Cognex revenue down 6% due to weak electronics sector

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Cognex has seen its revenue decrease six per cent in the second quarter of 2019, compared to the same period last year, because of what chairman Robert Shillman described as ‘persistent softness’ in the consumer electronics and automotive markets.

The company expects its revenue to continue to decline in the third quarter 2019, because of lower revenue predicted from consumer electronics and weakness in Europe and Asia.

Revenue was $199 million for Q2-19, with an operating margin of 26 per cent.

The decline was partially offset by growth in sales into the logistics market. While revenue was down year-on-year, it increased 15 per cent from the first quarter of 2019 thanks to the growth in logistics and the usual seasonal increase in sales to customers in consumer electronics.

Cognex's research, development and engineering (RD&E) expenses increased four per cent from Q2-18 and decreased seven per cent from Q1-19. The year-on-year increase in RD&E reflects the addition of new Cognex engineering resources over the past year. The increase was partially offset by a reduction in incentive compensation costs.

The sequential decrease in RD&E is because of the timing of application engineering for large deployments in consumer electronics.

Robert Willett, CEO of Cognex, said that, because of the slowdown in spending by customers in consumer electronics and automotive, Cognex has ‘reallocated resources to faster-growing areas’.

He added: ‘Our long-term positive view notwithstanding, our outlook for the near term has worsened due to a further deterioration in business conditions we are seeing in Europe and Asia.’

As of 30 June 2019, Cognex has $862 million in cash and investments, and no debt. In the first six months of 2019, Cognex generated $120 million in cash from operations, spent $62 million to repurchase its common stock, and paid out $17 million in dividends paid to shareholders.

Cognex intends to continue to repurchase shares of its common stock, subject to market conditions and other relevant factors.

Revenue for Q3-19 is expected to be between $175 million and $185 million, which represents a decline from both Q3-18 and Q2-19. The decline from Q3-18 is due almost entirely to lower expected revenue from consumer electronics. The decline from Q2-19 is because of typical seasonal softness experienced during Q3, outside of consumer electronics, and increased weakness expected in Europe and Asia.

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