10-Q 1 cgnx-20240331.htm 10-Q cgnx-20240331
March 31, 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q 
(Mark One)
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2024 or
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to __________

Commission File Number 001-34218
COGNEX CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2713778
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)

One Vision Drive
Natick, Massachusetts 01760-2059
(508) 650-3000
(Address, including zip code, and telephone number, including area code, of principal executive offices)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.002 per shareCGNXThe NASDAQ Stock Market LLC


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  
 Yes   No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer  Accelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
 Yes   No  
As of March 31, 2024, there were 171,662,056 shares of Common Stock, $.002 par value per share, of the registrant outstanding.



INDEX
 
PART IFINANCIAL INFORMATION
Consolidated Statements of Operations for the three-month periods ended March 31, 2024 and April 2, 2023
Consolidated Statements of Comprehensive Income (Loss) for the three-month periods ended March 31, 2024 and April 2, 2023
Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023
Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2024 and April 2, 2023
Consolidated Statements of Shareholders’ Equity for the three-month periods ended March 31, 2024 and April 2, 2023

2


PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 Three-months Ended
March 31, 2024April 2, 2023
 (unaudited)
Revenue$210,797 $201,124 
Cost of revenue68,860 57,384 
Gross margin141,937 143,740 
Research, development, and engineering expenses37,105 38,542 
Selling, general, and administrative expenses90,628 83,037 
Operating income14,204 22,161 
Foreign currency gain (loss)46 394 
Investment income3,120 3,587 
Other income (expense)196 73 
Income before income tax expense17,566 26,215 
Income tax expense5,544 600 
Net income$12,022 $25,615 
Net income per weighted-average common and common-equivalent share:
Basic$0.07 $0.15 
Diluted$0.07 $0.15 
Weighted-average common and common-equivalent shares outstanding:
Basic171,692 172,624 
Diluted172,594 173,903 
Cash dividends per common share$0.075 $0.070 














 
The accompanying notes are an integral part of these consolidated financial statements.
3


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
 
 Three-months Ended
March 31, 2024April 2, 2023
 (unaudited)
Net income$12,022 $25,615 
Other comprehensive income (loss), net of tax:
Available-for-sale investments:
Net unrealized gain (loss), net of tax of $117 and $1,858 in the three-month periods, respectively
359 5,426 
Reclassification of net realized (gain) loss on the sale of available-for-sale investments into current operations(2) 
Net change related to available-for-sale investments357 5,426 
Foreign currency translation adjustments:
Foreign currency translation adjustments(16,156)(359)
Net change related to foreign currency translation adjustments(16,156)(359)
Other comprehensive income (loss), net of tax(15,799)5,067 
Total comprehensive income (loss)$(3,777)$30,682 





















The accompanying notes are an integral part of these consolidated financial statements.
4


COGNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
March 31, 2024December 31, 2023
 (unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$138,859 $202,655 
Current investments, amortized cost of $141,876 and $132,799 in 2024 and 2023, respectively, allowance for credit losses of $0 in 2024 and 2023
139,334 129,392 
Accounts receivable, allowance for credit losses of $1,339 and $583 in 2024 and 2023, respectively
138,556 114,164 
Unbilled revenue2,737 2,402 
Inventories170,871 162,285 
Prepaid expenses and other current assets71,173 68,099 
Total current assets661,530 678,997 
Non-current investments, amortized cost of $285,376 and $250,790 in 2024 and 2023, respectively, allowance for credit losses of $0 in 2024 and 2023
278,426 244,230 
Property, plant, and equipment, net104,111 105,849 
Operating lease assets74,113 75,115 
Goodwill386,157 393,181 
Intangible assets, net105,054 112,952 
Deferred income taxes397,563 400,400 
Other assets6,279 7,088 
Total assets$2,013,233 $2,017,812 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$27,459 $21,454 
Accrued expenses70,429 72,374 
Accrued income taxes40,433 16,907 
Deferred revenue and customer deposits39,983 31,525 
Operating lease liabilities9,798 9,624 
Total current liabilities188,102 151,884 
Non-current operating lease liabilities67,367 68,977 
Deferred income taxes239,538 246,877 
Reserve for income taxes28,144 26,685 
Non-current accrued income taxes 18,338 
Other liabilities893 299 
Total liabilities524,044 513,060 
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred stock, $.01 par value – Authorized: 400 shares in 2024 and 2023, respectively; no shares issued and outstanding
  
Common stock, $.002 par value – Authorized: 300,000 shares in 2024 and 2023, respectively; issued and outstanding: 171,662 and 171,599 shares in 2024 and 2023, respectively
343 343 
Additional paid-in capital1,047,643 1,037,202 
Retained earnings502,338 512,543 
Accumulated other comprehensive loss, net of tax(61,135)(45,336)
Total shareholders’ equity1,489,189 1,504,752 
Total liabilities and shareholders' equity$2,013,233 $2,017,812 

The accompanying notes are an integral part of these consolidated financial statements.
5


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Three-months Ended
March 31, 2024April 2, 2023
 (unaudited)
Cash flows from operating activities:
Net income$12,022 $25,615 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense13,302 16,579 
Depreciation of property, plant, and equipment5,279 3,986 
Amortization of intangible assets2,813 942 
Excess and obsolete inventory charges471 788 
Fair value adjustment on acquired inventories (Note 17)1,224  
Amortization of discounts or premiums on investments306 700 
Realized (gain) loss on sale of investments(2) 
Change in deferred income taxes(3,333)(10,656)
Change in operating assets and liabilities:
Accounts receivable(25,669)(18,455)
Unbilled revenue(347)(173)
Inventories(10,938)(5,338)
Prepaid expenses and other current assets(3,395)231 
Accounts payable7,398 (192)
Accrued expenses(470)(9,942)
Accrued income taxes5,258 4,721 
Deferred revenue and customer deposits8,737 17,003 
Other987 1,744 
Net cash provided by (used in) operating activities13,643 27,553 
Cash flows from investing activities:
Purchases of investments(233,726)(46,480)
Maturities and sales of investments189,758 46,199 
Purchases of property, plant, and equipment(4,061)(5,507)
Net payments related to business acquisitions (Note 17)(994) 
Net cash provided by (used in) investing activities(49,023)(5,788)
Cash flows from financing activities:
Net payments from issuance of common stock under stock plans(2,861)(3,055)
Repurchase of common stock(9,339)(24,178)
Payment of dividends(12,888)(12,091)
Net cash provided by (used in) financing activities(25,088)(39,324)
Effect of foreign exchange rate changes on cash and cash equivalents(3,328)356 
Net change in cash and cash equivalents(63,796)(17,203)
Cash and cash equivalents at beginning of period202,655 181,374 
Cash and cash equivalents at end of period$138,859 $164,171 










