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Cognex profits shrink in 'challenging but stable' market

15 Feb 2024

Machine vision firm posts sharp contraction in earnings in its latest financial year.

Cognex, one of the world’s largest providers of machine vision technology, has posted sales of $197 million for the closing quarter of 2023 - slightly better than its earlier forecast but still down nearly 20 per cent on the same period a year earlier.

The latest result means that the Natick, Massachusetts, company’s full-year sales were $838 million, having dropped by around the same degree from the record-breaking 2022 total of just over $1 billion.

“Our fourth quarter results reflected a challenging, but stable business environment,” commented Rob Willett, the Cognex CEO. “Revenue across most of our end markets was down year-on-year in the quarter, and our largest customers continued a pause in significant capital expenditures.”

That fall in demand also hit the bottom line, nearly halving earnings for what is typically a highly profitable business.

Annual net income of $113 million was down from $216 million in 2022 - although the company’s executive team has decided to maintain its quarterly shareholder dividend at the same level for now.

AI ‘profound’ for machine vision
Discussing the latest results in an investor conference call, Willett said that Cognex would focus on strict cost management, while continuing to invest in long-term growth prospects.

“We launched a record number of new products in 2023 and commenced a multi-year investment in our ‘emerging customer’ initiative to expand our customer base,” he said. “We believe these actions position us well to capitalize on exciting industry trends as growth returns.”

Citing “broad softness” across several of the firm’s key markets, including the automotive and medical sectors, and particular weakness in China largely related to consumer electronics manufacturing, the CEO suggested that things should start to improve in the second half of 2024.

And Willett added that while the electric vehicle market is expected to provide a long-term growth opportunity for Cognex in battery inspection, right now there is ongoing uncertainty regarding the level of end-user demand and political backing for the technology.

Overall, that is likely to mean flat sales in the opening quarter of 2024, with hopes of a rebound in the semiconductor market and perhaps consumer electronics later in the year.

Willett also stressed Cognex’s efforts to harness artificial intelligence (AI) techniques like neural networks in machine vision applications, which he says were recognized by the company several years ago.

“[We have] a portfolio of new products incorporating more AI for human-like vision,” he told investors, adding that the technology had “profound implications” for machine vision.

The CEO said that with hiring of skilled labor a major issue for manufacturing and tech companies, Cognex technology would ultimately reduce the need for that labor. He cited one major customer that is said to spend $1 billion on human inspectors every year.

“Cognex can help reduce costs while improving the quality of those inspections,” noted Willett.

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