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Cognex sales subdued amid customer caution

10 May 2023

Large buyers of machine vision equipment delay purchases as they absorb excess capacity.

Machine vision company Cognex has reported revenues of $201 million for the opening quarter of 2023 - down sharply on the total posted a year ago, but slightly higher than the firm’s management had predicted in February.

The current dip in sales is the result of softer spending by some of Cognex’s largest customers in the e-commerce and factory automation sectors, who are being more cautious with their capital expenditure, and working their way through excess inventory they had previously stockpiled.

Despite the slump in sales and increased costs due to wage increases, the highly profitable Massachusetts-based company was still able to post a net income of $25.6 million for the quarter - down from $67.3 million a year ago.

EV battery opportunity
Discussing the latest developments with investors, Cognex CEO Rob Willett said that sales were being delayed by spending cuts and additional layers of executive approval at key customers concerned about their own near-term demand.

While new orders and manufacturing purchase indicators have decreased slightly in the US and Europe, Willett noted an improved picture in China. “We've seen slow periods like this before and we've come out of them delivering meaningful growth,” he added.

The CEO also pointed to the likely future impact of the Inflation Reduction Act and Chips Act in the US, which are already thought to have driven companies to commit $200 billion towards manufacturing projects in the country - five times the prior year’s total.

“Cleantech and semiconductor investments are beginning to ramp up now,” said Willett. “We expect these will be medium- to long-term growth drivers for Cognex, as manufacturers typically implement machine vision in the later stages of these capital projects.”

Outside the US there is significant investment under way in Korea, Malaysia, Singapore, India, and Vietnam, he added, with opportunities for further automation enabled by machine vision across both factory automation and logistics.

And, as with other photonics applications - in particular laser welding - electric vehicle (EV) battery production presents a major new market for machine vision.

“EV battery manufacturers are responding favorably to our industry-leading technology that combines the computational lighting products we acquired with SAC [Sirius Advanced Cybernetics] and our deep-learning vision software,” Willett told investors.

Blink-of-an-eye imaging
The CEO also talked up the recent introduction of Cognex’s “Insight 3800” vision system, describing it as “the fastest embedded smart camera in the market today” and twice as fast as its predecessor.

“It can perform tasks such as automated inspection on high-speed production lines in as little as 10 milliseconds, which is less than one-third of the time [needed to] blink an eye,” Willett boasted.

“After launching this product at the beginning of April, we're getting very positive responses from customers and we've already seen meaningful orders.”

While some of the firm’s largest e-commerce customers have pressed pause on capital investment, Willett pointed out that smaller companies are now looking to deploy machine vision technology, something that would lead to a significantly larger overall market in the future.

“We haven't had the ease of use and ease of implementation with our products that was needed to make those customers absorb our technology, and for us to serve them profitably,” the CEO said. “[But] that's really changed over the last couple of years.”

One key market sector for that expansion should be consumer electronics production, although overall 2023 is expected to represent a “down” year for what is typically a very cyclical market.

• Looking ahead, the Cognex executive team said that it expected sales to rise to somewhere between $225 million and $245 million in the June quarter, and to increase again in the following three months.

That outlook appeared to please investors, with the Cognex stock price rising in value by around 5 per cent when financial markets opened immediately after the company’s update. Currently trading at just under $50 on the Nasdaq, the firm’s market capitalization stands at around $8.5 million.

Mad City Labs, Inc.AlluxaCHROMA TECHNOLOGY CORP.Universe Kogaku America Inc.TRIOPTICS GmbHABTechLASEROPTIK GmbH
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