What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-07-31 compared with 2025-05-01 · 79 added, 76 removed, 95 unchanged (62% of the section changed)

1 unchanged sentence

Forward-Looking Statements

Certain statements made in this report, as well as oral statements made by the Company from time to time, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Certain statements made in this report, as well as oral statements made by Cognex Corporation ("Cognex", "we", "us", "our", or the "Company") from time to time, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Readers can identify these forward-looking statements by our use of the words “expects,” “anticipates,” “estimates,” "potential," “believes,” “projects,” “intends,” “plans,” “will,” “may,” “shall,” “could,” “should,” "opportunity," "goal" and similar words and other statements of a similar sense.

These statements are based on our current estimates and expectations as to prospective events and circumstances, which may or may not be in our control and as to which there can be no firm assurances given.

These forward-looking statements, which include statements regarding business and market trends, future financial performance and financial targets, the impact of tariffs, customer demand and order rates and timing of related revenue, future product or revenue mix, research and development activities, sales and marketing activities, new product offerings, innovation and product development activities, customer acceptance of our products, capital expenditures, cost and working capital management activities, investments, liquidity, dividends and stock repurchases, strategic and growth plans and opportunities, acquisitions, and estimated tax benefits and expenses and other tax matters, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected.

These forward-looking statements, which include statements regarding business and market trends, future financial performance and financial targets, the impact of tariffs, customer demand and order rates and timing of related revenue, future product or revenue mix, research and development activities, sales and marketing activities, new product offerings, innovation and product development activities, customer acceptance of our products, commercial partnerships, capital expenditures, cost management activities, investments, liquidity, dividends and stock repurchases, strategic and growth plans and opportunities, acquisitions, and estimated tax benefits and expenses, changes in tax legislation, and other tax matters, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected.

Such risks and uncertainties include:

17 unchanged sentences

(18) fluctuations in foreign currency exchange rates and the use of derivative instruments;

(19) unfavorable global economic conditions, including increases in interest rates, elevated inflation rates, and recession risks;

(19) unfavorable global economic conditions, including, without limitation, increases in interest rates, elevated inflation rates, and recession risks;

(20) business disruptions from natural or man-made disasters, public health crises, or other events outside our control;

5 unchanged sentences

Executive Overview

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

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 seek to improve efficiency and quality in a wide range of businesses across attractive industrial end markets.

3 unchanged sentences

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

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

Revenue for the first quarter of 2025 totaled $216,036,000, representing an increase of 2% over the first quarter of 2024.

The increase was due primarily to higher revenue from customers in the logistics and semiconductor industries, partially offset by continued weakness in the automotive industry and the unfavorable impact of foreign currency exchange rate changes on revenue.

Gross margin as a percentage of revenue was 67% for the first quarters of both 2025 and 2024.

Operating expenses for the first quarter of 2025 decreased 7% from the first quarter of 2024.

The decrease was principally due to disciplined cost management, lower stock-based compensation expense, and the favorable impact of foreign currency exchange rate changes on expenses.

Operating income increased to 12% of revenue for the first quarter of 2025 as compared to 7% of revenue for the first quarter of 2024 due to revenue growth and lower operating expenses.

Net income increased to 11% of revenue, or $0.14 per diluted share, for the first quarter of 2025, as compared to 6% of revenue, or $0.07 per diluted share, for the first quarter of 2024.

This results in a broad base of potential customers across a variety of industries, including logistics, automotive, consumer electronics, semiconductor, and packaging.

Revenue for the second quarter of 2025 totaled $249,093,000, representing an increase of 4% over the second quarter of 2024 primarily due to strong growth in logistics and improved trends in broader factory automation markets, partially offset by continued weakness in the automotive industry.

Gross margin as a percentage of revenue was 67% for the second quarter of 2025 as compared to 70% for the second quarter of 2024, primarily due to less favorable industry mix.

Operating expenses for the second quarter of 2025 decreased 3% from the second quarter of 2024, principally due to disciplined cost management.

Operating income increased to 17% of revenue for the second quarter of 2025 as compared to 16% of revenue for the second quarter of 2024 due to revenue growth and lower operating expenses.

