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Cognex Corporation Reports First Quarter Results for 2004
Cognex Corporation Posted 04/20/2004
Machine Vision Company Announces Dramatic Increases in Bookings, Revenues and Profits
Overview of the Quarter
Cognex Corporation (CGNX) today announced revenue for the first quarter ended April 4, 2004 of $48,169,000, and net income of $8,567,000, or $0.18 per diluted share. These results compare very favorably with both the comparable quarter in 2003 and with the prior quarter, as shown in the table below:
Time Period Revenue Net Income per Diluted Share
Current quarter: Q1-04 $48,169,000 $8,567,000 $0.18
Prior year's quarter: Q1-03 $32,888,000 $1,793,000 $0.04
Increase fr Q1-03 to Q1-04 46% 378% 345%
Prior quarter: Q4-03 $41,878,000 $5,714,000 $0.13
Increase from Q4-03 to Q1-04 15% 50% 44%
'I am overjoyed to report significant increases in revenue and profits for the first quarter of 2004, both year-on-year and sequentially,' said Dr. Robert J. Shillman, Cognex's Chief Executive Officer and Chairman. 'These increases were driven primarily by strong demand from our customers in the semiconductor industry, whose businesses have recovered from the three year slump. In addition, despite the turnaround, we continued to keep a tight rein on spending and invested only in those areas that drive revenue, such as in sales and marketing. Bottom line...our first quarter results have given us a great start to 2004, and we believe that 2004 will be an excellent year for Cognex.'
Details of the Quarter
Statement of Operations Highlights - First Quarter of 2004
- Revenue for the first quarter of 2004 increased 46% over the comparable quarter in 2003 and 15% on a sequential basis. The increase, both year-on-year and sequentially, is due to higher sales to Original Equipment Manufacturer (OEM) customers in the semiconductor industry.
- Gross margin was 69% in the first quarter of 2004 compared to 64% in the comparable quarter in 2003 and 68% in the prior quarter. Cost of revenue for the first quarter of 2004 as well as the first and fourth quarters of 2003 includes a benefit of $262,000, $309,000 and $116,000, respectively, relating to an inventory reserve recorded in the fourth quarter of 2001. Excluding this benefit, gross margin would have been 69% in the first quarter of 2004, 63% in the first quarter of 2003, and 68% in the prior quarter. The increase in gross margin, both year-on-year and sequentially, is due to higher sales volume as well as product mix.
- Research, Development & Engineering (R, D & E) spending in the first quarter of 2004 increased 15% from the comparable quarter in 2003 and 11% from the prior quarter. The increase in R, D & E spending, both year-on-year and sequentially, is due to higher employee-related expenses including a full quarter of spending for Gavitec's machine vision business, which was acquired on December 1, 2003, and the accrual of anticipated company bonuses for 2004.
- Selling, General & Administrative (S, G & A) spending in the first quarter of 2004 increased 23% from the comparable quarter in 2003 and 10% on a sequential basis. The increase in S, G & A spending, both year-on-year and sequential, is due to higher employee-related costs, including higher commissions, additional end-user sales personnel, and the accrual of anticipated company bonuses for 2004, as well as the impact of foreign exchange rates on the company's international operations.
- Investment and other income was $1,274,000 in the first quarter of 2004 compared to $1,294,000 in the comparable quarter of 2003 and $1,396,000 in the prior quarter. The decrease in investment and other income, both year-on-year and sequentially, is due to lower yields on cash and investment balances.
- The foreign currency gain was $625,000 in the first quarter of 2004 as compared to a loss of $627,000 in the comparable quarter of 2003 and a loss of $749,000 in the prior quarter. The company recognizes foreign currency gains and losses on the revaluation and settlement of accounts receivable balances that are reported in one currency and collected in another.
- The effective tax rate was 29% in the first quarter of 2004 as compared to 31% in both the comparable quarter of 2003 as well as in the prior quarter. The decrease in the effective tax rate is due to more of the company's profits being earned and taxed in lower tax jurisdictions in 2004 than in 2003.
Balance Sheet Highlights - April 4, 2004
- Cognex's financial position remains very strong at April 4, 2004, with nearly $335,000,000 in cash and investments and no debt. Cash and investments increased over $30,000,000 from the end of 2003. This increase is the net result of positive cash flow from operations and cash received from the exercise of employee stock options, less a dividend payment of approximately $2,700,000.
- Days sales outstanding (DSO) for the first quarter of 2004 was 48 days, compared to 56 days in the prior quarter, and is well within the company's targeted range.
- Inventories at April 4, 2004 decreased 8% from the end of 2003, as inventory turns improved in the first quarter to a rate equivalent to 3.8 times per year from 3.4 times per year in the fourth quarter of 2003.
Business Trends and Financial Outlook
- In the first quarter of 2004, bookings increased by nearly 50% on a sequential basis, and the company's book-to-bill ratio was above 1.0. This increase was primarily due to higher orders from customers in the semiconductor and electronics industries. Cognex expects revenue for the second quarter of 2004 to be between $53 million and $56 million. At that revenue level, gross margin is expected to be in the high 60% range. For the second quarter, operating expenses (R, D & E and S, G & A) are expected to increase on a sequential basis in the range of 5% to 10% as the company increases its investment in sales and marketing to help drive revenue. The effective tax rate for the second quarter of 2004 is expected to be 29%. And, as a result of the above, earnings for the second quarter are expected to be between $0.20 and $0.24 per diluted share.
Analyst Conference Call and Simultaneous Webcast
Cognex Corporation will host a conference call to discuss its results for the first quarter of 2004, as well as its financial outlook, today at 5:30 p.m. eastern time. The telephone number for the live call is 800-770-5589 (or 973-935-2039 if outside the United States). A replay will begin tonight at approximately 7:30 p.m. eastern time and will run continuously for 72 hours. The telephone number for the replay is 877-519-4471 (or 973-341-3080 if outside the United States) and the access code is 4677951.
Internet users can listen to a real-time audio broadcast of the conference call as well as an archive of the call on Cognex's website at http://www.cognex.com.
Certain statements made in this press release and its attachments, which do not relate solely to historical matters, are forward-looking statements. You can identify these forward-looking statements by use of the words 'expects,' 'anticipates,' 'estimates,' 'believes,' 'projects,' 'intends,' 'plans,' 'will,' 'may,' 'shall' and similar words. These forward-looking statements, which include statements regarding business trends and the company's financial outlook, involve risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) global economic conditions that impact the capital spending trends of manufacturers in a variety of industries; (2) the cyclicality of the semiconductor and electronics industries; (3) the inability to achieve significant international revenue; (4) fluctuations in foreign exchange rates; (5) the loss of, or significant curtailment of purchases by, any one or more principal customers; (6) the reliance upon certain sole source suppliers to manufacture and deliver critical components for the company's products; and (7) the other risks detailed in the company's reports filed with the SEC, including the company's Form 10-K for the fiscal year ended December 31, 2003. You should not place undue reliance upon any such forward-looking statements, which speak only as of the date made. The company disclaims any obligation to update forward-looking statements after the date of such statements.