Cognex Corporation

only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greer Aviv, head of investor relations. Thank you.

Please go ahead. Thank you, operator. Good morning, everyone. And thank you for joining us. Our earnings release was published yesterday after market closed and our 10 key was filed this morning. The earnings materials are available on our investor relations website. We are joined here today by Matt Moschner, our CEO, and Dennis Fair, our CFO. Today we plan to share several key messages with you, including how we're positioning Cognx for long-term success, an update on our technology leadership and end market trends, our performance in the quarter, and our expectations for the third quarter. After prepared remarks, we'll open the lines for Q&A. Both our published materials and the call today will reference non-GAAP measures. You can find a reconciliation of certain items from GAAP to non-GAAP in our press release and earnings presentation. Today's earnings materials will contain forward-looking statements, including statements regarding our expectations. Our actual results may differ from our projections due to the risks and uncertainties that are described in our SEC filings, including our most recent form, 10K. With that, I'll turn the call over to Matt.

Thanks, Greer. Good morning, everyone. And thank you for joining us today. I'm excited to speak with you as the new CEO of Cognx. While this is my first earnings call in this role, I've had the privilege of being a Cognoid for over eight years. Since I joined in 2017, I've worked alongside many of the talented individuals who continue to drive our success. And I've developed a deep understanding of our business, technology, culture, and the values that make Cognx so unique. At Investor Day last month, I outlined three strategic objectives that will guide Cognx's future, which can be seen on slide three of the earnings presentation. For those who could not join us in Investor Day, I will briefly recap those strategic objectives and how I'm positioning Cognx for long-term success. First, we will target to be the number one provider of AI technology for industrial machine vision applications. Our continuous innovation in this area will help customers solve increasingly complex vision problems, like cosmetic defect inspections, faster, more accurately, and with less setup time. Second, we're committed to providing the best customer experience in our industry. Our goal is to deliver a seamless engagement from first interaction to full-scale deployment through our direct sales model, a unified product ecosystem, and upgraded global customer support capabilities. And third, we're focused on doubling the number of customers that we serve by scaling our -to-market engine to reach new markets and geographies, while better serving small and mid-size manufacturers. Our Salesforce transformation is already generating good results and is an component of this strategy. To support the execution of our strategic objectives, I announced my newly formed leadership team on July 17th, as outlined on slide four. This team has decades of experience in our industry and with Cognx, and together we will drive an ambitious, profitable growth agenda, delivering even greater value to our customers and further strengthening our leadership and industrial machine vision. Q2 represents an early but meaningful step forward in this journey, marked by continued adjusted EBITDA margin expansion and strong free cash flow generation. Turning to slide five, let's begin with a few financial highlights from the second quarter. The momentum we saw in Q1 continued in Q2, with revenue of $249 million increasing 4% -on-year, representing our fourth consecutive quarter of organic growth. Broader factory automation was stronger in Q2, driven by consumer electronics and packaging. Our commitment to bottom line profitability is reflected in our strong Q2 performance, with adjusted EBITDA increasing 9% -over-year, and our adjusted EBITDA margin expanding by 80 basis points to 20.7%. This is the highest quarterly margin we've achieved in the past two years. In addition to the strong financial performance in Q2, we are executing against our strategic objectives. First, we continue to reach new customers through our Salesforce transformation and expansion, and we're seeing promising gains, including increased revenue growth and key verticals such as packaging. Second, we continue to drive AI innovation, which I will talk more about in detail as we turn to slide six of the presentation. At Cognx, we have over four decades of technology leadership, and this remains the core to our identity. As we shared with you at Investor Day, we're proud to continue that legacy with One Vision, a cloud-based platform designed to transform the way manufacturers build, train, and scale AI-powered vision tools with unmatched ease of use. One Vision reflects our commitment to making advanced machine vision easy, not just powerful, but practical and scalable. Although still in early stages, feedback from initial One Vision adopters has been positive. A standout example is Paldot, one of Korea's largest noodle manufacturers. Paldot's noodle production includes a multi-step inspection process, with the final step focused on verifying the width of the packaging seal, a critical factor in preventing package rupture. Paldot wanted to further enhance their quality control inspection performance by driving down false reject rates to very low levels, which can be difficult to complex PC-based systems. But with One Vision, Paldot was able to collect images directly from their production line, train a powerful new model in the cloud, and seamlessly deploy it back to the edge. This streamlined approach eliminated the need for a new complex system, it expanded our device footprint with Paldot, and positioned us to support their growth across additional lines. With One Vision, we're setting a new benchmark for how game-changing AI vision tools are deployed, one that simplifies complexity without compromising performance. As we expand this capability to additional Cognex products in the future, we expect it will further strengthen our position as the technology leader in our industry. Turning now to an update on our end markets, which you'll find on page seven of the earnings presentation. Our discussion of 2025 trends is based on current observations, while acknowledging ongoing macroeconomic uncertainties. Strong second quarter growth in consumer electronics, logistics, and packaging was somewhat offset by a modest slowdown in semi and ongoing weakness in automotive. Starting with logistics, revenue continued to grow double digits year over year, marking our sixth consecutive quarter of growth in this market. Importantly, growth was across a broad base of customers. For the full year, we continue to expect strong growth in logistics, driven by ongoing investments by large e-commerce players in further penetration of the broader logistics market. Next is automotive. As expected, automotive continued to decline year over year, as it remains our most challenged vertical, reflecting broad headwinds to this industry. Looking to the full year, we remain cautious about the outlook for auto, as we have previously discussed, and continue to anticipate a more modest decline in 2025 relative to last year's 14% contraction. Turning to packaging, our business showed positive momentum in Q2, with revenue up mid-sigil digits year over year. Growth was driven by contributions from both healthcare and FMCG. Our Salesforce transformation is delivering impactful results, helping us reach a broader cross-section of packaging customers. For the full year, the outlook for packaging is incrementally more positive. Turning to consumer electronics, Q2 revenue increased year over year, reflecting broad base strength. We continue to expect revenue to be relatively similar in Q2 and Q3, implying another quarter of strong year over year growth in Q3. As a result, our full year growth outlook for electronics has improved. Moving to semi, we saw a slowdown in Q2, with semi revenue declining modestly year over year, against a strong comparison. This result is in line with the cautious full year outlook we adopted due to uncertainty from trade policy and tariffs. In summary, we're focused on executing against our strategic objectives and delivering on our long-term financial framework to drive shareholder value. I'm confident in our direction, proud of our team, and excited about what's ahead. Let me now hand it over to Dennis to walk through the financial results in the outlook for