Net income increased to 16% of revenue, or $0.24 per diluted share, for the second quarter of 2025, as compared to 15% of revenue, or $0.21 per diluted share, for the second quarter of 2024.

Results of Operations

5 unchanged sentences

GAAP") and should be considered in addition to, and not a substitute for, results prepared in accordance with U.S.

Revenue increased by $5,239,000, or 2%, for the three-month period in 2025 as compared to the same period in 2024.

Changes in foreign currency exchange rates resulted in a lower level of reported revenue in 2025 as compared to 2024.

Excluding the impact of foreign currency exchange rate changes, revenue increased by 5% over the prior year.

Higher revenue from the logistics and semiconductor industries was partially offset by continued weakness in the automotive industry, while broader factory automation revenue remained stable.

The following table sets forth our disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands) for the three-month periods ended March 30, 2025 and March 31, 2024.

Three-months Ended

March 30, 2025 March 31, 2024 $ Change % Change

Revenue increased by $9,801,000, or 4%, for the three-month period and increased $15,040,000, or 3%, for the six-month period as compared to the same periods in 2024.

Strong growth in logistics and improved trends in broader factory automation markets was partially offset by continued weakness in the automotive industry.

Although not material to total revenue or any geographic trend, revenue from customers in the semiconductor industry declined modestly for the three-month period but still showed growth for the six-month period.

The following table sets forth our disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands) for the three-month and six-month periods ended June 29, 2025 and June 30, 2024.

Three-months Ended Six-months Ended

June 29, 2025 June 30, 2024 $ Change % Change June 29, 2025 June 30, 2024 $ Change % Change

(unaudited) (unaudited)

Americas $ 92,137 $ 85,162 $ 6,975 8 % $ 191,867 $ 168,297 $ 23,570 14 %

8 unchanged sentences

Changes in revenue from a geographic perspective were as follows:

• Revenue from customers based in the Americas increased by 20% for the three-month period in 2025 as compared to the same period in 2024.

Strong growth in logistics was partially offset by continued weakness in the automotive industry.

• Revenue from customers based in Europe decreased by 11% for the three-month period in 2025 as compared to the same period in 2024.

Changes in foreign currency exchange rates resulted in a lower level of reported revenue in the first quarter of 2025 as compared to the same period in 2024, as the U.S.

was stronger on average versus the Euro and sales denominated in Euros were translated into U.S.

Dollars at a lower rate.

Excluding the impact of foreign currency exchange rate changes, revenue from customers based in Europe decreased by 7% for the three-month period due primarily to continued weakness in the automotive industry.

• Revenue from customers based in Greater China decreased by 10% for the three-month period in 2025 as compared to the same period in 2024.

Changes in foreign currency exchange rates did not have a material impact on the three-month period.

The decrease was primarily due to the timing of revenue from large electronics orders.

Broader Greater China revenue increased in most other industries over the same period in the prior year.

• Revenue from customers based in other countries in Asia decreased by 5% for the three-month period in 2025 as compared to the same period in 2024.

Changes in foreign currency exchange rates resulted in a lower level of reported revenue in 2025, primarily driven by a stronger U.S.

Dollar versus the Japanese Yen and Korean Won as compared to the prior year.

Excluding the impact of foreign currency exchange rate changes, revenue from customers based in other countries in Asia was relatively flat with the prior year, as higher semiconductor revenue was offset by lower automotive revenue.

The following table sets forth our gross profit (in thousands) for the three-month periods ended March 30, 2025 and March 31, 2024.

Three-months Ended

March 30, 2025 March 31, 2024 $ Change % Change

• Revenue from customers based in the Americas increased by 8% for the three-month period and increased by 14% for the six-month period as compared to the same periods in 2024.

Strong growth in logistics and improved trends in the consumer electronics and packaging industries was partially offset by continued weakness in the automotive industry.

• Revenue from customers based in Europe increased by 17% for the three-month period and increased by 6% for the six-month period as compared to the same periods in 2024.

The increase was due primarily to

procurement changes made by consumer electronics customers to shift their purchases from entities based in China to Europe.

Improved trends in the packaging industry also contributed to the increase in revenue.

These increases were largely offset by weakness in the automotive industry for the six-month period.

• Revenue from customers based in Greater China decreased by 17% for the three-month period and decreased by 15% for the six-month period as compared to the same periods in 2024.

