Cognex Corporation

Greetings and welcome to the Cognix second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Susan Conway, Senior Director of Investor Relations. Thank you, ma'am. You may begin.

Thank you. Good evening, everyone. Welcome to our second quarter earnings conference call. With us are Rob Willett, Cognix's president and CEO, and Paul Todgham, our chief financial officer. We'll start with prepared remarks and then open the call for questions. I'd like to remind you that our earnings release and quarterly report on Form 10-Q are available in the investor relations section of our website at www.cognex.com forward slash investor. Both contain detailed information about our financial results. During the call, we may use a non-GAAP financial measure if we believe it is useful to investors or if we think it will help them better understand our results or business trends. You can see a reconciliation of certain items from GAAP to non-GAAP in Exhibit 2 of the earnings release. Any forward-looking statements 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. However, things can change and actual results may differ materially from those projected or anticipated. For a detailed list of risk factors, you should refer to our SEC filings, including our most recent Form 10-K and Form 10-Q we filed tonight for Q2. Now I'll turn the call over to Rob.

Thanks, Sue. Hello, everyone. Thank you for joining us. As shown in today's news release, Cogmex reported the highest quarterly revenue in our 40-year history, along with terrific profitability for the second quarter of 2021. Revenue was also at the top of the expected range we gave as guidance last quarter. Revenue grew by 59% from Q2 of 2020, making it the fourth quarter in a row in which we have reported year-on-year revenue growth of more than 30%. This high level of achievement was made possible by the efforts of Cosnoids around the world. They worked hard to support customers and meet increasing order rates in a very difficult supply environment. Logistics. was again our largest end market in Q2. We also reported another record revenue quarter for logistics due to continued strong demand from the e-commerce sector. Cosnex is recognized as the technology leader in logistics by companies investing for improved productivity and throughput. That's leading to a broadening customer base for us. Plus, sectors that struggled in 2020, such as brick and mortar retail, are restarting their automation plans. Consumer electronics was a large contributor to growth in Q2. Revenue was higher than we expected because some business happened earlier than we anticipated. While a highlight for this quarter, it does not change our overall view of consumer electronics for the year. We continue to believe revenue from consumer electronics for 2021 will be modestly below the level we reported last year. This is due to lower levels of investment in smartphone manufacturing and in devices needed for online learning and working from home when compared to a year ago. Revenue from manufacturing industries increased substantially from depressed levels in Q2 of 2020. Automotive set a new quarterly revenue record after being hard hit last year. Other highlights included consumer products and food and beverage. Semi also grew well year on year. Medical related industries did too. Moving now to our supply chain. We're facing the most difficult supply chain environment I've experienced in my 13 years at Cogmex. The use of Cogmex products is growing worldwide as manufacturers respond to labor shortages and increasing consumer demand. They're implementing machine vision to improve their throughput and the quality of their products. At the same time, Cogmex and many other companies are under pressure from record-long component lead times, vendors struggling to supply parts, freight delays and capacity constraints, labor shortages, and COVID concerns. At a time like this, we're thankful we never focused on just-in-time inventory or squeezed our suppliers for short-term gains. Our close, long-term relationships with our suppliers have been helping us. Even so, the situation intensified as we moved through Q2. We continued to aggressively secure strategic components and move fast to certify alternative parts where we see shortages. Our suppliers understand that, and our customers appreciate what we're doing to accommodate their requests. Let's talk next about new product development. The spring and summer are an exciting time at Cognex. It's when we bring our technical and sales leadership together for strategic planning. These are some of my favorite weeks of the year. There's a tremendous excitement within Cogmex about the new technologies and products we expect to introduce over the next few years and the growth opportunities ahead of us. Cogmex's industry-leading vision tools are a key differentiator for us in solving our customers' most challenging applications. Our long-term development and investment in RD&E continue to make our vision tools progressively stronger, more accessible, and easier to use. An example is Vision Pro X, a recent major update to our PC-based vision platform. Vision Pro X enables customers to use Cognex rules-based vision software and deep learning technology together more easily in a powerful development environment. Along with Vision Pro X, we introduced SmartLine, the industry's first hybrid smart tool for PC vision that combines the high accuracy of 2D vision with the flexibility of deep learning. SmartLine quickly solves complex line detection for high precision alignment applications in consumer electronics assembly and semiconductor manufacturing processes that are too challenging for traditional vision alone. Furthermore, our new Vision Pro Deep Learning 2.0 software release, which runs with Vision Pro X, adds new deep learning capabilities from Cosmex that enable the high-precision measurement of scratches, blemishes, cracks, and other defects. This is particularly valuable in demanding medical and electronics applications. We're also leveraging a software advantage with new optics technology from investments we've made in image formation. An example is our new high-speed steerable mirror, which features next-generation liquid lens technology to significantly expand the field of view for our powerful Dataman 470 fixed-mount barcode reader. The steerable mirror is ideal for quickly reading a high volume of barcodes at shorter working distances, such as in pharmaceutical packaging aggregation, as well as across large fields of view, such as reading many barcodes on a large pallet in a warehouse. Both applications previously required either the integration of multiple readers or the programming of PC vision and many high resolution cameras. In other product news, we continue to make good progress transitioning our logistics business from customized to standard solutions. These standard solutions are easier to deploy and require less hands-on engineering support from Cosmex. We believe this will enable us to scale more easily and report higher gross margins in logistics over the long term. It's gratifying to see the hard work and ingenuity of Cognoids come to market in innovations like these. They underscore the value of our long-term investments in RD&E. The decisions we make on where to invest and our work hard, play hard, move fast approach to business continue to serve us well. Now, I will hand the call over to Paul, the details of the quarter.