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I think what we've already said is that we're expecting a growth in our electronics market.
I think we've said around in double digits low double digits. Obviously, we're expecting significant contraction in our logistics business right? Automotive overall I think probably moderate performance in that market and similar in other markets overall.
2022 end market colour
Transcript
2022 Q3
21 Dec 22
So, this is Paul. It was smaller this quarter but when it was at its worst which was really Q4 last year Q1, Q2 this year it was about a 400 basis point impact on our gross margin give or take 50 basis points or so.
So very significant. And I do think as you're covering many companies you hear a lot of talk about freight and component cost inflation and some element of broker buys. My read from studying our peers is we're sort of unique in this being such a large phenomenon. And partly that's because we do airfreight already today.
So we haven't been substituting ship for air like some peers or others in the automation industry have. And that we've been I think doing quite a good job of offset core component inflation with the pricing actions we took since implementing a pricing strategy sort of mid to around the summer of last year that we've been executing against.
So, what it's been this quarter it was lower than that maybe call it half of that or so. And I do expect to see that winding down but we're going to be carrying some amount of that into the first half of next year.
colour on the impact on GM from buying expensive spot rate components previously
Transcript
2022 Q3
20 Dec 22
And our answers will have really a good picture of the electronics business next year come April. That's when things sort of really kind of locked in for the year. It's been a good year for us relative to the rest of our business in electronics. And I think may be a phenomenon again where we're really connected to the technology leaders in the industry that's, sort of, more high end and more advanced consumers of manufacturing technology.
So they've been investing and that's very promising.
So what kind of drives that kind of up or down year generally kind of new technologies coming into the market whether it's in smartphones itself or in other similar type technologies or consumer electronics technologies. And there's always a lot of exciting stuff going on in that industry. It's more a matter of when is it coming to market. And how much the timing plays out next year versus in future years.
So that's what we know in April.
April is when Cognex knows how cons elec will pan out for 2023
Transcript
2022 Q3
20 Dec 22
of you've got data points showing that people are buying through smartphones and PCs and whatnot after the last couple of years, but it seems like the capital spending side maybe is holding in better.
So just curious what your -- are your customers investing ahead of new product launches or new types of technology within that? I'm just trying to get a sense of the difference between maybe the production rates versus the capital spending side?
customers spending on new product launches
Transcript
2022 Q3
20 Dec 22
But in this case, it does expose us to a few big players who really are not looking to invest particularly in greenfield sites as we move into next year. And our exposure that was more than 50% of our business last year was related to that.
So I would think our exposure to that part is going to be down more than the companies that you quoted to perhaps have a broader exposure to broader conveying and material handling.
worse than Honeywell because og 50% expisure to a few big players
Transcript
2022 Q3
20 Dec 22
I think folks like Honeywell and Qian are teeing up down 30-ish type numbers.
You talked about 10 points of outgrowth in your core business. Would you think about if the market were to be down that much your outgrowth formula would hold, or there's some mix or comp issue that you think would be more of a distinguishing factor?
honeywell warehouse automation
Transcript
2022 Q3
20 Dec 22
And then the question really is, when does the large customer business come back in the – is it back half of 2023? Is it 2024?
when will amazon come back spending?
Transcript
2022 Q3
20 Dec 22
I think to kind of contextualize that, we have significant and growing base of regular logistics customers, right? And they're growing and they're growing very strongly outside the US. And that -- and we expect that to continue, right? And we're expecting continued strength in that to be one of the fastest-growing parts of our business. It's less than half of our logistics business, but it's -- I mean last year it was. And -- but the growth dynamic and the broadening of those customers and the geographic broadening is really a great thing for us. Then, we have this other dynamic that we're speaking to a lot, which are large technology e-commerce players and there are a few of those, right? And one I think we focus on a lot of your questions often do, but there are a few of those customers and they really are going through a similar phenomenon where they're taking this kind of time out from investing having really overbuilt capacity and seeing some more challenging environments post pandemic right? So I think the big challenge and one that's hard to call is when will that investment cycle turn and those companies start investing more heavily again. I don't think, it's in the first half of next year. I feel confident in saying that. But at some point we're very confident it will return. And we just have so much value to add and we all see that. And we have so much new technology to bear beyond barcode reading that we're very confident about that coming back. But I certainly am not expecting it in the first half of next year.
return to spending in logistics won't be in Half 1 of 2023
Transcript
2022 Q3
20 Dec 22
No I mean I think that's right. After Q3 we're now down on logistics year-on-year.