The decrease was primarily due to the procurement change in Europe mentioned above, as well as shifts in business from consumer electronics customers from China to the Other Asia region.

Outside of the procurement change, revenue from the Greater China region decreased slightly over the same periods in the prior year.

• Revenue from customers based in other countries in Asia increased by 6% for the three-month period and decreased by 3% for the six-month period as compared to the same periods in 2024.

Other Asia regions benefited from the shift in consumer electronics business out of China noted above, offset by continued weakness in the automotive industry.

The following table sets forth our gross profit (in thousands) for the three-month and six-month periods ended June 29, 2025 and June 30, 2024.

Three-months Ended Six-months Ended

June 29, 2025 June 30, 2024 $ Change % Change June 29, 2025 June 30, 2024 $ Change % Change

(unaudited) (unaudited)

Gross profit $ 167,876 $ 166,599 $ 1,277 1 % $ 312,199 $ 308,536 $ 3,663 1 %

Percentage of total revenue 67 % 70 % 67 % 69 %

Gross margin was 67% for the three-month periods in both 2025 and 2024.

The gross margin in 2024 included the final sell-through of acquired Moritex Corporation inventories that were written up to fair value.

This favorable year-over-year impact was offset by less favorable industry mix, as well as the unfavorable impact of changes in foreign currency exchange rates.

The impact of pricing pressure was offset by productivity measures, including material cost reductions.

Gross margin was 67% for both the three-month and six-month periods in 2025 as compared to 70% and 69% for the same periods in 2024, respectively.

The decrease was primarily due to less favorable industry mix, and, to a lesser extent, the impact from tariffs.

Operating Expenses

The following table sets forth our operating expenses (in thousands) for the three-month periods ended March 30, 2025 and March 31, 2024.

Three-months Ended

March 30, 2025 March 31, 2024 $ Change % Change

The following table sets forth our operating expenses (in thousands) for the three-month and six-month periods ended June 29, 2025 and June 30, 2024.

Three-months Ended Six-months Ended

June 29, 2025 June 30, 2024 $ Change % Change June 29, 2025 June 30, 2024 $ Change % Change

(unaudited) (unaudited)

Research, development, and engineering expenses $ 33,102 $ 34,962 $ (1,860) (5) % $ 67,829 $ 72,067 $ (4,238) (6) %

5 unchanged sentences

Research, Development, and Engineering Expenses

Research, development, and engineering (RD&E) expenses decreased by $2,378,000, or 6%, for the three-month period in 2025 as compared to the same period in 2024.

The decrease was due to disciplined cost management, including a reduction in RD&E headcount.

Foreign currency exchange rate changes also contributed to the lower RD&E expenses, as costs denominated in foreign currencies were translated into U.S.

Dollars at a lower rate.

RD&E expenses as a percentage of revenue were 16% and 18% for the three-month period in 2025 and 2024, respectively.

Research, development, and engineering (RD&E) expenses decreased by $1,860,000, or 5%, for the three-month period and decreased by $4,238,000, or 6%, for the six-month period as compared to the same periods in 2024.

The decrease was primarily due to disciplined cost management, including a reduction in RD&E headcount.

RD&E expenses as a percentage of revenue were 13% and 15% for the three-month and six-month periods in 2025, respectively, as compared to 15% and 16% for the same periods in 2024, respectively.

We believe that a continued commitment to RD&E activities is essential to maintain or achieve product leadership with our existing products and to provide innovative new product offerings, as well as to provide engineering support for large customers.

2 unchanged sentences

Selling, General, and Administrative Expenses

Selling, general, and administrative (SG&A) expenses decreased by $7,124,000, or 8%, for the three-month period in 2025 as compared to the same period in 2024.

Selling, general, and administrative (SG&A) expenses decreased by $1,839,000, or 2%, and $8,963,000, or 5%, respectively, for the three-month and six-month periods in 2025 as compared to the same periods in 2024.

The decrease was due to disciplined cost management, including a reduction in SG&A headcount.

Lower stock-based compensation expense due to higher credits resulting from the annual true-up of forfeiture rate assumptions, as well as the favorable impact of foreign currency exchange rate changes, also contributed to the decrease in SG&A expenses.