The accompanying notes are an integral part of these consolidated financial statements.
6


COGNEX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of December 31, 2023
171,599 $343 $1,037,202 $512,543 $(45,336)$1,504,752 
Net issuance of common stock under stock plans294  (2,861)— — (2,861)
Repurchase of common stock(231) — (9,339)— (9,339)
Stock-based compensation expense— — 13,302 — — 13,302 
Payment of dividends ($0.075 per common share)
— — — (12,888)— (12,888)
Net income— — — 12,022 — 12,022 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $117
— — — — 359 359 
Reclassification of net realized (gain) loss on the sale of available-for-sale investments— — — — (2)(2)
Foreign currency translation adjustment— — — — (16,156)(16,156)
Balance as of March 31, 2024 (unaudited)
171,662 $343 $1,047,643 $502,338 $(61,135)$1,489,189 

 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
 SharesPar Value
Balance as of December 31, 2022
172,631 $345 $979,167 $528,179 $(69,297)$1,438,394 
Net issuance of common stock under stock plans449 1 (3,056)— — (3,055)
Repurchase of common stock(479)(1)— (24,177)— (24,178)
Stock-based compensation expense— — 16,579 — — 16,579 
Payment of dividends ($0.070 per common share)
— — — (12,091)— (12,091)
Net income— — — 25,615 — 25,615 
Net unrealized gain (loss) on available-for-sale investments, net of tax of $1,858
— — — — 5,426 5,426 
Foreign currency translation adjustment— — — — (359)(359)
Balance as of April 2, 2023 (unaudited)
172,601 $345 $992,690 $517,526 $(64,230)$1,446,331 













The accompanying notes are an integral part of these consolidated financial statements.
7


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: Summary of Significant Accounting Policies
As permitted by the rules of the Securities and Exchange Commission applicable to Quarterly Reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles (GAAP). Reference should be made to the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a full description of other significant accounting policies.
In the opinion of the management of Cognex Corporation (the "Company"), the accompanying consolidated unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, and financial statement reclassifications necessary to present fairly the Company’s financial position as of March 31, 2024, and the results of its operations for the three-month periods ended March 31, 2024 and April 2, 2023, and changes in shareholders’ equity, comprehensive income, and cash flows for the periods presented.
The results disclosed in the Consolidated Statements of Operations for the three-month periods ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year.
NOTE 2: New Pronouncements
Accounting Standards Update (ASU) 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures"
The amendments in this ASU apply to all entities that are subject to Topic 740, Income Taxes. The amendments require public business entities to disclose specific categories in their rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. They also require all entities to disclose income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes and by individual jurisdictions in which income taxes paid, net of refunds received, is equal to or greater than five percent of total income taxes paid. For public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2024. The amendments in this ASU should be applied on a prospective basis. Management does not expect ASU 2023-09 to have a material impact on the Company's financial statements and disclosures.
Accounting Standards Update (ASU) 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures"
The amendments in this ASU apply to all public entities, including public entities with a single reportable segment, that are required to report segment information in accordance with Topic 280, Segment Reporting. The amendments require public business entities to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the amendments require disclosure of significant segment expenses and other segment items, as well as incremental qualitative disclosures. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023 and interim periods with fiscal years beginning after December 15, 2024. The amendments in the ASU should be applied on a retrospective basis. We did not early adopt ASU 2023-07. Management does not expect ASU 2023-07 to have a material impact on the Company's financial statements and disclosures.

8


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3: Fair Value Measurements
Financial Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of March 31, 2024 (in thousands):
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
Unobservable Inputs (Level 3)
Assets:
Money market instruments$667 $ $ 
Corporate bonds 353,745  
Treasury notes 45,053  
Asset-backed securities 16,995  
Certificate of deposit 6,429  
Treasury bills 3,499  
Sovereign bonds 1,967  
Economic hedge forward contracts 22  
Liabilities:
Economic hedge forward contracts 221  
The Company’s money market instruments are reported at fair value based upon the daily market price for identical assets in active markets, and are therefore classified as Level 1.
The Company’s debt securities and forward contracts are reported at fair value based on model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability, and are therefore classified as Level 2. Management is responsible for estimating the fair value of these financial assets and liabilities, and in doing so, considers valuations provided by a large, third-party pricing service. For debt securities, this service maintains regular contact with market makers, brokers, dealers, and analysts to gather information on market movement, direction, trends, and other specific data. They use this information to structure yield curves for various types of debt securities and arrive at the daily valuations. The Company's forward contracts are typically traded or executed in over-the-counter markets with a high degree of pricing transparency. The market participants are generally large commercial banks.
Non-financial Assets that are Measured at Fair Value on a Non-recurring Basis
Non-financial assets, such as property, plant and equipment, operating lease assets, goodwill, and intangible assets, are required to be measured at fair value only when an impairment loss is recognized. The Company did not record impairment charges related to non-financial assets during the three-month periods ended March 31, 2024 or April 2, 2023.
9


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4: Cash, Cash Equivalents, and Investments
Cash, cash equivalents, and investments consisted of the following (in thousands):
March 31, 2024December 31, 2023
Cash$128,264 $183,242 
Certificate of deposit6,429  
Treasury bills3,499  
Money market instruments667 19,413 
Cash and cash equivalents138,859 202,655 
Corporate bonds134,032 124,851 
Asset-backed securities4,309 3,551 
Sovereign bonds993 990 
Current investments139,334 129,392 
Corporate bonds219,713 183,965 
Treasury notes45,053 43,523 
Asset-backed securities12,686 15,763 
Sovereign bonds974 979 
Non-current investments278,426 244,230 
$556,619 $576,277 
Corporate bonds consist of debt securities issued by both domestic and foreign companies; asset-backed securities consist of debt securities collateralized by pools of receivables or loans with credit enhancement; sovereign bonds consist of direct debt issued by foreign governments; and treasury notes consist of debt securities issued by the U.S. government. All of the Company's securities as of March 31, 2024 and December 31, 2023 were denominated in U.S. Dollars.
Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheets and amounted to $4,119,000 and $3,169,000 as of March 31, 2024 and December 31, 2023, respectively.
The following table summarizes the Company’s available-for-sale investments as of March 31, 2024 (in thousands):
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Current:
Corporate bonds$136,479 $ $(2,447)$134,032 
Asset-backed securities4,391  (82)4,309 
Sovereign bonds1,006  (13)993 
Non-current:
Corporate bonds225,074 175 (5,536)219,713 
Treasury notes45,760  (707)45,053 
Asset-backed securities13,512  (826)12,686 
Sovereign bonds1,030  (56)974 
$427,252 $175 $(9,667)$417,760 
10


