227,414,000 ($ 295,144,000 ) was paid in cash on the closing date and ¥ 148,831,000 ($ 994,000 ) was paid during the first quarter of 2024 as a purchase price adjustment based on the closing balance sheet.

The Company acquired cash balances totaling $ 38,088,000 as part of this transaction, to arrive at a net cash outflow of $ 257,056,000 on the closing date.

There was no contingent consideration as part of this transaction.

Established in 1973, Moritex develops, manufactures, and sells high-end optical components, such as lenses and lighting, for industrial use.

The acquisition of Moritex is expected to increase the Company's optical technology capabilities, which include our proprietary embedded liquid lenses and, more recently, computational lighting from our 2022 acquisition of SAC Sirius Advanced Cybernetics GmbH (described below).

Vision technology relies on acquiring high-quality images to optimize the performance of machine vision tools.

Historically, our customers have primarily used third-party lenses and lighting for image acquisition.

We anticipate the portfolio of Moritex optical components will allow us to expand our served market to include high-end lenses and lighting and provide our customers with a more complete product offering by replacing third-party components with Cognex-manufactured optical components.

In the fourth quarter of 2024, the Company recorded measurement-period adjustments that increased goodwill by $ 6,478,000 and are reflected in the final purchase price allocation below.

The adjustments consisted primarily of changes to deferred income tax liabilities based on the final push-down accounting for intangible assets to legal-entity jurisdictions, a reduction in customer relationships based on a methodology refinement, and changes to provisional assets and liabilities based on new information obtained within the one-year measurement period that refined initial estimates.

The portfolio of Moritex optical components allows us to expand our served market to include high-end lenses and lighting and provide our customers with a more complete product offering by replacing third-party components with Cognex-manufactured optical components.

Moritex also provides the Company with a more substantial presence in Japan, which is an important machine vision market where we believe we can increase our share through a stronger local presence.

This transaction was accounted for as a business combination.

As of the date of this filing, the purchase price allocation is preliminary and may change during the one-year measurement period ending October 18, 2024 as new

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

information becomes available, particularly related to tax positions reflected as of the acquisition date.

Identifiable assets acquired and liabilities assumed were recorded at their estimated fair values, which were valued using level 3 inputs, as of the acquisition date.

Identifiable assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date, which were valued using level 3 inputs for intangible assets, inventories, and property, plant and equipment.

Pro-forma information, as well as revenue and earnings from the date of the acquisition, are not presented because they are not material to the Company’s consolidated financial statements.

Transaction costs were approximately $ 5,800,000 and were expensed as incurred as part of SG&A expenses on the Consolidated Statement of Operations.

The purchase price was allocated based on provisional amounts as follows (in thousands):

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The purchase price was allocated as follows (in thousands):

Cash and cash equivalents $ 38,088

17 unchanged sentences

None of the acquired goodwill is deductible for tax purposes.

SAC Sirius Advanced Cybernetics GmbH

On December 7, 2022, the Company acquired all of the outstanding shares of SAC Sirius Advanced Cybernetics GmbH ("SAC"), a leader in computational lighting technology based in Germany.

The acquisition of SAC and its technology is expected to expand the Company’s capabilities in defect detection, and accelerate its growth trajectory with electric vehicle battery manufacturers.

The purchase price of the acquisition was not material to the Company's consolidated financial statements.

Loss (Recovery) from Fire

On June 7, 2022, the Company’s primary contract manufacturer experienced a fire at its plant in Indonesia.

The fire destroyed a significant amount of Cognex-owned consigned inventories, as well as component inventories owned by the contract manufacturer that were designated for Cognex products.

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

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 supply chain, and expand production capacity.

On June 7, 2022, the Company’s primary contract manufacturer experienced a fire at its plant in Indonesia, destroying a significant amount of Cognex inventories.

In 2022, the Company recorded a net loss related to the fire of $ 20,779,000 , consisting primarily of losses of inventories and other assets of $ 48,339,000 , partially offset by insurance proceeds received from the Company's insurance carrier of $ 27,560,000 .

In 2023, the Company recorded recoveries related to the fire of $ 8,000,000 , consisting of $ 2,500,000 for proceeds received from the Company's insurance carrier in relation to a business interruption claim and $ 5,500,000 for proceeds received as part of a financial settlement for lost inventory and other losses incurred as a result of the fire.

Management does not anticipate additional recoveries.

These losses and recoveries are presented in the caption "Loss (recovery) from fire" on the Consolidated Statements of Operations.

COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restructuring Charges

In December 2022, following its acquisition of SAC Sirius Advanced Cybernetics GmbH (refer to Note 21), the Company completed restructuring activities to align the cost and operating structure of the acquired business with the Company's business strategy.

The restructuring activities included a workforce reduction of 18 employees and the termination of certain operating lease contracts, and resulted in charges of $ 1,657,000 in 2022.

These charges are included in “Restructuring charges” on the Consolidated Statements of Operations.

The following table summarizes the restructuring charges for the year ended December 31, 2022 (in thousands):

One-time termination benefits $ 1,584

Contract termination costs 73

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

One-time Termination Benefits Contract Termination Costs Total

Balance as of December 31, 2021 $ — $ — $ —

Restructuring charges 1,584 73 1,657

Cash payments ( 646 ) — ( 646 )

Foreign exchange rate changes 26 2 28

Balance as of December 31, 2022 964 75 1,039

Cash payments ( 973 ) ( 75 ) ( 1,048 )

Foreign exchange rate changes 9 — 9

Balance as of December 31, 2023 $ — $ — $ —

Subsequent Events

24 unchanged sentences

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 8. Financial Statements and Supplementary Data