Lower stock-based compensation expense due to higher credits resulting from the annual true-up of forfeiture rate assumptions in the first quarter also contributed to the decrease in SG&A expenses for the six-month period.

These decreases were partially offset by higher incentive compensation accruals.

Non-operating Income (Expense)

The following table sets forth our non-operating income (expense) (in thousands) for the three-month periods ended March 30, 2025 and March 31, 2024.

Three-months Ended

March 30, 2025 March 31, 2024 $ Change % Change

The following table sets forth our non-operating income (expense) (in thousands) for the three-month and six-month periods ended June 29, 2025 and June 30, 2024.

Three-months Ended Six-months Ended

June 29, 2025 June 30, 2024 $ Change % Change June 29, 2025 June 30, 2024 $ Change % Change

(unaudited) (unaudited)

Foreign currency gain (loss) $ (1,503) $ (181) $ (1,322) 730 % $ (3,956) $ (135) $ (3,821) 2830 %

2 unchanged sentences

Total non-operating income (expense) $ 4,629 $ 3,111 $ 1,518 49 % $ 6,335 $ 6,473 $ (138) (2) %

The Company recorded foreign currency losses of $2,453,000 for the three-month period in 2025 and foreign currency gains of $46,000 for the three-month period in 2024.

The Company recorded foreign currency losses of $1,503,000 and $3,956,000 for the three-month and six-month periods in 2025, respectively, and $181,000 and $135,000 for the same periods in 2024, respectively.

Foreign currency gains and losses in each period resulted primarily from the revaluation and settlement of assets and liabilities that are denominated in currencies other than the functional currency of the Company, which is the U.S.

Dollar, or its subsidiaries.

Investment income increased by $870,000, or 28%, for the three-month period due primarily to higher yields on the Company's portfolio of debt securities.

Investment income increased by $924,000, or 30%, for the three-month period and increased by $1,794,000, or 29%, for the six-month period as compared to the same periods in 2024 due primarily to higher yields on the Company's portfolio of debt securities.

Other income for the second quarter of 2025 included a one-time Employee Retention Credit from the U.S.

Internal Revenue Service to refund payroll taxes paid during the COVID-19 pandemic.

Income Tax Expense

The following table sets forth income tax information (in thousands) for the three-month periods ended March 30, 2025 and March 31, 2024.

Three-months Ended

March 30, 2025 March 31, 2024 $ Change % Change

The following table sets forth income tax information (in thousands) for the three-month and six-month periods ended June 29, 2025 and June 30, 2024.

Three-months Ended Six-months Ended

June 29, 2025 June 30, 2024 $ Change % Change June 29, 2025 June 30, 2024 $ Change % Change

(unaudited) (unaudited)

Income before income tax expense $ 48,062 $ 41,568 $ 6,494 16 % $ 75,860 $ 59,134 $ 16,726 28 %

1 unchanged sentence

Effective income tax rate 16 % 13 % 15 % 18 %

The Company’s effective tax rate was 15% for the three-month period in 2025 and 32% for the three-month period in 2024.

The Company recorded a net discrete tax benefit of $307,000 in 2025 and a net discrete tax expense of $3,085,000 in 2024.

Excluding the impact of discrete tax items, the Company's effective tax rate was 16% in 2025 compared to 14% in 2024.

The Company’s effective tax rate was 16% and 15% for the three-month and six-month periods in 2025, respectively, and 13% and 18% for the same periods in 2024, respectively.

The Company recorded net discrete tax benefits of $211,000 and $518,000 for the three-month and six-month periods in 2025, respectively, compared to a net discrete tax benefit of $463,000 for the three-month period in 2024 and a net discrete tax expense of $2,622,000 for the six-month period in 2024.

Excluding the impact of discrete tax items, the Company's effective tax rate was 16% for both the three-month and six-month periods in 2025 compared to 14% for the same periods in 2024.

The increase was due to more of the Company's profits taxed in relatively higher tax rate jurisdictions.

On July 4, 2025, tax legislation known as the One Big Beautiful Bill Act ("OBBBA") was enacted in the United States.

OBBBA modifies certain international tax provisions such as the tax on Global Intangible Low Taxed Income ("GILTI") and renames GILTI as Net CFC Tested Income ("NCTI").