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the Company’s available-for-sale investments as of December 31, 2023 (in thousands):
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Current:
Corporate bonds$128,150 $ $(3,299)$124,851 
Asset-backed securities3,637  (86)3,551 
Sovereign bonds1,012  (22)990 
Non-current:
Corporate bonds189,326 506 (5,867)183,965 
Treasury notes43,654 82 (213)43,523 
Asset-backed securities16,773  (1,010)15,763 
Sovereign bonds1,037  (58)979 
$383,589 $588 $(10,555)$373,622 
The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of March 31, 2024 (in thousands):
 Unrealized Loss Position For: 
 Less than 12 Months12 Months or GreaterTotal
 Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Corporate bonds$95,052 $(1,087)$222,979 $(6,896)$318,031 $(7,983)
Treasury notes42,612 (647)2,441 (60)45,053 (707)
Asset-backed securities14,742 (860)2,252 (48)16,994 (908)
Sovereign bonds  1,968 (69)1,968 (69)
$152,406 $(2,594)$229,640 $(7,073)$382,046 $(9,667)
The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of December 31, 2023 (in thousands):
 Unrealized Loss Position For: 
 Less than 12 Months12 Months or GreaterTotal
 Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Corporate bonds$30,770 $(359)$226,643 $(8,807)$257,413 $(9,166)
Treasury notes20,725 (153)2,441 (60)23,166 (213)
Asset-backed securities17,062 (1,049)2,252 (47)19,314 (1,096)
Sovereign bonds  1,968 (80)1,968 (80)
$68,557 $(1,561)$233,304 $(8,994)$301,861 $(10,555)
Management monitors debt securities that are in an unrealized loss position to determine whether a loss exists related to the credit quality of the issuer. When developing an estimate of expected credit losses, management considers all relevant information including historical experience, current conditions, and reasonable forecasts of expected future cash flows. Based on this evaluation, no allowance for credit losses on debt securities was recorded as of March 31, 2024 or December 31, 2023. Management currently intends to hold these securities to full value recovery at maturity.
11


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the Company's gross realized gains and losses on the sale of debt securities for the three-month periods ended March 31, 2024 and April 2, 2023 (in thousands):
Three-months Ended
March 31, 2024April 2, 2023
Gross realized gains$2 $ 
Gross realized losses  
Net realized gains (losses)$2 $ 
Realized gains and losses are included in "Investment income" on the Consolidated Statements of Operations. Prior to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, were recorded in shareholders’ equity as accumulated other comprehensive income (loss).
The following table presents the effective maturity dates of the Company’s available-for-sale investments as of March 31, 2024 (in thousands):
<1 year1-2 Years2-3 Years3-4 Years4-5 Years5-8 YearsTotal
Corporate bonds$134,032 $57,463 $59,120 $58,225 $44,905 $ $353,745 
Treasury notes 3,429 14,097 22,829 4,698  45,053 
Asset-backed securities4,309 6,486    6,200 16,995 
Sovereign bonds993 974     1,967 
$139,334 $68,352 $73,217 $81,054 $49,603 $6,200 $417,760 

NOTE 5: Inventories
Inventories consisted of the following (in thousands):
March 31, 2024December 31, 2023
Raw materials$106,506 $93,201 
Work-in-process3,241 5,747 
Finished goods61,124 63,337 
$170,871 $162,285 
NOTE 6: Leases
The Company's leases are primarily leased properties across different worldwide locations where the Company conducts its operations. All of these leases are classified as operating leases. Certain leases may contain options to extend or terminate the lease at the Company's sole discretion. As of March 31, 2024, there were no options to terminate and twenty-eight options to extend that were accounted for in the determination of the lease term for the Company's outstanding leases. Certain leases contain leasehold improvement incentives, retirement obligations, escalating clauses, rent holidays, and variable payments tied to a consumer price index. There were no restrictions or covenants for outstanding leases as of March 31, 2024.
The total operating lease expense for the three-month periods ended March 31, 2024 and April 2, 2023 were $3,563,000 and $2,392,000, respectively. The total operating lease cash payments for the three-month periods ended March 31, 2024 and April 2, 2023 were $3,208,000 and $2,404,000, respectively. The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month periods ended March 31, 2024 and April 2, 2023 were $82,000 and $24,000, respectively.
12


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Future operating lease cash payments are as follows (in thousands):
Year Ended December 31,Amount
Remainder of fiscal 2024$10,392 
202512,093 
202610,031 
20279,171 
20288,721 
20298,137 
Thereafter44,658 
$103,203 
The discounted present value of the future lease cash payments resulted in a total lease liability of $77,165,000 and $78,601,000 as of March 31, 2024 and December 31, 2023, respectively. The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of March 31, 2024.
The Company leases a building in Singapore that serves as a distribution center for customers in Asia. The lease contains two components: an 88,000 square-foot premises that had a commencement date in June of 2023 and a second 27,000 square-foot premises that does not commence until the fourth quarter of 2025. Accordingly, the second component of the lease has not yet been recorded on the Consolidated Balance Sheets, nor has it created any significant rights and obligations as of March 31, 2024. This second lease component has an original term of eight years and the Company has the right and option to extend this term by an additional five years, commencing upon the expiration of the original term. Future payment obligations associated with this lease component total $13,231,000, none of which is payable in 2024 and which reflects the estimated extension period of five years. Future payment obligations related to this lease component are not included in the future operating lease cash payments table above.
The weighted-average discount rate was 5.7% for the leases outstanding as of both March 31, 2024 and December 31, 2023. The weighted-average remaining lease term was 10.3 and 10.5 years for the leases outstanding as of March 31, 2024 and December 31, 2023, respectively.
NOTE 7: Goodwill
The changes in the carrying value of goodwill were as follows (in thousands):
Balance as of December 31, 2023$393,181 
  Foreign exchange rate changes(7,024)
Balance as of March 31, 2024$386,157 
13


