Cognex Corporation (NASDAQ:CGNX) Q3 2019 Earnings Conference Call - Final Transcript
Oct 28, 2019 • 05:00 pm ET
of the United States and particularly in business that relates to China.
Unlike Q3, we don't expect growth from logistics to offset the overall revenue shortfall in Q4. Even though logistics revenue grew by approximately 50% year-on-year in Q3, we expect it to decrease year-on-year in Q4. This is the result of a major customer delaying delivery of large orders for new sites.
Gross margin for Q4 is expected to be in the mid 70% range, consistent with the gross margin for Q3. Operating expenses are expected to increase by mid to high single digits on a sequential basis. Approximately 4 percentage points are attributable to incremental costs for the Sualab team, estimated amortization of intangibles and expenses associated with the acquisition.
The effective tax rate is expected to be 16%, excluding discrete tax items. I'd like to make you aware of two discrete tax items expected to be recorded in 2019. The first item involves changes to our corporate tax structure, which came about because of legislation passed by the European Union. For that one, we expect a discrete tax benefit of between $100 million and $125 million and a slight increase to our 16% effective tax rate, excluding discrete events going forward.
The second item is our decision to move acquired Sualab technology out of Korea to align with our corporate tax structure. This is expected to result in a discrete tax expense of between $27 million and $33 million. These items continue to be evaluated, and because of that, we do not have more detail at this time.
With that, we will open the call for questions. Operator, please go ahead.