Cognex Corporation (NASDAQ:CGNX) Q3 2019 Earnings Conference Call - Final Transcript
Oct 28, 2019 • 05:00 pm ET
estimate as a result of both growth in the underlying market and new opportunities that are now addressable with Cognex products. Despite near-term challenging market conditions, we believe our served market will grow in the low teens over the long term, and we expect to continue to outperform market growth as a result of our superior technology and the strength of our customer relationships.
Now I will turn the call over to Laura for financial details from the third quarter. Laura, the microphone is yours.
Laura A. MacDonald
Thank you, Rob, and hello, everyone.
Revenue in Q3 was $183 million, at the high end of our expected range. Revenue declined 21% year-on-year due to lower sales in consumer electronics, particularly smartphone manufacturing. Revenue from automotive and the broader factory automation market also declined from Q3 '18, partially offsetting the shortfall with growth in logistics.
Gross margin of 74% was down slightly from Q3 '18 and consistent with Q2 '19 despite lower revenue. Operating expenses declined from both Q3 '18 and the prior quarter, reflecting reduced expenses for incentive compensation plans. We continue to be prudent with discretionary spending without changing product development plans. Operating margin in Q3 was 24%, representing a decline both year-on-year and sequentially due to the lower revenue environment. Excluding discrete tax items, earnings per share were $0.23 in Q3 '19 compared with $0.39 in Q3 '18 and $0.27 in Q2 '19.
Looking at revenue growth year-on-year from a geographic perspective, the Americas was the best performing region, increasing mid-teens year-on-year due to strong growth in logistics. The impact of this quarter's substantially lower contribution from consumer electronics was most noticeable in Europe, where revenue declined by more than 45% year-on-year.
Customers in Greater China continue to defer their capital spending plans, resulting in low double-digit revenue decline year-on-year. This decline would have been greater in Greater China and less extreme in Europe if not for procurement changes made by certain customers in consumer electronics, shifting their purchases from China -- to China from Europe. In the rest of Asia, revenue was relatively flat with Q3 '18.
Turning to our strong balance sheet. We ended the quarter with $918 million in cash and investments and no debt. Even after purchasing Sualab, we have enough capital to support our organic growth objectives and M&A plans and for sharing our ongoing success with our shareholders through stock buybacks and dividends. In that regard, our Board of Directors has increased the quarterly cash dividend by 10% to $0.055 per share. The dividend is payable on November 29 to all shareholders of record on November 15.
Now I'll turn the call back to Rob.
Thank you, Laura.
Moving next to guidance. We expect revenue for the fourth quarter will be between $155 million and $165 million, making it the lowest revenue-generating quarter this year compared with revenue of $193 million reported in Q4 of 2018. Industrial markets are significantly weaker today and continue to deteriorate, led by automotive. The contraction is most pronounced outside