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 8: Intangible Assets
Amortized intangible assets consisted of the following (in thousands):
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Customer relationships$72,775 $(6,587)$66,188 
Completed technologies60,160 (22,112)38,048 
Trademarks842 (117)725 
Non-compete agreements340 (247)93 
Balance as of March 31, 2024$134,117 $(29,063)$105,054 
 Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Customer relationships$75,965 $(5,352)$70,613 
Completed technologies62,123 (20,745)41,378 
Trademarks903 (50)853 
Non-compete agreements340 (232)108 
Balance as of December 31, 2023$139,331 $(26,379)$112,952 
As of March 31, 2024, estimated future amortization expense related to intangible assets was as follows (in thousands):
Year Ended December 31,Amount
Remainder of fiscal 2024$8,179 
202510,615 
202610,310 
20279,587 
20288,857 
20298,857 
Thereafter48,649 
$105,054 
NOTE 9: Warranty Obligations
The Company records the estimated cost of fulfilling product warranties at the time of sale based upon historical costs to fulfill claims. Obligations may also be recorded subsequent to the time of sale whenever specific events or changes in circumstances impacting product quality become known that would not have been taken into account using historical data. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers and third-party contract manufacturers, the Company’s warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. An adverse change in any of these factors may result in the need for additional warranty provisions. Warranty obligations are included in “Accrued expenses” on the Consolidated Balance Sheets.
The changes in the warranty obligation were as follows (in thousands):
Balance as of December 31, 2023$4,244 
Provisions for warranties issued during the period1,157 
Fulfillment of warranty obligations(939)
Foreign exchange rate changes(9)
Balance as of March 31, 2024$4,453 
14


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 10: Commitments and Contingencies
As of March 31, 2024, the Company had outstanding purchase orders totaling $40,843,000 to procure inventory from various vendors. Certain of these purchase orders may be canceled by the Company, subject to cancellation penalties. These purchase commitments relate primarily to expected sales in the next twelve months.
A significant portion of the Company's outstanding inventory purchase orders as of March 31, 2024, as well as additional preauthorized commitments to procure strategic components based on the Company's expected customer demand, are placed with the Company's primary contract manufacturer for the Company's assembled products. The Company has the obligation to purchase any non-cancelable and non-returnable components that have been purchased by the contract manufacturer with the Company's preauthorization, when these components have not been consumed within the period defined in the terms of the Company's agreement with this contract manufacturer. While the Company typically expects such purchased components to be used in future production of Cognex finished goods, these components are considered in the Company's reserve estimate for excess and obsolete inventory. Furthermore, the Company accrues for losses on commitments for the future purchase of non-cancelable and non-returnable components from this contract manufacturer at the time that circumstances, such as changes in demand, indicate that the value of the components may not be recoverable, the loss is probable, and management has the ability to reasonably estimate the amount of the loss.
Various claims and legal proceedings generally incidental to the normal course of business are pending or threatened on behalf of or against the Company. While we cannot predict the outcome of these matters, we believe that any liability arising from them will not have a material adverse effect on our financial position, liquidity, or results of operations.
NOTE 11: Derivative Instruments
The Company’s foreign currency risk management strategy is principally designed to mitigate the potential financial impact of changes in the value of transactions and balances denominated in foreign currencies resulting from changes in foreign currency exchange rates. The Company enters into economic hedges utilizing foreign currency forward contracts with maturities that do not exceed approximately three months to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and payables. The gains and losses on these derivatives are intended to be offset by the changes in the fair value of the assets and liabilities being hedged. These economic hedges are not designated as hedging instruments for hedge accounting treatment.
The Company had the following outstanding forward contracts (in thousands):
March 31, 2024December 31, 2023
CurrencyNotional
Value
USD
Equivalent
Notional
Value
USD
Equivalent
Derivatives Not Designated as Hedging Instruments:
Singapore Dollar39,950 $29,652 39,700 $30,136 
Euro18,500 19,940 40,000 44,302 
Mexican Peso205,000 12,273 145,000 8,505 
Chinese Renminbi50,000 6,886 50,000 7,025 
Hungarian Forint2,250,000 6,152 2,240,000 6,466 
British Pound3,330 4,229 3,345 4,258 
Japanese Yen600,000 3,980 600,000 4,255 
Swiss Franc2,400 2,673   
Canadian Dollar1,720 1,270 1,470 1,112 

15


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Information regarding the fair value of the outstanding forward contracts was as follows (in thousands):
 Asset DerivativesLiability Derivatives
 BalanceFair ValueBalanceFair Value
 Sheet
Location
March 31, 2024December 31, 2023Sheet
Location
March 31, 2024December 31, 2023
Derivatives Not Designated as Hedging Instruments:
Economic hedge forward contractsPrepaid expenses and other current assets$22 $151 Accrued expenses$221 $106 

The following table presents the gross activity for all derivative assets and liabilities which were presented on a net basis on the Consolidated Balance Sheets due to the right of offset with each counterparty (in thousands):
Asset DerivativesLiability Derivatives
March 31, 2024December 31, 2023March 31, 2024December 31, 2023
Gross amounts of recognized assets$22 $151 Gross amounts of recognized liabilities$221 $106 
Gross amounts offset  Gross amounts offset  
Net amount of assets presented$22 $151 Net amount of liabilities presented$221 $106 

Information regarding the effect of derivative instruments on the consolidated financial statements was as follows (in thousands):
 Location in Financial StatementsThree-months Ended
 March 31, 2024April 2, 2023
Derivatives Not Designated as Hedging Instruments:
Gains (losses) recognized in current operationsForeign currency gain (loss)$(245)$(1,471)
16


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 12: Revenue Recognition
The following table summarizes disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands):
Three-months Ended
March 31, 2024April 2, 2023
Americas$83,135 $80,442 
Europe52,354 59,842 
Greater China30,049 33,172 
Other Asia45,259 27,668 
$210,797 $201,124 

The following table summarizes disaggregated revenue information by revenue type (in thousands):
Three-months Ended
March 31, 2024April 2, 2023
Standard products and services$187,632 $190,783 
Application-specific customer solutions23,165 10,341 
$210,797 $201,124 
Costs to Fulfill a Contract
Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $11,783,000 and $13,265,000 as of March 31, 2024 and December 31, 2023, respectively.
Accounts Receivable, Contract Assets, and Contract Liabilities
Accounts receivable represent amounts billed and currently due from customers which are reported at their net estimated realizable value. The Company maintains an allowance against its accounts receivable for credit losses. Contract assets consist of unbilled revenue which arises when revenue is recognized in advance of billing for certain application-specific customer solutions contracts. Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition.
The following table summarizes the allowance for credit losses activity for the three-month period ended March 31, 2024 (in thousands):
Balance as of December 31, 2023$583 
Write-offs, net of recoveries17 
Foreign exchange rate changes1 
Balance as of March 31, 2024$601 
17


