Cognex Corporation (NASDAQ:CGNX) Q4 2019 Earnings Conference Call - Final Transcript

Feb 13, 2020 • 05:00 pm ET

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Cognex Corporation (NASDAQ:CGNX) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Greetings, welcome to the Cognex Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I will now turn the conference over to our host, Susan Conway, Senior Director of Investor Relations. Thank you. You may begin.

Executive
Susan Conway

Thank you and good evening everyone. I'm Susan Conway, Senior Director of Investor Relations. With us today are Cognex's Chairman, Dr. Bob Shillman; President and CEO, Rob Willett; Vice President and Corporate Controller, Laura MacDonald; and Cognex's Treasurer Chris Stagno. I'd like to point out that our earnings release and our annual report on Form 10-K are available on our Investor Relations website at www.cognex.com/investor. Both contain highly detailed information about our financial results. During the quarter, 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 business results. You can see a reconciliation of certain items from GAAP to non-GAAP in exhibit two of the earnings release. Any forward-looking statements that 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 Dr. Bob.

Executive
Robert J. Shillman

Thanks Sue and hello everyone, welcome to our fourth quarter of 2019 year-end earnings conference call. Normally, I'd say I was pleased to report record fourth quarter net income and earnings per share, but this time records in net income and EPS were only achieved because of the substantial discrete tax item in Q4 that combined, there are a number of them, to benefit net income by $61 million. Unfortunately, without those discrete items, Q4 revenue, net income, and EPS all decreased both year-on-year and sequentially due to ongoing weaknesses in many of the industrial markets that we serve. I'll now turn the call over to my partner and Cognex's CEO, Rob Willett, who will provide details on our 2019 results. Rob, the microphone is yours.

Executive
Robert Willett

Thank you, Dr. Bob and good evening everyone. Looking back at 2019, annual revenue declined by approximately $80 million or 10% due to a simultaneous reduction in spending by customers in our two largest markets, consumer electronics and automotive, which together represented approximately half of our revenue. As we discussed on previous calls during 2019, customers in consumer electronics reduced and deferred investments on large automation projects that included machine vision primarily related to smartphone manufacturing. In particular, no significant new technology or form factors for smartphones entered the market in any major way in 2019. As a result, revenue from consumer electronics contracted by about 30% year-on-year. In automotive, revenue declined by approximately 10% from 2018.