Cognex Corp at Goldman Sachs Industrials and Materials Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Yeah. So Dennis, it's a good overview. Look, Cognex has like -- has had incredibly good fundamentals over a long period of time, almost 70% type gross margins. In the past, you've had EBITDA margins that have been north of 30%. It's interesting. You've been the CFO now for about 20 months. What's been interesting to me is, you've now introduced a new through-the-cycle financial framework. I think you've implemented some structural cost actions. And you're changing the way I think the company is running with more financial rigor. When you think about the kind of changes that have been put in place, like what have you been learning through this 20-month period? What's the new Cognex going to look like, and then we'll go from there.

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Yeah. So look, for those that are not familiar, you outlined at your Investor Day a new through-the-cycle framework of 13% to 14% revenue growth, which embedded 10% to 11% organic growth and 20% to 30% EBITDA margins. So let's kind of peel back the onion and how we're kind of thinking about these targets longer term, and then we can start thinking about the near term as well, right? So from a longer-term perspective, 20% to 30% EBITDA margins, super wide range, right? And it seems like this year, you're probably going to end at the lower end of that range. How are you thinking about like the progress from 20% to 30%?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Okay. So let's -- so interesting. A couple of things that you said there, right, which were -- some of it is going to be growth dependent. So the big question is how much growth, right? Because I don't think it's 10% to 11%. I think it's probably something lower than that. So why don't we start there? So if you get to like a 25% type margin in the next two to three years, what do you envision from a growth perspective to get there? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 03, 2025 / 1:00PM, CGNX.OQ - Cognex Corp at Goldman Sachs Industrials and Materials Conference

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Yeah. So for somebody who's covered Cognex for a minute, like the way you're talking about the financial leverage is a lot different than the way the company used to be run before. It used to take a lot more organic growth to really kind of see the bottom line performance as well. So it's great to see, I think, like the operational discipline and the rigor that you guys are bringing to the organization. When -- so we'll get to growth in a second. So when you think about the levers then just on the cost structure, so let's just start with OpEx, right? How are you thinking about how much opportunity there is? Is it toggling back just on variable expenses? Like where -- like what is the opportunity within OpEx?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Yeah. Super helpful. So if I parse out those two elements, I know there are more than two elements, but two main elements. You take a look at the R&D perspective, you used to spend 14% to 16% in any given year. I mean, it was like clockwork, right? It sounds to me like -- not to put words in your mouth, but that sounds to me like there's probably a few hundred basis points of opportunity just in R&D.

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Okay. Great. And then on the OpEx side, with the shift, and that was a really good explanation of it. It sounds like -- I remember there's a decent amount of attrition associated with the emerging customer initiative as well. And so you try to work out necessarily as well but now you've shifted and you're really focused on productivity improvements as well in leveraging technology to help good leverage.

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Makes total sense. Okay. Let's go back to organic growth. So as you mentioned earlier, long term targets 10% to 11%. You made a comments earlier about getting 20% EPS growth out of mid single digit type organic growth. But double click on the mid single digit organic growth. So as you're thinking about where we sit today, and I fully recognize that your business is short cycle. Is that kind of like the right framework then for next year? Like how -- give us a little bit more color on that mid-single-digit comment. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 03, 2025 / 1:00PM, CGNX.OQ - Cognex Corp at Goldman Sachs Industrials and Materials Conference

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Yeah. I think that's a really good way to contextualize it. And the reality is you are a short-cycle business. You've only given -- historically have only given guidance one quarter out, although you're giving more information now than we've seen historically, which is great. Let's then take -- let's talk about your different end markets, right? So let's start with logistics. So logistics has seen a nice rebound for the last, I think, seven quarters, right? You've seen double-digit growth in that business. It seems like a lot of that is coming from just increased penetration of the warehouses at this point with automation. Talk to us about what you're hearing from your customers, the sustainability of this business continuing to grow at this clip into next year.

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : All right. So talk about that because consumer electronics has also been growing in 2025, and you benefited to some degree from manufacturing getting -- going from one region to the next, right? So China to India, et cetera. So you kind of think about the 2026 growth rate, you've got form factor changes, which are also super important. And I know we will find out a lot more in like the April time frame from your big customers. But what gets you -- like what are you sanguine about in 2026? And why do you think the growth rate will accelerate?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Yeah. No, that's great to hear. I mean, look, I remember the form factor change, the iPhone X in 2017, all that shift to OLED. When you think about those form factor changes, I know it's probably hard to gauge, but is there anything that is comparable to what we saw in that -- 2017 time frame was a great year for Cognex and the growth rates were incredible, largely driven by electronics. So yes, is there anything that you see out there right now that is really kind of shifting that could really accelerate the growth rate?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Okay. Great. I'm going to keep going on some of the end markets and -- but I'll open it up to the audience for questions as well. Let's talk about the consumer packaging has been a nice -- seen nice healthy growth in 2025. It seems like a lot of that is driven by internal initiatives. So maybe just no pun intended, unpack like what's been going on there.

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : And is that -- like is it fair to say that, that business for you is still fairly underpenetrated and because of the investments that you've made, like this should be a growth avenue for you going forward?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Great. Auto -- wherever you want to go with auto. But I guess maybe -- I'm sure I can do this, but if you could just level set how much auto is down for you? And then like whether you've now -- it seems like you've now seen like a bottoming, but go ahead--?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Is your business over-indexed to a particular region? Like are you over-indexed to the US versus China versus Europe? And then similarly, EVs versus legacy ICE platforms?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Auto. Auto, yeah.

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Great. I'll open it up to the audience, see if there's any questions or else I'm happy to keep going. Okay. So -- I'm sorry, somebody has a question? Okay. So let's talk about gross margins. I know it's -- I know that it's not part of your financial framework anymore, right? It's organic growth, EBITDA margins. But gross margins this past quarter, adjusted for the one month of Moritex and the commercial agreement, (inaudible) right, for the quarter. What -- like what was -- what caused like there's a deterioration of like roughly 170 basis points? Like what was -- what drove that deterioration this quarter?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Okay. Great. So if I think about kind of the framework then for 2026, based on what I've heard you say today, it looks like from a growth perspective, mix is probably going to be less of a headwind, correct, right? Because logistics maybe not growing, but [some things] may be growing faster. China pricing stabilizing, less of a headwind. And then tariffs, I mean, have you seen most of the impact from tariffs already? I guess--?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Okay. Great. That's where I was getting to. It sounds like it's bottomed. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 03, 2025 / 1:00PM, CGNX.OQ - Cognex Corp at Goldman Sachs Industrials and Materials Conference

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Sure. And so last question, the inorganic side, right? And we only have about a minute left. But maybe part of your longer-term framework is to do more M&A. Talk about the pipeline and like how you guys are thinking about potentially putting more capital?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Great. So we've run out of time but thank you very much for coming here today. Dennis, great seeing you.