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the deferred revenue and customer deposits activity for the three-month period ended March 31, 2024 (in thousands):
Balance as of December 31, 2023$31,525 
Deferral of revenue billed in the current period, net of recognition24,921 
Recognition of revenue deferred in prior period(16,184)
Foreign exchange rate changes(279)
Balance as of March 31, 2024$39,983 
As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations for our contracts that have an original expected duration of less than one year. The remaining unsatisfied performance obligations for our contracts that have an original expected duration of more than one year, primarily related to extended warranties, are not material.
NOTE 13: Stock-Based Compensation Expense
Stock Plans
The Company’s stock-based awards that result in compensation expense consist of stock options, restricted stock units ("RSUs"), and performance restricted stock units ("PRSUs"). In May 2023, the shareholders of the Company approved the Cognex Corporation 2023 Stock Option and Incentive Plan (the “2023 Plan”). The 2023 Plan permits awards of stock options (both incentive and non-qualified options), stock appreciation rights, RSUs, and PRSUs. Up to 8,100,000 shares of common stock (subject to adjustment in the event of stock splits and other similar events) may be issued pursuant to awards granted under the 2023 Plan. In connection with the approval of the 2023 Plan, no further awards will be made under the Cognex Corporation 2001 General Stock Option Plan, as amended and restated (the “2001 Plan”), and the Cognex Corporation 2007 Stock Option and Incentive Plan, as amended and restated (the “2007 Plan”). With the approval of the 2023 Plan, the 10,610,800 shares of common stock subject to awards granted under the 2001 Plan and the 2007 Plan that were outstanding as of May 3, 2023 may become eligible for issuance under the 2023 Plan if such awards are forfeited, cancelled or otherwise terminated (other than by exercise) (the “Carryover Shares”). As of March 31, 2024, forfeitures, cancellations, and other terminations from the 2001 Plan and the 2007 Plan have resulted in 707,900 Carryover Shares, raising the authorized total shares that may be issued under the 2023 Plan to 8,807,900.
As of March 31, 2024, the Company had 6,001,000 shares available for grant under its stock plans. Stock options are granted with an exercise price equal to the market value of the Company’s common stock at the grant date and generally vest over four or five years based upon continuous service and expire ten years from the grant date. RSUs generally vest upon three or four years of continuous employment or incrementally over such three or four-year periods. PRSUs generally vest upon three years of continuous employment and achievement of performance criteria established by the Compensation Committee of our Board of Directors on or prior to the grant date. Participants are not entitled to dividends on stock options, RSUs, or PRSUs.
18


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Stock Options
The following table summarizes the Company’s stock option activity for the three-month period ended March 31, 2024:
Shares
(in thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (in years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding as of December 31, 2023
9,008 $50.87 
Granted1,523 39.44 
Exercised(56)19.87 
Forfeited or expired(330)57.58 
Outstanding as of March 31, 2024
10,145 $49.11 6.30$21,531 
Exercisable as of March 31, 2024
5,973 $49.04 4.56$15,941 
Options vested or expected to vest as of March 31, 2024 (1)9,405 $49.28 6.09$20,336 
 (1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.

The total cash received as a result of stock option exercises for the three-month periods ended March 31, 2024 and April 2, 2023 were $1,121,000 and $3,976,000, respectively. In connection with these exercises, the tax benefit (expense) realized by the Company for the three-month periods ended March 31, 2024 and April 2, 2023 was $(29,000) and $(1,466,000), respectively.

The fair values of stock options granted in each period presented were estimated using the following weighted-average assumptions:
 Three-months Ended
 March 31, 2024April 2, 2023
Risk-free rate4.3 %4.0 %
Expected dividend yield0.76 %0.59 %
Expected volatility39 %39 %
Expected term (in years)4.74.3
Risk-free rate
The risk-free rate was based upon a treasury instrument whose term was consistent with the contractual term of the option.
Expected dividend yield
The current dividend yield was calculated by annualizing the cash dividend declared by the Company’s Board of Directors and dividing that result by the closing stock price on the grant date. 
Expected volatility
The expected volatility was based upon a combination of historical volatility of the Company’s common stock over the contractual term of the option and implied volatility for traded options of the Company’s stock.
Expected term
The expected term was derived from the binomial lattice model from the impact of events that trigger exercises over time.
19