So we know we said we'd be down for the year. We're now there. And with Q3 going to be the most down as we've sort of communicated last quarter. Consumer electronics is playing out really as we expected and communicated in our last earnings call. And again automotive gets a little bit clouded by the fire impact and currency and so on. But we're generally pleased by what we're seeing in EV and there's tentativeness elsewhere, the broader market in Europe for instance, there a some tentativeness in automotive.
end market colour
Transcript
2022 Q3
20 Dec 22
Business activity in the broader factory automation market is holding up although it's less robust than it was a year ago particularly in Asia and we're not expecting a big budget flush this year overall.
factory automation ok
Transcript
2022 Q3
20 Dec 22
That level represents a decline of roughly 25% from both last year's record-setting performance and Q2 of 2022. It was better than we expected, when we gave our updated Q3 guidance, but still lower than we would have anticipated earlier in the year. The business disruption from the fire caused revenue from most end markets to decline in Q3 year-on-year, and all to decline on a sequential basis. The quarter was also impacted by lower revenue from large customer projects in logistics
fire hit sales
Transcript
2022 Q3
20 Dec 22
t Analyst Day we introduced an updated view of our served market. The new estimate is $6.5 billion up 55% from our previous estimate of $4.2 billion that we shared with you in 2019. We believe the market will grow by 13% over the medium to long-term.
served market est up to 6.5bn from 4.2bn
Transcript
2022 Q3
20 Dec 22
Our differentiated technology and the opportunities we see in logistics gives us confidence we can continue to be a share gainer and grow this part of our revenue by 30% over the long-term.
logistics "30%" grower over time
Transcript
2022 Q3
20 Dec 22
We believe that logistics will continue to be an important growth driver for us. It has emerged as the largest, and we expect it will remain the fastest-growing sector in our served market. We estimate the logistics segment to be a $2 billion market growing by 20% long-term.
still believe in LT logistics growth
Transcript
2022 Q3
20 Dec 22
ur largest customer and other e-commerce technology leaders are taking a post-pandemic timeout to absorb excess capacity. This follows two years of heavy investment through Q3 of 2021, which you may recall was a record-setting quarter for both our logistics revenue and Cognex overall.
logistics still slow
Transcript
2022 Q3
20 Dec 22
Turning first to the fire. We believe that business disruption is now behind us. The leadership team and I appreciate the hard work and collaboration of Cognoids and our suppliers in the aftermath of the fire. They demonstrated the best of our culture during a difficult time. Together, they helped replenish the significant component inventory positions that were destroyed in the fire and fulfill customer demand more quickly than we anticipated. These efforts led to strong shipments at quarter end, which allowed us to reduce the negative impact of the fire on Q3 revenue to roughly $40 million or about half of what we estimated in our original guidance. This also resulted in exceeding the updated guidance we published in September.
fire disruption over, better than expected re:impact on revenue
Transcript
2022 Q3
20 Dec 22
Cognoids have built a remarkable $300 million business in logistics, a market that is still in the early stages of adopting Cognex machine vision technology. We see the engineering support, we provide customers to get up and running as a worthwhile cost of winning share, but it is slightly dilutive to our overall gross margin. We're making good progress transitioning our logistics business from customized to standardized solutions that are easier for customers to deploy
serving customers
Transcript
2021 Q4
22 Sep 22
One, in keeping with our customer first company value, we've been prioritizing delivery during this time of global chip shortages that added incremental costs in 2021, due to the significant premiums we've paid to procure components through brokers, and for expedited freight. The good news is that our customers appreciate what we're doing for them.
servibg customers
Transcript
2021 Q4
22 Sep 22