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While we continue to see a challenging operating environment in the first quarter, we are more optimistic about the back half of the year.
We have started to see signs in longer cycle businesses that momentum could be building.
For the full year, we expect logistics to grow as we start to see infrastructure investment plans materializing, though logistics growth this year will likely still be below the long-term market growth we expect.
We expect our EV battery business to be a strong growth driver long term, but we are seeing more tentativeness from these customers, driven by uncertainty around end-user demand and the political environment.
The semi landscape is improving, as you have heard from the leading semi equipment manufacturers, with more optimistic 2024 outlook. Consumer electronics has positive long-term trends, but the timing and in-year contribution remains uncertain.
outlook for 2024
Transcript
2023 Q4
24 Feb 24
About half of our 2023 revenue decline was driven by 2 large long-standing customers who reduced their spending after heavy investment in prior years.
However, we are confident that we still maintained or gained share with each of these customers. In some of our end markets, notably EV battery and semiconductor manufacturing, large investment plans are underway. Many of these projects have not reached a stage where significant volume of our products is ordered, but we anticipate our customers' manufacturing projects that broke ground in 2022 and 2023 will represent future revenue opportunity for Cognex.
2 large customers cut sopending
Transcript
2023 Q4
24 Feb 24
Certainly, softer consumer demand in both the premium smartphone segment is a challenge. And I'd say customers are being more conservative on plans to invest capital to automate. And I'd also say some of the transition we are expecting in supply chain has been a little slower to materialize than we expected.
I think we're -- we normally don't have a really good sense of how next year is going to shape out until we get into the spring of next year, and that's normally when we give you an overall look.
CE weak -- smartphones.
Transcript
2023 Q3
8 Jan 24
Okay. And my last question is on Intelligrated -- on logistics. Honeywell talked about winning a -- seeing a significant jump in orders in the third quarter sequentially. Typically, how -- what's the lag behind -- how do you lag, just coming slight behind them? And should we -- is that a sustainable green shoot?
Robert Willett
So we also saw an increase in orders sequentially, not a large increase.
I think as we said, we sort of think we're bumping along the bottom.
I think that there we think of Intelligrated as one of the large integrators in the industry.
So if you look at the overall group, I think they're similar to kind of some of the things that we would see overall.
But I would say, in general, integrators get orders and contracts before we do.
So I'm not sure that I would view what Honeywell said as a leading indicator for us overall. But generally, as Intelligrated get more business, that flows through to us on a lag.
honeywell inmteligrated
Transcript
2023 Q3
4 Nov 23
I think what we're seeing is probably pretty consistent with what I think we've been explaining and communicating over the balance of the year which is -- there is a huge demand coming for EV battery manufacturing. But short -- there's a little bit of short-term headwind and some investment plans have had to change from Asia to Europe and even more from -- to the United States, right?
So that's meant that, some plants that were planned to be built in other geographies are being built, particularly in America, but also in Europe.
So I think that's one phenomenon that's playing out much as we expected. And as I think most of us understand when new plants go up, whether it's semiconductor or EV, it's quite a long time to build out the facility and then automation and particularly vision and robotics is something that goes in pretty late in the process.
So we're expecting that to come. But some of those projects are being delayed by the CHIPS Act for chips and the IRA Act for EV.
EV colour
Transcript
2023 Q3
4 Nov 23
From an end market standpoint, our biggest year-on-year declines were in Consumer Electronics, and semi. Revenue from many other end markets, including logistics, automotive and consumer products increased year-on-year in Q3.
outside cons elec revenue grew
Transcript
2023 Q3
4 Nov 23
As expected, Consumer Electronics faced the steepest decline in the quarter. This was driven by both project timing and softer demand, particularly in China, where the underlying market remains cautious and customers are managing inventory to lower levels.
cos elec very weak, poarticularly china
Transcript
2023 Q3
4 Nov 23
we’ve spoken about consumer electronics and the level of revenue we’re expecting much lower in the second half, partly as a result of that earlier revenue recognition of the $15 million at the end of Q2.
consume electronics
Transcript
2023 Q2
28 Aug 23
logistics, I think that’s what we’re seeing is kind of bumping along at this level currently and probably continuing at that level until things start to pick up with new investments.
logistics
Transcript
2023 Q2
28 Aug 23
In terms of automotive, what we see going on there is, we see nice strength building in EV, right? We’re seeing – we had – in the last quarter, we had good growth, more than 30% year-on-year growth in our EV business, but it’s still representing less than a quarter of our automotive business overall. And we’re seeing headwinds offsetting that currently in auto, I think as big car companies and dealers have excess inventory and there isn’t such a desire to produce going on.
So that’s sort of the take in automotive.
auto
Transcript
2023 Q2
28 Aug 23
I think if we turn our minds to a year ago, that was when we really saw some of our big customers in e-commerce really return off their investment in kind of new infrastructure right? And we’ve sort of unwound any backlog a long time ago related to that. And what we really see now is, we’re kind of we think we’re kind of bumping along the bottom of where we were.