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The weighted-average grant-date fair values of stock options granted during the three-month periods ended March 31, 2024 and April 2, 2023 were $14.66 and $17.79, respectively.
The total intrinsic values of stock options exercised for the three-month periods ended March 31, 2024 and April 2, 2023 were $1,055,000 and $3,439,000, respectively. The total fair values of stock options vested for the three-month periods ended March 31, 2024 and April 2, 2023 were $25,807,000 and $31,181,000, respectively.
Restricted Stock Units (RSUs)
The following table summarizes the Company's RSUs activity for the three-month period ended March 31, 2024:
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
Nonvested as of December 31, 2023
1,429 $54.22 
Granted765 38.82 
Vested(339)65.45 
Forfeited or expired(36)52.43 
Nonvested as of March 31, 2024
1,819 $45.68 
The fair value of RSUs is determined based on the observable market price of the Company's stock on the grant date less the present value of expected future dividends. The weighted-average grant-date fair values of RSUs granted during the three-month periods ended March 31, 2024 and April 2, 2023 were $38.82 and $46.61, respectively. There were 339,000 and 453,000 RSUs that vested during the three-month periods ended March 31, 2024 and April 2, 2023, respectively.
Tax obligations for vested RSUs are settled by withholding a portion of the shares prior to distribution to the shareholder. The total cash used by the Company to fund the tax payments for the three-month periods ended March 31, 2024 and April 2, 2023 were $3,981,000 and $7,032,000, respectively. In connection with these vested RSUs, the tax benefit (expense) realized by the Company for the three-month periods ended March 31, 2024 and April 2, 2023 was $(4,793,000) and $(2,718,000), respectively.
Performance Restricted Stock Units (PRSUs)
The following table summarizes the Company's PRSUs activity for the three-month period ended March 31, 2024:
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
Nonvested as of December 31, 2023
79 $52.23 
Granted55 39.05 
Vested  
Forfeited or expired  
Nonvested as of March 31, 2024
134 $46.82 
The fair value of PRSUs is calculated using the Monte Carlo simulation model to estimate the probability of satisfying the service and market conditions stipulated in the award grant. There were 55,000 and 46,000 PRSUs granted during the three-month periods ended March 31, 2024 and April 2, 2023, respectively. No PRSUs vested during the three-month periods ended March 31, 2024 and April 2, 2023.
Stock-Based Compensation Expense
The Company stratifies its employee population into three groups: one consisting of the CEO, one consisting of senior management, and another consisting of all other employees. The Company currently applies an estimated annual forfeiture rate of 0% to all stock-based awards for the CEO, 9% to all stock-based awards for senior management, and a rate of 13% for all other employees. Each year during the first quarter, the Company revises its forfeiture rate based on updated estimates of employee turnover. This resulted in a decrease to compensation expense of $1,832,000 and $234,000 during the three-month periods ended March 31, 2024 and April 2, 2023,
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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
respectively.
As of March 31, 2024, total unrecognized compensation expense, net of estimated forfeitures, related to non-vested equity awards, including stock options, RSUs, and PRSUs, was $86,273,000, which is expected to be recognized over a weighted-average period of 2.1 years.
The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended March 31, 2024 were $13,302,000 and $1,745,000, respectively. The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended April 2, 2023 were $16,579,000 and $2,308,000, respectively. No compensation expense was capitalized as of March 31, 2024 or December 31, 2023.
The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands):
 Three-months Ended
 March 31, 2024April 2, 2023
Cost of revenue$605 $621 
Research, development, and engineering4,389 5,890 
Selling, general, and administrative8,308 10,068 
$13,302 $16,579 
NOTE 14: Stock Repurchase Program
In March 2022, the Company's Board of Directors authorized the repurchase of $500,000,000 of the Company's common stock. Under this March 2022 program, the Company repurchased 479,000 shares at a total cost of $24,178,000 during the three-month period ended April 2, 2023 and 231,000 shares at a total cost of $9,339,000 during the three-month period ended March 31, 2024, leaving a remaining balance of $323,553,000 as of March 31, 2024. The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.
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COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 15: Income Taxes
The Company's effective tax rate was 32% and 2% for the three-month periods ended March 31, 2024 and April 2, 2023, respectively.
The Company has defined its major tax jurisdictions as the United States, Ireland, China, Japan, and Korea, and within the United States, Massachusetts. The statutory tax rate is 12.5% in Ireland, 25% in China, 34.6% in Japan, and 21% in Korea, compared to the U.S. federal statutory corporate tax rate of 21%. These foreign tax rate differences resulted in a favorable impact to the effective tax rate for both the three-month periods ended March 31, 2024 and April 2, 2023.
The Company recorded a net discrete tax expense totaling $3,085,000 for the three-month period ended March 31, 2024, and a net discrete tax benefit totaling $3,594,000 for the same period in 2023.
Discrete tax items for the three-month period ended March 31, 2024 included (1) an increase in tax expense of $1,123,000 related to stock-based compensation; (2) an increase in tax expense of $458,000 related to state tax matters; (3) an increase in tax expense of $458,000 for interest expense related to tax reserves; and (4) a net increase in tax expense of $1,046,000 for other tax matters.
Discrete tax items for the three-month period ended April 2, 2023 included (1) an increase in tax expense of $1,068,000 related to stock-based compensation; (2) a decrease in tax expense of $2,292,000 for releasing tax reserves on state tax credits; (3) a decrease in tax expense of $2,198,000 for adjustments to certain deferred tax assets; and (4) a decrease in tax expense of $172,000 for return-to-provision adjustments.
The Company’s reserve for income taxes, including gross interest and penalties, was $30,511,000 as of March 31, 2024, of which $28,144,000 was classified as a non-current liability and $2,367,000 was classified as an offset to deferred tax assets. If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period.
Within the United States, the tax years 2020 through 2022 remain open to examination by the IRS, and 2019 through 2022 remain open to examination by various state tax authorities. The tax years 2017 through 2023 remain open to examination by various international taxing authorities in other jurisdictions in which the Company operates.
In October 2021, more than 135 countries and jurisdictions agreed to participate in a "two-pillar" international tax approach developed by the Organisation for Economic Co-operation and Development (OECD), which includes establishing a global minimum corporate tax rate of 15%. The OECD published "Tax Challenges Arising from the Digitalisation of the Economy — Global Anti-Base Erosion Model Rules (Pillar Two)" in December 2021 and subsequently issued additional commentary and administrative guidance clarifying several aspects of the model rules. Since the model rules have been released, many countries have now enacted Pillar Two-related laws, some of which became effective January 1, 2024, and it is anticipated that more countries will follow suit throughout 2024. As of March 31, 2024, the Company does not expect Pillar Two taxes to have a significant impact on its 2024 financial statements.

NOTE 16: Weighted-Average Shares
Weighted-average shares were calculated as follows (in thousands):
 Three-months Ended
 March 31, 2024April 2, 2023
Basic weighted-average common shares outstanding171,692 172,624 
Effect of dilutive equity awards902 1,279 
Weighted-average common and common-equivalent shares outstanding172,594 173,903 
Stock options to purchase 8,176,000 and 6,515,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month periods ended March 31, 2024 and April 2, 2023, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive. Restricted stock units totaling 1,000 and 10,000 shares of common stock, on a weighted-average basis, were outstanding during the
22


COGNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
three-month periods ended March 31, 2024 and April 2, 2023, respectively, but were not included in the calculation of dilutive net income per share because they were anti-dilutive. No PRSUs were excluded in the calculation of dilutive net income per share for the three-month periods ended March 31, 2024 and April 2, 2023, as PRSUs were not anti-dilutive on a weighted-average basis.
NOTE 17: Business Combinations
On October 18, 2023, the Company acquired all the outstanding shares of Moritex Corporation ("Moritex"), a global provider of premium optical components based in Japan, for an enterprise value of ¥40 billion Japanese Yen, or approximately $270 million U.S. Dollars based on the closing date foreign exchange rate.
The cash-free, debt-free enterprise value was adjusted by cash acquired, debt assumed, and final working capital balances to arrive at total consideration to be allocated to assets acquired and liabilities assumed of ¥44,376,245,000 ($296,138,000 based on the closing date foreign exchange rate), of which ¥44,227,414,000 ($295,144,000) was paid in cash on the closing date and ¥148,831,000 ($994,000) was paid during the three-month period ended March 31, 2024 as a final purchase price adjustment based on the closing balance sheet.