The Company records NCTI taxes on a deferred basis.

The Company is in the early stages of evaluating the impact of U.S.

tax law changes introduced by OBBBA on our consolidated financial statements and disclosures.

As of the date of this filing, we expect OBBBA to materially increase our deferred tax liability and income tax expense in the third quarter of 2025, while also providing a cash tax benefit estimated between $12 million and $15 million for the full year.

A full quantitative estimate of all specific financial impacts cannot be reasonably determined at this time due to the complexity of the changes in OBBBA and the need for further analysis.

Liquidity and Capital Resources

The Company has historically been able to generate positive cash flow from operations, which has funded its operating activities and other cash requirements and resulted in an accumulated cash and investment balance of $512,757,000 as of March 30, 2025.

The Company has established guidelines relative to credit ratings, diversification, and maturities of its investments to maintain liquidity and safety of its investment portfolio.

Operating Activities

Net cash provided by operating activities totaled $40,502,000 in the first quarter of 2025 compared to $13,643,000 in the same period of 2024.

Net cash provided by operating activities totaled $83,127,000 for the six-month period in 2025 as compared to $41,406,000 in the same period of 2024.

Disciplined cost management and a reduction in inventories primarily drove the increase in operating cash flow from the prior year.

In the second quarter of 2025, the Company will make the final payment totaling $15,503,000 related to a one-time transition tax on unrepatriated foreign earnings.

In the second quarter of 2025, the Company made the final payment totaling $15,503,000 related to a one-time transition tax on unrepatriated foreign earnings arising from the Tax Cuts and Jobs Act of 2017.

Investing Activities

Net cash provided by investing activities totaled $33,087,000 for the three-month period in 2025.

Net cash provided by investing activities totaled $29,121,000 for the six-month period in 2025.

Investing activities included capital expenditures that totaled $4,695,000 and consisted primarily of continued investments in business systems, manufacturing equipment related to new product introductions, and building and leasehold improvements.

Financing Activities

Net cash used in financing activities totaled $118,370,000 for the three-month period in 2025.

In March 2022, the Company's Board of Directors authorized the repurchase of $500,000,000 of the Company's common stock.

Under this March 2022 program, in addition to repurchases made in prior periods, the Company repurchased 3,047,000 shares at a total cost of $103,413,000 during the three-month period in 2025.

This cost included $1,180,000 of buyback excise tax in accordance with the Inflation Reduction Act of 2022.

As of March 30, 2025, the remaining balance of the 2022 program was $164,020,000.

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

Net cash used in financing activities totaled $131,626,000 for the six-month period in 2025.

In March 2022, the Company's Board of Directors (the "Board") authorized a program providing for the repurchase of $500,000,000 of the Company's common stock (the "Program").

Under the Program, in addition to repurchases made in other periods, the Company repurchased 3,047,000 shares at a total cost of $102,233,000 during the six-month period in 2025.

As of June 29, 2025, the remaining balance of the Program was $164,020,000.

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

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

The Company’s Board of Directors declared and paid cash dividends of $0.080 per share in the first quarter of 2025, totaling $13,550,000.

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.

The Board declared and paid cash dividends of $0.08 per share for the first and second quarters of 2025, totaling $26,981,000.

Future dividends will be declared at the discretion of the Board 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.

Future Cash Requirements

As of March 30, 2025, the Company had inventory purchase commitments of $53,401,000, with the majority payable within twelve months, and lease payment obligations of $119,196,000, with $15,238,000 payable within twelve months.

As of March 30, 2025, the Company had a remaining balance of $18,338,000 payable related to a one-time transition tax on unrepatriated foreign earnings arising from the Tax Cuts and Jobs Act of 2017, of which $15,503,000 will be paid in the second quarter of 2025 and the remainder was satisfied through the application of prior-year federal tax overpayments.

As of June 29, 2025, the Company had inventory purchase commitments of $50,682,000, with the majority payable within twelve months, and lease payment obligations of $124,195,000, with $16,653,000 payable within twelve months.

We believe that the Company's existing cash and investment balances, together with cash flow from operations, will be sufficient to meet its operating, investing, and financing activities for the next twelve months.

6 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-Q

Item 2. Management’s Discussion and Analysis