Cognex Corporation (NASDAQ:CGNX) Q3 2019 Earnings Conference Call - Final Transcript
Oct 28, 2019 • 05:00 pm ET
Greetings, and welcome to the Cognex's Third Quarter 2019 Earnings Conference Call. [Operator Instructions]
It is now my pleasure to introduce Susan Conway, Senior Director of Investor Relations. Thank you. Please begin.
Thank you, and good evening, everyone.
With us today are Cognex President and CEO, Rob Willett; Vice President and Corporate Controller, Laura MacDonald; and Cognex Treasurer, Chris Stagno.
I'd like to point out that our earnings release and quarterly report on Form 10-Q are available on our Investor Relations website at investor.cognex.com. Both contain highly detailed information about our financial results. During the call, we may use a non-GAAP financial measure if we believe it is useful to investors or if we believe it will help investors better understand our results or business trends. You can see a reconciliation of certain items from GAAP to non-GAAP in Exhibit 2 of the earnings release. Any forward-looking statements we made in the earnings release or any that we may make during this call are based upon information that we believe to be true as of today. Things often change, however, and actual results may differ materially from those projected or anticipated. You should refer to our SEC filings, including our most recent Form 10-K, for a detailed list of these risk factors.
With that, now I'd like to turn the call over to CEO, Rob Willett.
Hello, everyone. Thanks for joining us today.
I know most of you are used to hearing Cognex's Chairman, Dr. Bob Shillman, welcome participants to our earnings call. Dr. Bob is unable to join us this evening due to a prior commitment. He sends his regards, and he looks forward to talking with you on our next call.
Cognex delivered Q3 results in line with our expectations, with revenue at the top end of our July guidance. That said, our revenue was down both year-on-year and sequentially as a result of the ongoing slowdown in manufacturing investment. The decline can be almost entirely attributed to consumer electronics, which decreased by approximately $50 million, roughly 50% from Q3 of 2018. The automotive and the broader industrial sectors also continue to weaken due to persistent global economic uncertainty and trade conflicts, particularly in Europe and China. That deterioration was partially offset by growth in logistics, which increased by approximately 50% year-on-year. We have confidence in our logistics strategy, and we believe we can continue to grow at that 50% rate over the long-term.
In logistics, well-known traditional brick-and-mortar retailers are starting to invest heavily in logistics automation to compete more effectively with their e-commerce competitors. They are changing their supply chain, and they are looking to Cognex's industry-leading products to help them implement an automation strategy to fulfill orders rapidly, reliably and cost effectively. Near-term market conditions notwithstanding, the long-term potential for machine vision and for Cognex is unchanged. Our long-term operating model remains intact, and with a target of 20% compound annual growth, mid-70s gross margin and 30% operating margin.
Now, I'd like to say a few