NOTE 18: Subsequent Events
On May 2, 2024, the Company’s Board of Directors declared a cash dividend of $0.075 per share. The dividend is payable on May 30, 2024 to all shareholders of record as of the close of business on May 16, 2024.
23


ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements
Certain statements made in this report, as well as oral statements made by the Company from time to time, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Readers can identify these forward-looking statements by our use of the words “expects,” “anticipates,” “estimates,” "potential," “believes,” “projects,” “intends,” “plans,” “will,” “may,” “shall,” “could,” “should,” "opportunity," "goal" and similar words and other statements of a similar sense. These statements are based on our current estimates and expectations as to prospective events and circumstances, which may or may not be in our control and as to which there can be no firm assurances given. These forward-looking statements, which include statements regarding business and market growth opportunities and trends, future financial performance and financial targets, customer demand and order rates and timing of related revenue, managing supply challenges, delivery lead times, future product mix, research and development activities, sales and marketing activities (including our Emerging Customer Program), new product offerings and product development activities, customer acceptance of our products, the potential effects of emerging technologies, capital expenditures, cost management activities, investments, liquidity, dividends and stock repurchases, strategic and growth plans, our ability to maintain and grow key relationships, acquisitions, and estimated tax benefits and expenses and other tax matters, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) the technological obsolescence of current products and the inability to develop new products, particularly in connection with emerging artificial intelligence technologies; (2) the impact of competitive pressures; (3) the inability to attract and retain skilled employees and maintain our unique corporate culture; (4) the failure to properly manage the distribution of products and services; (5) economic, political, and other risks associated with international sales and operations, including the impact of trade disputes, the economic climate in China, and the wars in Ukraine and Israel; (6) the challenges in integrating and achieving expected results from acquired businesses, including our acquisition of Moritex Corporation; (7) information security breaches; (8) the failure to comply with laws or regulations relating to data privacy or data protection; (9) the inability to protect our proprietary technology and intellectual property; (10) the failure to manufacture and deliver products in a timely manner; (11) the inability to obtain, or the delay in obtaining, components for our products at reasonable prices; (12) the failure to effectively manage product transitions or accurately forecast customer demand; (13) the inability to manage disruptions to our distribution centers or to our key suppliers; (14) the inability to design and manufacture high-quality products; (15) the loss of, or curtailment of purchases by, large customers in the logistics, consumer electronics, or automotive industries; (16) potential impairment charges with respect to our investments or acquired intangible assets; (17) exposure to additional tax liabilities, increases and fluctuations in our effective tax rate, and other tax matters; (18) fluctuations in foreign currency exchange rates and the use of derivative instruments; (19) unfavorable global economic conditions, including high interest rates and fluctuating inflation rates; (20) business disruptions from natural or man-made disasters, such as fire, or public health issues; (21) exposure to potential liabilities, increased costs, reputational harm, and other adverse effects associated with expectations relating to environmental, social, and governance considerations; (22) stock price volatility; and (23) our involvement in time-consuming and costly litigation or activist shareholder activities. The foregoing list should not be construed as exhaustive and we encourage readers to refer to the detailed discussion of risk factors included in Part I - Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as updated by Part II - Item 1A of this Quarterly Report on Form 10-Q. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation to subsequently revise forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date such statements are made.
Executive Overview
Cognex Corporation (the "Company”) invents and commercializes technologies that address some of the most critical manufacturing and distribution challenges. We are a leading global provider of machine vision products and solutions that seek to improve efficiency and quality in a wide range of businesses across attractive industrial end markets. In addition to product revenue derived from the sale of machine vision products, the Company also generates revenue by providing maintenance and support, consulting, and training services to its customers; however, service revenue accounted for less than 10% of total revenue for all periods presented.
Machine vision is used in a variety of industries where technology is widely recognized as an important component of automated production, distribution, and quality assurance. Virtually every manufacturer or distributor can achieve better quality and efficiency by using machine vision. This results in a broad base of potential customers across a variety of industries, including automotive, logistics, consumer electronics, medical-related, semiconductor, consumer products, and food and beverage.

24


Revenue for the first quarter of 2024 totaled $210,797,000, representing an increase of 5% from the first quarter of 2023. The increase was primarily driven by incremental revenue arising from the acquisition of Moritex Corporation ("Moritex") that closed in the fourth quarter of 2023 and a strategic logistics project that completed in the first quarter of 2024, partially offset by lower spending trends across our factory automation business. Gross margin as a percentage of revenue was 67% for the first quarter of 2024 as compared to 71% for the first quarter of 2023 due primarily to the impact of a less favorable revenue mix and charges related to the Moritex acquisition.
Operating expenses for the first quarter of 2024 increased 5% from the first quarter of 2023. Investments in our “Emerging Customer” sales initiative and incremental costs related to the acquisition of Moritex were partially offset by the impact of cost management activities and lower stock-based compensation expense.
Operating income decreased to 7% of revenue for the first quarter of 2024 as compared to 11% of revenue for the first quarter of 2023. The lower gross margin percentage and continued investment in our "Emerging Customer" sales initiative more than offset higher revenue levels. This lower level of operating income, as well as the unfavorable impact of discrete tax items, resulted in net income of 6% of revenue, or $0.07 per diluted share, for the first quarter of 2024, as compared to 13% of revenue, or $0.15 per diluted share, for the first quarter of 2023.
Results of Operations
As foreign currency exchange rates are a factor in understanding period-to-period comparisons, we believe the presentation of results on a constant-currency basis in addition to reported results helps improve investors’ ability to understand our operating results and evaluate our performance in comparison to prior periods. We also use results on a constant-currency basis as one measure to evaluate our performance. Constant-currency information compares results between periods as if exchange rates had remained constant period-over-period. We generally refer to such amounts calculated on a constant-currency basis as excluding the impact of foreign currency exchange rate changes. Results on a constant-currency basis are not in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and should be considered in addition to, and not as a substitute for, results prepared in accordance with U.S. GAAP.
Revenue
Revenue increased by $9,673,000, or 5%, for the three-month period as compared to the same period in 2023. Revenue from the acquisition of Moritex that closed in the fourth quarter of 2023 contributed just under 8% to total revenue. Revenue from Moritex and a strategic logistics project that completed in the first quarter of 2024 was partially offset by lower spending trends across our factory automation business, most notably in the automotive and consumer electronics industries. The year-over-year decrease in automotive revenue was due to continued softness across the non-electric vehicle business, as well as delayed spending from electric vehicle battery manufacturers. Excluding the strategic project, logistics revenue was relatively flat year-over-year.
The following table sets forth our disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands) for the three-month periods ended March 31, 2024 and April 2, 2023.
Three-months Ended
March 31, 2024April 2, 2023$ Change% Change
(unaudited)
Americas$83,135 $80,442 $2,693 %
Percentage of total revenue39 %40 %
Europe$52,354 $59,842 $(7,488)(13)%
Percentage of total revenue25 %30 %
Greater China$30,049 $33,172 $(3,123)(9)%
Percentage of total revenue14 %16 %
Other Asia$45,259 $27,668 $17,591 64 %
Percentage of total revenue21 %14 %
Total revenue$210,797 $201,124 $9,673 %
Changes in revenue from a geographic perspective were as follows:
Revenue from customers based in the Americas increased by 3% for the three-month period as compared to the same period in 2023. The increase was primarily driven by a strategic logistics project completed in
25


