Cognex Corp Q4 2024 Earnings Call Summary

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

Question: Damian Karas - UBS Equities - Analyst : Hey, good morning, everyone.

Question: Damian Karas - UBS Equities - Analyst : Yeah, thanks for all the color around the end market. Rob, I wanted to ask you about autos. I know you've talked in the past about this being the worst market environment you've ever experienced in your career, and I know you expect autos to also continue to be your weakest market this year. But what's your assessment on, how much lower that customer spend could possibly go from here? I mean, the business segment was down, 14% in 2024. Are you kind of thinking like double digit declines again in 2025 or or should we'd be thinking much more modest declines from here.

Question: Damian Karas - UBS Equities - Analyst : That's really helpful. And then I wanted to ask you about consumer electronics, which you know was down for the second year in a row in 2024 and I know you said you'll have better insights you know when the second quarter earnings comes around, but I wanted to ask you, your slides you mentioned kind of limited change to form factors, what's your sense for that aspect, this coming year, do you think that there should be more consumer electronic product changes, this coming year compared to the past few years?

Question: Damian Karas - UBS Equities - Analyst : Understood, really appreciate your thoughts. Best of luck out there.

Question: Tommy Moll - Stephens Inc - Analyst : Good morning and thank you for taking my questions.

Question: Tommy Moll - Stephens Inc - Analyst : Rob, I want to start on logistics and ask what insight you can provide there on the breadth of the strength, whether that's in terms of the geographies, the subverticals, I'm thinking e-commerce versus parcel perhaps. And then the durability of this strength. I mean there were multiple quarters there where I guess we were in an absorption phase for a lot of the capacity built out during the pandemic. Does it feel like we're solidly back into a period where we need more capacity, or how would you situate us?

Question: Tommy Moll - Stephens Inc - Analyst : Thank you, Rob. As a follow up, and perhaps this is for Dennis, I wanted to ask about what you would highlight for us in terms of OpEx discipline, Dennis. So you've sketched the contours previously on the level of investment for the emerging customer initiatives, so I'm thinking elsewhere in the OpEx budget, what can you highlight us whether quantifying or just speaking qualitatively about a philosophy on cost management there. Thank you.

Question: Tommy Moll - Stephens Inc - Analyst : Thank you, Dennis. I'll turn it.

Question: Andrew Buscaglia - BNP Paribas - Analyst : Hey, good morning guys.

Question: Andrew Buscaglia - BNP Paribas - Analyst : I just want to get an update into the year end on the on the merchant customer initiative terms of your expectations. It seems like it's going well, and do you care to to provide any context around incremental revenue from the strategy going forward, maybe in '25?

Question: Andrew Buscaglia - BNP Paribas - Analyst : Okay, and what are the -- what are you guided to gross margins in the high 60s and what are the biggest levers there that could provide some tailwind to the margins going above 70% again? Is it is really this volume coming back or can this emerging customer initiative have an impact in '25 on gross margins already?

Question: Andrew Buscaglia - BNP Paribas - Analyst : Yeah, thank you.

Question: Jamie Cook - Truist Securities - Analyst : Hi, good morning. I guess two questions. One, Rob, just on the, total market serve the $6.5 billion that you guys have put out there, just wondering, understanding you probably. Feel comfortable with that number. I'm just wondering if perhaps as you're thinking going forward do we pivot which and markets we want to focus on perhaps markets that are less cyclical like, automotive or consumer electronics maybe focusing more on, medical or or other markets so that I just get your sales over time can be less cyclical versus some of the markets that you focus on so wondering if it'll be a pivot there over time. And then I guess my second question, obviously you're still sitting with a very strong balance sheet sitting in, net cash with more techs behind you. I'm just wondering, what your appetite is or the environment is for, acquisitions in 2025 relative to where we sat in 2024. Thank you.

Question: Jamie Cook - Truist Securities - Analyst : Thank you, very helpful.

Question: Piyush Avasthy - Citigroup Inc - Analyst : Hey, good morning, guys. Thanks for taking my questions.

Question: Piyush Avasthy - Citigroup Inc - Analyst : So the current US administration appears to be more pro US manufacturing. Speaking with your customers across the auto or consumer electronics and markets, have you at least begun to see a step up in conversations with your customers are talking about reshaping their manufacturing footprint and maybe adopting more automation and machine vision?

Question: Piyush Avasthy - Citigroup Inc - Analyst : Helpful. I was a bit late on the call, so maybe you address this, but I think you highlighted pricing challenges in the quarter, particularly competing in the China regions. Can you update us on that? Like how would you characterize the pricing environment as it doesn't seem that the demand outlook has changed much and our competitors in other regions being disciplined from a pricing standpoint or are you seeing more incidents of lowering prices to win contracts?

Question: Piyush Avasthy - Citigroup Inc - Analyst : Appreciate all the color.

Question: Jake Levinson - Melius Research - Analyst : Hi, good morning, everyone.

Question: Jake Levinson - Melius Research - Analyst : Just a -- just to attack the M&A side of things from a different angle. I know you folks have bought some really interesting machine learning assets (inaudible) before AI was cool, so to speak, has the -- as the rise of AI and the broader public consciousness, does that increase the competition for those types of deals or are they just too much for most buyers that would be looking at the things that interest you guys.

Question: Jake Levinson - Melius Research - Analyst : Yes, exactly.

Question: Jake Levinson - Melius Research - Analyst : Okay. I appreciate it, Rob. I'll keep it to one question today. Good luck.

Question: Joe Ritchie - Goldman Sachs - Analyst : Hey guys, good morning.

Question: Joe Ritchie - Goldman Sachs - Analyst : So Rob, I thought your comments on infusing AI, into your tools and the fact that you now require less images to train a model were really interesting. I guess I'm just curious on one hand I can think of that as being a competitive advantage if you are, first mover in your techno technology is advanced relative to others. On the other hand, it also kind of seems like it may potentially lower the barriers to entry for additional competitors, startups, maybe Chinese competitors. I'm just curious like how do you get comfortable that you can sustain your technology advantage and this isn't just going to, increase competition for your for your end markets.

Question: Joe Ritchie - Goldman Sachs - Analyst : Thank you, Rob. I'll keep it there.

Question: Katie Fleischer - KeyBanc Capital Markets - Analyst : This is Katie Fleischer on for Ken. I'll keep it short here. I just was wondering how you're positioning for tariffs and any potential margin impacts from those if another trade war materializes?

Question: Katie Fleischer - KeyBanc Capital Markets - Analyst : Great. Thank you. I'll leave it there.

Question: Jairam Nathan - Daiwa Capital Markets - Analyst : Hi, thanks for squeezing me in here. So I just wanted to go back to your Moritex acquisition. I think when you made the acquisition, the objectives were expanding beyond Japan and using more of Moritex optics into Cognex equipment. So I just wanted to kind of understand how it was done in the year, what's the progress? And I just had one more question, please.

Question: Jairam Nathan - Daiwa Capital Markets - Analyst : Do you need to do any validation like would it does it take longer, to kind of get into you to get more Moritex components into the products, is that a bottleneck or something or?

Question: Jairam Nathan - Daiwa Capital Markets - Analyst : Okay. And just finally, some of the logistics companies seem to be, especially on the parcel side, seem to be -- like they're talking about moving from -- moving to sensing from scanning. I just wanted to understand how would that impact Cognex if that trend kind of continues? I just want to understand it could be good for you. I just want to understand that.

Question: Jairam Nathan - Daiwa Capital Markets - Analyst : Okay, thank you.