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Cognex Reports First Quarter 2016 Results

NATICK, Mass., May 02, 2016 (BUSINESS WIRE) -- Cognex Corporation CGNX, -0.90% today announced its financial results for the first quarter of 2016. In Table 1 below, selected financial data for the quarter ended April 3, 2016 is compared to the first and fourth quarters of 2015. A reconciliation of certain financial measures from GAAP to non-GAAP is shown in Exhibit 2 of this news release.

Table 1*

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Net Income

Net Income
Operations per
Diluted Share

Quarterly Comparisons

Current quarter: Q1-16 $96,205,000 $14,885,000 $0.17
Prior year’s quarter: Q1-15 $101,373,000 $19,472,000 $0.22
Change from Q1-15 to Q1-16 (5%) (24%) (23%)
Prior quarter: Q4-15 $97,768,000 $18,854,000 $0.22
Change from Q4-15 to Q1-16 (2%) (21%) (23%)

*Table 1 excludes the results of discontinued operations, which relate to the company’s Surface Inspection Systems Division (SISD) that was sold on July 6, 2015.

“I am pleased to report that our first quarter results were better than the guidance we gave to investors in February,” said Dr. Robert J. Shillman, Chairman of Cognex. “This positive news was due to several factors in the quarter, including higher revenue from customers in the logistics market, a higher gross margin and lower-than-planned operating expenses. However, despite these favorable developments, I am not pleased to report that the slower business trends we saw in the second half of last year have continued.”

“The year started off on a stronger note than anticipated, and our guidance for Q2 reflects a significant sequential increase in revenue and substantial margin expansion due to an expected concentration of large orders in the consumer electronics industry,” said Robert J. Willett, Chief Executive Officer of Cognex. “Nevertheless, our outlook for 2016 is not any more bullish than it was a few months ago.”

Details of the Quarter

Statement of Operations Highlights – First Quarter of 2016

  • Revenue for Q1 2016 decreased 5% from Q1 2015 and 2% from Q4 2015. Cognex experienced the typical seasonal decline from Q4 to Q1 in factory automation. The decline from last year’s record first-quarter revenue was primarily due to lower revenue from the consumer electronics industry.
  • Gross margin was 78% for both Q1 2016 and Q1 2015, and 76% for Q4 2015. Gross margin increased on a sequential basis due to revenue mix, with a higher percentage of revenue coming from product sales than service.
  • Research, Development & Engineering (RD&E) expenses increased 21% from Q1 2015 and 17% from Q4 2015. RD&E increased year-on-year due to Cognex’s investment in engineering resources and higher outsourced engineering costs. RD&E increased on a sequential basis due to support of potential high-volume opportunities and higher stock option expense.
  • Selling, General & Administrative (SG&A) expenses decreased 4% from Q1 2015 and increased 2% from Q4 2015. SG&A decreased year-on-year as Cognex’s investment in its sales and support organization was offset by lower patent-related legal fees. SG&A increased on a sequential basis due to higher stock option expense.
  • Investment and other income was $1,344,000 in Q1 2016, $540,000 in Q1 2015 and $2,059,000 in Q4 2015. The increase year-on-year was due to a higher average invested balance. The decrease on a sequential basis was the result of a larger reduction in Q4 than in Q1 to the estimated liability for contingent consideration related to a recent acquisition.
  • The tax rate was 15% in Q1 2016, 16% in Q1 2015, and 13% in Q4 2015. Excluding discrete tax items, the rate was 18% in Q1 2016 and Q1 2015, and 17% in Q4 2015 (tax adjustments are summarized in Exhibit 2).
  • Cognex’s financial position as of April 3, 2016, was very strong, with $649 million in cash and investments and no debt. During Q1 2016, Cognex paid out $6 million in dividends to shareholders. Earlier today, Cognex announced it will increase the cash dividend paid in Q2 2016 to $0.075 per share from $0.07 per share paid in Q1. The company also intends to repurchase shares of its common stock in Q2 2016, subject to market conditions and other relevant factors.

Financial Outlook – Q2 2016

  • Cognex expects revenue for Q2 2016 to be between $135 million and $140 million. This range represents substantial growth over Q1 2016, due primarily to large orders expected from consumer electronics customers, but a slight decline from Q2 2015 due to timing. In 2016, Cognex expects to recognize large consumer electronics orders in both Q2 and Q3, as opposed to last year when the majority was recognized in Q2.
  • Gross margin is expected to be in the mid-to-high 70% range.
  • Operating expenses are expected to increase by up to 4% on a sequential basis, and to be essentially flat year-on-year.
  • The effective tax rate is expected to be 18% before...