the first quarter of 2024, partially offset by continued softness across our factory automation business.
Revenue from customers based in Europe decreased by 13% for the three-month period as compared to the same period in 2023. Similar to the Americas, the Europe region continued to experience broader softness across our factory automation business.
Revenue from customers based in Greater China decreased by 9% for the three-month period as compared to the same period in 2023. The Greater China region continued to experience a challenging business environment. The impact of lower spending trends was partially offset by the revenue contribution from the Moritex acquisition, as well higher revenue related to a large consumer electronics customer.
Revenue from customers based in other countries in Asia increased by 64% for the three-month period as compared to the same period in 2023. The increase was primarily driven by incremental revenue related to the acquisition of Moritex, for which the majority of revenue currently comes from customers based in Japan, as well as higher revenue from customers in the semiconductor and logistics industries.
Gross Margin
The following table sets forth our gross margin (in thousands) for the three-month periods ended March 31, 2024 and April 2, 2023.
Three-months Ended
March 31, 2024April 2, 2023$ Change% Change
(unaudited)
Gross margin$141,937 $143,740 $(1,803)(1)%
Percentage of total revenue67 %71 %
Gross margin as a percentage of revenue was 67% and 71% for the three-month periods in 2024 and 2023, respectively. The decrease was due to less favorable revenue mix in the first quarter of 2024 that included a strategic logistics project and Moritex products, both at lower-than-average gross margins. The lower gross margin percentage was also due to charges related to the Moritex acquisition that closed in the fourth quarter of 2023 that included the amortization of acquired technologies (approximately $900,000) and the final sell-through of acquired inventories that were written up to fair value (approximately $1,200,000). These decreases were partially offset by lower inventory costs driven by a reduction in premiums paid to brokers for the purchase of components as supply chain constraints eased.
Operating Expenses
The following table sets forth our operating expenses (in thousands) for the three-month periods ended March 31, 2024 and April 2, 2023.
Three-months Ended
March 31, 2024April 2, 2023$ Change% Change
(unaudited)
Research, development, and engineering expenses$37,105 $38,542 $(1,437)(4)%
Percentage of total revenue18 %19 %
Selling, general, and administrative expenses$90,628 $83,037 $7,591 %
Percentage of total revenue43 %41 %
Total operating expenses$127,733 $121,579 $6,154 %
Percentage of total revenue61 %60 %
Research, Development, and Engineering Expenses
Research, development, and engineering (RD&E) expenses decreased by $1,437,000, or 4%, for the three-month period as compared to the same period in 2023, primarily from lower stock-based compensation expense due to the impact of forfeiture adjustments. Personnel-related costs remained relatively flat, as the additional costs associated with a new team of optical engineers that joined Cognex with the acquisition of Moritex in the fourth quarter of 2023 were offset by lower deferred compensation costs related to the 2019 acquisition of Sualab Co, Ltd. that were fully paid in October 2023 and cost management activities that included the realignment of headcount to business levels.
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RD&E expenses as a percentage of revenue were 18% and 19% for the three-month periods in 2024 and 2023, respectively. We believe that a continued commitment to RD&E activities is essential to maintain or achieve product leadership with our existing products and to provide innovative new product offerings, as well as to provide engineering support for large customers. In addition, we consider our ability to accelerate the time to market for new products to be critical to our revenue growth and competitive position. These percentages are impacted by revenue levels and investment cycles.
Selling, General, and Administrative Expenses
Selling, general, and administrative (SG&A) expenses increased by $7,591,000, or 9%, for the three-month period as compared to the same period in 2023. The increase in SG&A expenses was primarily due to increased costs related to our “Emerging Customer” sales initiative, including additional headcount, travel expenses, and marketing costs. We launched this initiative in 2023 to serve a broader customer base and deepen penetration of less served markets, and are continuing to increase our investment in 2024.
Costs related to the acquisition of Moritex that closed in the fourth quarter of 2023 also contributed to the higher SG&A expenses. These costs included additional sales and support personnel-related costs, the amortization of acquired customer relationships and trademarks (approximately $1,200,000), and integration costs (approximately $1,300,000).
Lower stock-based compensation expense and cost management activities helped to offset the increase in SG&A expenses, including the realignment of headcount to support the Emerging Customer sales initiative.
Non-operating Income (Expense)
The following table sets forth our non-operating income (expense) (in thousands) for the three-month periods ended March 31, 2024 and April 2, 2023.
Three-months Ended
March 31, 2024April 2, 2023$ Change% Change
(unaudited)
Foreign currency gain (loss)$46 $394 $(348)(88)%
Investment income$3,120 $3,587 $(467)(13)%
Other income (expense)$196 $73 $123 168 %
Total non-operating income (expense)$3,362 $4,054 $(692)(17)%
The Company recorded foreign currency gains of $46,000 and $394,000 for the three-month periods in 2024 and 2023, respectively, primarily resulting from the revaluation and settlement of assets and liabilities that are denominated in currencies other than the functional currency of the Company, which is the U.S. Dollar, or its subsidiaries.
Investment income decreased by $467,000, or 13%, for the three-month period as compared to the same period in 2023. The decrease was primarily due to lower average investment balances, partially offset by higher yields on the Company's portfolio of debt securities. During the fourth quarter of 2023, net cash payments related to the acquisition of Moritex reduced cash available to invest by approximately $257 million, which resulted in lower investment income for the first quarter of 2024.
The Company recorded other income of $196,000 and $73,000 for the three-month periods in 2024 and 2023, respectively.
Income Tax Expense
The following table sets forth income tax information (in thousands) for the three-month periods ended March 31, 2024 and April 2, 2023.
Three-months Ended
March 31, 2024April 2, 2023$ Change% Change