Our logistics bookings are very consistent over the last few quarters as we’re waiting really for spending to come back on. That’s a phenomenon with large customers.
Then we also have, as you well know, a kind of base logistics business, which are other customers, right? That’s a business where we expect growth this year still, but we’re still also seeing some caution that we’re seeing elsewhere across all of our markets, where I think sort of macroeconomic concerns and other concerns perhaps hitting that market, too.
So I think we feel we’re kind of at the bottom of the trough. When will things pick up, I guess, is the big question. We don’t think this year, but we’re optimistic about next year.
logistoics bumoing alomg the bottom
Transcript
2023 Q2
28 Aug 23
China has not gained the momentum we expected at the time of our last call, and there is slower manufacturing activity in important factory automation markets, including Germany and the United States.
Our customers remain cautious with their capital investments, particularly in consumer electronics and semi where we have seen the steepest decline in demand.
weak conditions
Transcript
2023 Q2
22 Aug 23
Even so, automotive spending in the first quarter was tepid, driven by more cautious investment from our customers as they see demand for their products soften.
tepid spending in auto
Transcript
2023 Q1
31 May 23
For 2023, we believe our customers will not make heavy investments in new capabilities.
As a result, we expect annual revenue from consumer electronics will be modestly lower this year after growing in the mid-teens on a constant currency basis in 2022.
CE lower in 2023
Transcript
2023 Q1
31 May 23
consumer electronics.
consumer electronics
Transcript
2023 Q1
31 May 23
automotive,
automotive
Transcript
2023 Q1
31 May 23
logistics.
logistics
Transcript
2023 Q1
31 May 23
But can you maybe talk about it sounded like 2022 auto had a record year for you guys, up double-digits constant currency. What's your kind of big picture expectation for auto and EV battery this year particularly with the ongoing cutover to EV.
Just maybe your overall thoughts on how auto plays out this year versus 2022.
Robert Willett
Yes. Automotive grew in 2022, about 13% in constant currency. And we've seen some good momentum and strong growth potential there. It is EV and EV batteries and the use of more and more electronics in automotive design sensors and entertainment, et cetera, which is really, I think, driving the use of machine vision that's somewhat offset, but certainly not completely offset by a reduction in internal combustion engine type business, powertrain, which is where most machine vision used to be sold in that segment. We're feeling optimistic about the long-term growth drivers for that. There will be some pun intended bumps in the road around the timing of deployment of some of the EV spend, I think, which will lead to some volatility in that. But I think over -- I think we think we're in a pretty good three year period with what's going on in the industry with our capabilities, the SEC acquisition we discussed a lot of drivers, I think, really, again, no pun intended, helping us grow that business over the years to come.
Paul Todgham
Yes, if you want a little bit of color kind of by quarter, Rob gave some feedback about the slow start to the year more broadly. I will say automotive is a piece of that, right? References to some legislation that are potentially along with PMI, leading to some delays in investment and reshuffling the plans and so on auto would be a piece of that. Historically, automotive is one of our less volatile industries quarter on quarter and so on. But -- so I think we think we're off to a slower start this year. And then if we looked against last year, obviously, Q3 was a particularly low quarter for automotive, just given the fire and other factors.
So those would be the sort of relevant call it, Q1 being low, Q3 ideally would be up.
Auto colour, up 13% cc in 2022, EV/battery good,auto slow start to 2023
Transcript
2022 Q4
20 Feb 23
The mix between industries, certainly, as Logistics remains slightly dilutive to our margins overall.
logistics is mgn dilutive
Transcript
2022 Q4
20 Feb 23
is there anything that you would call out that we should think about as we try to model out 2023?
Robert Willett
Rob, I think you're right in the characterization of last year. We as normal last year, as I'll tell you now, we really don't have a clear picture of how it's going to play out and we'll have a much better picture when we talk next in May, and we'll give you, I think, a clearer read at that point. And then last year, yes, we bought high single digits and our growth rate was substantially north of that, right? So as the year played out. But there are things that drive our growth in electronics. And I think there are factors that are coming together quite nicely as we look out over longer periods, right?
Certainly, continued waves of investment in consumer electronics. There's a lot of new innovation coming, and we see it particularly in areas like virtual reality and augmented reality. We see electronics manufacturers beginning to diversify their supply chains outside of China, particularly. And generally, that's new equipment that we're helping them install in those markets. And then I think a really major trend really links to deep learning and edge learning, which is the desire to replace there are millions of visual inspectors that are working in these markets today where I think COVID has made customers particularly sensitive to their vulnerability to large numbers of human inspectors.
And as a result, I think we're seeing a lot more interest in applying our technology to help address that vulnerability that they have.
So I don't really know how this year is going to shape up I have a lot of optimism about our future in electronics, and we'll have a clearer view on this year's kind of CapEx and timing and spending. We certainly expect to at least maintain, if not gain share with some of those large consumer electronics customers that we have where we've built such great relationships over time.
And you can see one of them referenced as one of our largest customers last year as they have in a number of years.
CE better than expected in 2022, more colour in May
Transcript
2022 Q4
20 Feb 23